1126 GENERAL FARM PROGRAM 



other hand, the average price.s (cohimn (4) exhibit B), will be higher for 1941-50 

 than for 1940-49, so the price support standard, column (5), may be about un- 

 changed, or even increased. 



A further projection into the future probably can be made by competent 

 economists using data from table 1 of your committee print "Study of Selected 

 Trends and Factors Relating to the Long-Range Prospect for American Agricul- 

 ture," March 10, 1948. This forecasts the necessary statistics under alternative 

 situations of high employment, average level, and depression. 



Secretary Brannan's calculation of income and price support standards starts 

 with a period (1939-48) when prices averaged about 106 percent of parity on the 

 old 1910-14 base. It is doubtful if the Congress will appropriate sufficient money 

 to support indefinitely manv commodities at this exceptional level. 



In the insurance method all of the above reasoning applies, modified to the 

 extent that producers pay premiums and that funds mav accumulate in good times. 

 If premiums are wisely graduated as between small and large policies; if limitations 

 are placed upon the amount of income insm'ance a producer can carry; if higher 

 premiums are charged when prices are dangerously high; and if the absolute insur- 

 ance price is set within reasonable limits, the cost can be moderate. 



It should be remembered that the total cost of supporting ])rices or income at a 

 given level is approximately the same under any type of jirogram that may be 

 adopted. Under the production payment method, the cost is borne solely by the 

 Treasury. The insurance method puts jjart of the burden upon the insured 

 producers, from little or nothing upon small producers, to a substantial part of it 

 upon the large ones, and varying considerably with the prosperity of agriculture. 



The commodity loan and purchase agreement programs put part of the cost on 

 the Treasury and the balance is shifted to consumers in the form of artificially 

 higher prices. At present, however, experiences such as the potato program are 

 clarifying public understanding of t*e price-support method, and some of its 

 defects. People have seen huge stocks dumped on the Government, while the 

 housewife could not buv decent potatoes, even at exorbitant prices. And if 

 potatoes could cost the Government 200 million dollars in a year, plus perhaps a 

 greater amount to consumers in high prices, what may be the total cost to con- 

 sumers and Government if large surpluses emerge in wheat, corn, hogs, cotton, 

 dairy prodiicts, poultry, eggs, and tobacco — -supposing that all are supported? 



It should be remembered that we have had no complete experience with the price- 

 support method. We started in the depression with 6-cent cotton, 40-cent wheat, 

 and 30-cent corn, and operated in an over-all "up" market from then until Febru- 

 ary 1948. Moreover, the 1938 act provided flexible supports at a very low level — 

 52 to 75 percent of parity, at the discretion of the Secretary of Agriculture. Even 

 so, by 1942 we had accumulated hug^ surpluses of wheat, corn, and cotton. What 

 may now be the cost, if we should have declining markets, when we start with 

 support prices on the farm at $1.95 for wheat, $1.42 for corn, and 27.45 cents for 

 cotton? Will the Aiken bill, at 60 to 90 percent of parity, in a declining market, 

 fare better than the Wallace program, at 52 to 75 percent, on a rising market? 

 And will the people, now that they are alerted to inconsistencies, stand for artificial 

 scarcities and high prices when they know that they themselves, as taxpayers, are 

 financing great surpluses? 



The Aiken method purports to keep support levels in line with the supply posi- 

 tion. This cannot be completely successful, because to be so would mean setting 

 prices at equilibrium levels — prices at which consumers will normally absorb the 

 production. This, of course, is the same as no program at all and, obviously, is 

 not what is desired. 



It would seem that if a program is to be set up that will endure, and if parity 

 prices are to be used and base periods are to determine the average levels, the prin- 

 ciple of using the most recent normal or near-normal period, and supporting prices 

 at 100 percent of that parity, is worth considering. According to this test it is 

 believed that 1925-29 period is the one to use; it being the last period in which 

 price relationships, wages, and, in general, our economy aj a whole, was in some- 

 what near normal balance. 



On the whole, the parity percentage of support is a question of what is reasonable 

 and practicable. There is said to be no scientific basis for calculating the right 

 level to use. It must be something that the public will continue to finance, and 

 that will work out satisfactorily for the general economy. 



CONTROLS 



The great temptation to administrative officials is to limit the cost of farm pro- 

 grams by restricting production. We have had a good deal of experience since 



