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YOUR RESEARCH DEPARTMENT 



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What are food subsidies.' 



Food subsidies, or consumer subsi- 

 dies as they are sometimes called, are 

 grants or expenditures of public funds 

 in order to provide artificially low re- 

 tail food prices. 

 Do consumers need food subsidies? 



Most consumers do not need food 

 subsidies because their incomes have 

 increased far more than has the cost 

 of living. This is shown by virtually 

 all of the official government reports, 

 as well as by reports from private re- 

 search organizations. 

 How much has the cost of 

 living increased? 



About 24 per cent, as compared with 

 the five years 1935-39, according to 

 the United States Department of Labor. 

 Some items, like food and clothing, have 

 gone up more than 24 per cent, and 

 others, such as rent and fuel, have in- 

 creased less. The increase up to Septem- 

 ber 1943 for each item is as follows: 



37.4% 

 32.5% 

 26.3% 

 8.0% 

 7.7% 

 17.0% 

 23.9%, 



Food 



Clothing 



House furnishings 



Rent 



Fuel, electricity and ice 



Miscellaneous 



Average, all items 

 Reliable private studies, such as those 

 of the National Industrial Conference 

 Board, show practically the same in- 

 creases as the Department of Labor. 

 How much have consumer - 

 incomes increased? 



Consumer incomes have practically 

 doubled since 1935-39, according to of- 

 ficial government reports. Virtually 

 every known measure of the income of 

 individuals or groups shows increases of 

 25 to 200 per cent. The principal meas- 

 ures of consumer income in the United 

 States and the per cent of increase shown 

 by each up to September are as follows: 

 Average weekly earnings of factory 



workers 85% 



Total non-agricultural income 110% 

 Total wages and salaries 141% 



Coal mining (bituminous) 



payrolls 88% 



Total factory payrolls 228% 



These figures are all based on the re- 

 ports of the Department of Labor and 

 other government agencies, as published 

 in the official "Survey of Current Busi- 

 ness." These figures are not disputed, 

 but are simply ignored, by those who 

 advocate food subsidies. Note that total 



JANUARY, 1944 ^^ 



non-agricultural income has increased 



more than four times, and total wages 



and salaries nearly six times, as much as 



the cost of living. 



How about the income of 



"white collar" workers? 



Precise information on this p)oint is 

 not readily available, since wage rates 

 are usually summarized by industries 

 rather than by occupations. It is known, 

 of course, that some in this group have 

 had little or no increase in mcome. Col- 

 lege professors and others especially 

 attached by training and experience to a 

 particular position have had the least in- 

 crease in incomes. On the other hand, 

 common observation shows that many 

 families in the "white collar" class have 

 experienced substantial increases in in- 

 come. Such increases have come as a 

 result of rapid "promotions," by chang- 

 ing employers, by changing occupations, 

 by working more hours per week, and by 

 the employment of more persons per 

 family. 



Should general consumer subsidies be 

 provided on account of the 

 fixed income families? 



Consider these facts — Total wages 

 and salaries have increased 141 per cent 

 since 1935-39. To the exact extent that 

 the incomes of some families have in- 

 creased less than this, the incomes of 

 others have increased more. It is foolish 

 to attempt to help the relatively few fixed 

 income families by attempting to provide 

 subsidies for all families, most of which 

 have had increases in income of from 

 two to five times as great as the increase 

 in the cost of living. 

 What can he done to help the 

 fixed income families? 



They can be helped in three ways: 

 (1) by taking positive steps to control 

 the basic causes of inflation, (2) by in- 

 creasing their wages, or (3) by provid- 

 ing subsidies or relief especially for this 

 group alone. 



Are food subsidies necessary for 

 inflation control? 



Economists have studied and discussed 

 the subjects of prices and inflation for 

 many years, but there is virtually no 

 basis in economic literature for the claim 

 that food subsidies are either essential 

 to, or effective in, inflation control. For 

 example, in 1940 Dr. C. O. Hardy, of 

 the highly respected Brookings Institu- 

 tion, made and published in book form 



a comprehensive price control study, 

 "Wartime Control of Prices' at the re- 

 quest of the War Department. Although 

 Dr. Hardy listed and discussed seven 

 steps necessary to control prices, he did 

 not include food subsidies among them. 



Another outstanding authority, Pro- 

 fessor E. W. Kemmerer of Princeton 

 University, in his recent book, "The 

 ABC of Inflation," lists six basic types 

 of inflation controls, but he does not in- 

 clude food or consumer subsidies. Pro- 

 fessor Kemmerer does recommend retail 

 sales taxes, which are the exact opposites 

 of consumer subsidies. 



FcK)d subsidies are neither necessary 

 nor helpful in inflation control. On the 

 contrary, they are inflationary in them- 

 selves, since they increase the national 

 debt, increase the amount of money in 

 circulation, and put more money into 

 people's pockets to be used for bidding 

 up prices in legitimate stores and in 

 black markets. 



Will food subsidies prevent labor from 

 asking for, and getting, large 

 wage increases? 



As shown above, wages have already 

 increased a great deal. This trend will 

 certainly continue. The spokesmen for 

 organized labor hav/. supported food sub- 

 sidies primarily as a means of obtaining 

 wage increases. Not one labor union 

 spokesman has promised to drop demands 

 for higher wages if food subsidies are 

 continued. On the contrary, the demands 

 for wage increases have greatly increased 

 since last spring, when the administra- 

 tion began its subsidy program. 

 What are the principle reasons for 

 farmers' opposition to food subsidies? 



Farmers are opposed to general food 

 subsidies because: 



( 1 ) The)' increase the national debt, 



(2) They are inflationary in effect, 



(3) They are unjustified from the 

 consumer standpoint, 



(4) They will increase the burden of 

 taxes in postwar years, 



(5) They are subject to the most un- 

 desirable political abuses, 



(6) They tend to establish low stand- 

 ards of values for farm products, 



(7) They lead to the socialization of 

 agriculture and other industries, 

 and 



(8) They deny to farmers the right 

 to receive the full value of their 

 products in the market places. 



