A Dialogue About the Farm Scandal

THE CHAOS OF ABUNDANCE

Confusa: I see where the House of Representatives voted down President Kennedy's farm bill--and I don't even know whether to be glad, or sad, or what. Frankly, this whole farm problem completely baffles me.

Honestus: You've got plenty of company, Confusa.

Confusa: This bill was supposed to impose strict production controls on farmers. Why? I just can't understand how that would help farmers at all.

Honestus: It wouldn't. The idea was not to help farmers, but to help the Government.

Confusa: How SO?

Honestus: Controls on farm production are necessary to protect the Government from the consequences of its own price-support programs. The Government supports wheat, cotton and several other major crops at prices so high that it is profitable to grow these crops and turn them over to the Government at the support price. If there were no production controls, then any farmer with enough capital and know-how could grow as much wheat or cotton as he could find land to plant it on, then unload the stuff on the Government. Price supports and controls inevitably go together in agriculture, as they do in other sectors of national life--diminished freedom is the seamy side of the welfare state.

Confusa: So Government production controls are already in effect, but they have proved to be inadequate&$151;is that it?

Honestus: That's right. Despite very extensive controls, administered by thousands of Agriculture Department bureaucrats, farmers have dumped so much wheat, corn, cotton, cheese and other commodities on the Government that it costs the taxpayers more than a billion dollars a year just to keep the stuff in storage. Last year the Agriculture Department spent something like $7 billion, largely for price-support programs. That was more than twice the combined expenditures of the State, Justice, Interior, Commerce and Labor departments all put together.

Confusa: But why does the Government support farm prices at all?

Honestus: Several factors help perpetuate the system. One is the inherent momentum of Government aid programs: once they get started, it is hard to stop them. The recipients of aid come to depend upon it and to regard it as an inalienable right; the bureaucrats who administer the programs acquire an interest in preserving and justifying their functions and powers. Another factor is sentimentality--a feeling that farm life fosters the old-fashioned virtues. Many defenders of the price-support system argue it is needed to preserve the family farm, that disappearance of the family farm would weaken the moral fabric of the nation. And then--there's politics. The farm population has been declining for many decades, but farmers still make up a substantial enough minority in many states that legislators are wary of offending the farm vote. Finally, there is the brute fact of overproduction: the current output of several major crops in the U.S. far exceeds the marketplace demand for those crops. Even if the Government could somehow bring itself to regard the farm situation with cold and fearless eyes, it would still have to deal with this fact of overproduction.

Confusa: You say the number of farmers has been declining? Then why is there overproduction?

Honestus: Well, since the middle 1930s the number of operating farms in the U.S. has declined from nearly 7,000,000 to fewer than 4,000,000, and the farm population has shrunk from 25% of the total population to less than 10%. But a technological revolution has taken place in U.S. agriculture--the combined effect of more and better machinery, more efficient fertilizers, deadlier pesticides and higher-yielding hybrid plant varieties. As a result, productivity--production per worker--has increased much faster on the farms than it has in the factories. Just in the past decade, production per farm worker has soared 80%.

Confusa: Then the farm problem is simply a result of progress-this technological revolution in agriculture?

Honestus: No, not entirely. The overproduction is the combined result of the technological revolution and the Government's price-support programs. High price supports tend to bring on gluts because they divert land, capital and effort into production of the supported crops.

Confusa: It's ironical that price-support programs set up to deal with surpluses should create bigger surpluses.

Honestus: U.S. farm programs produce a rich crop of ironies. The price-support system was started during the Great Depression to keep farmers from going bankrupt. Yet in actual operation, it helps the poorest farmers least; the really hefty price-support payments go to the big operators. A notable recipient of price-support payments in recent years has been the Delta & Pine Land Co., a sprawling Mississippi firm largely owned by British interests; it's been getting more than a million dollars a year in price-support loans on cotton. Another irony is that, while supposedly helping to preserve old-fashioned rural virtues, price-support programs tend to make U.S. farmers dependent on the Government and put before them abundant temptations to cheat. Also, while the Government is trying to curb farm production, it is simultaneously fostering increased production through research, distribution of free fertilizer, and so forth.

Confusa: Does the Government support the prices of all crops?

Honestus:No, large segments of U.S. agriculture--meat, poultry, fruits, most vegetables--get along all right without price supports or controls. Secretary Freeman wants to extend production controls to some of these still free products, but so far Congress has fought him off. The main supported crops are wheat, feed grains (corn, oats, grain sorghums, barley--so called because they are grown mainly for livestock feed), cotton, tobacco and dairy products. Price supports are also in effect for some relatively minor crops, including rice and peanuts.

Confusa: And the production controls--how do they work?

Honestus: There are variations from one crop to another. The principal control device is the acreage allotment--a farmer is assigned a certain number of acres, depending on how many acres of that particular crop he grew in the past. For wheat, cotton, tobacco and a few other crops, the controls are mandatory--it is illegal to market these crops if they are grown outside assigned acreage allotments. A less confining system is in effect for corn and other feed grains: the farmer can get price-support loans only on feed grains grown within acreage allotments. But if he is willing to forgo price supports, he is free to grow as many acres of feed grains as he wants. Feed grains have been exempted from mandatory controls because of the vastness of the enforcement problem : the acreage devoted to feed grains in the U.S. is three times the wheat acreage, ten times the cotton acreage. A main feature of the Administration bill voted down by the House was that it would have extended mandatory controls to feed grains--requiring an enormous expansion of the Agriculture Department's bureaucratic webs of inspection and control.

Confusa: What would happen if the whole system--price supports and production controls--was simply abolished?

Honestus: If that took place all of a sudden, prices of wheat and some other farm commodities would probably fall so steeply that many farmers would get very badly hurt. Price supports cannot be abolished all at once: the producers who have come to depend upon price supports must be warned and given time to make adjustments. If price supports were gradually abolished over the course of, say, five years, U.S. agriculture could survive and even thrive. For growers of feed grains, the adjustments to a free market might not have to be very drastic: as feed prices fell, meat would become cheaper; people would then buy more meat, and the increased consumption of meat would support feed grain prices--supply and demand would come into equilibrium. For wheatgrowers, the adjustments might be more painful because lower prices would not bring about increased domestic consumption&$151;people are not going to eat substantially more bread because a loaf is a few cents cheaper. Without any Government supports at all, the price of U.S. wheat might keep on declining to the point where foreign markets would absorb the wheat not consumed in the U.S. At internationally competitive prices, only large and efficient producers could grow wheat profitably, and many of the smaller farmers would have to switch to other crops or get out of farming. Overall, the effects of a free market for U.S. agriculture would be lower domestic food prices, expanded agricultural exports, a slower flow of capital investment into farming-and fewer farmers.

Confusa: Isn't that the essence of the farm problem--too many farmers?

Honestus: Well, it's seldom said that bluntly--even though it's so. Actually, there are two separate farm problems, which require separate solutions, and some of the confusion about farm policy arises from failure to distinguish between them. There is the problem of marginal farmers, most of them in the South, who barely scratch a living from the soil; their difficulty is not overproduction but underproduction. The marginal farmer lacks the capital, land, energy, initiative, skill, or whatever else is required to earn a U.S.-style livelihood in agriculture in competition with commercial farmers. The other problem, of course, is overproduction. The Kennedy Administration proposes to deal with it by what it calls "supply management"--that is, imposing broader and tighter curbs on farm production while keeping price supports at high levels. The alternative approach, favored by the American Farm Bureau Federation, is to gradually decrease price supports to the point where they serve as a safeguard against drastic price drops rather than as an incentive to overproduction. Production controls could then be gradually whittled away, and perhaps abolished altogether. Basically, this was the approach advocated, but not clearly and consistently pursued, by Ezra Taft Benson, Agriculture Secretary under President Eisenhower.

Confusa: Is there any prospect that this approach of lower support prices and more freedom will be adopted?

Honestus: Benson's failure to make any progress in that direction was discouraging. But there are some hopeful signs. The Kennedy Administration at least recognizes that the cost of present farm programs is intolerably high. And the House did reject the more-controls approach. The Farm Bureau's advocacy of lower support prices suggests that many farmers are disgusted with the present system of high supports and entangling controls (with 1,600,000 members, the bureau is the biggest of U.S. farmer organizations). And it is at least possible that the non-farmers of the nation will some day come to realize that the present system hurts them both as taxpayers and as consumers, and get indignant enough to demand thoroughgoing reform.

Confusa: Well, Honestus, you can count me among the indignant ones right now.

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