Political Farm Law

June 18, 1956

The new farm law is primarily a political document. It will not solve our self-created farm problem. It will entangle the government more hopelessly than ever in farm controls. It will greatly increase the already heavy burden upon the taxpayer. True, the new law is better than the bill the President vetoed; but it threatens in the long run to do even more harm than the law it displaced.

Mr. Eisenhower’s own objections to the new measure when he signed it were enough to condemn it. He rightly deplored the “inflexible” requirement that the government must dispose of 5 million bales of its cotton surplus abroad at a price no higher than 25 or 26 cents a pound. This is not only much below the original government acquisition cost of 32 cents a pound or more; it is below the present domestic level of about 35 cents a pound, and below the 1956 support rate of 31 cents a pound.

TWO-PRICE SYSTEM

This disposal requirement threatens not only to get us into serious difficulties with other cotton-raising countries, but it means that foreign textile firms will be able to get their raw American cotton at much lower prices than our own textile firms will have to pay. This will place the American textile industry at a disadvantage both in the home and in the foreign market. If, as is being suggested, the government subsidizes the American textile exporter, it will mean that the taxpayers must subsidize the cotton manufacturer to offset their subsidy to the cotton grower! The new bill in effect sets up a two-price system for cotton without explicitly calling it that. It does explicitly call for a two-price plan for rice.

But Mr. Eisenhower thinks that the “advantages” of the new law “outweigh its harmful provisions” because “the heart of the bill is the soil bank.” This “will check current additions to our price-depressing, market-destroying surplus stocks of farm products.” It remains to be seen whether the soil bank will in fact do this.

If the soil bank had been made a complete substitute for a price-support program something might have been said in favor of it. But it is an addition to the price-support program. Price supports, in fact, are even being raised. This means that the government will first pay the farmer a subsidy to encourage him to increase his crop production, and then pay him still another subsidy to encourage him to decrease his crop production. In addition to getting price supports for what he raises, the farmer will be paid 90 cents a bushel for the corn he doesn’t raise, 15 cents a pound for the cotton he doesn’t raise, and $1.20 a bushel for the wheat he doesn’t raise.

CONTRADICTIONS

The soil bank, it is estimated, will pay farmers $1,250,000,000 a year above present subsidies for taking crop acreage out of production and putting it into cover crops or trees. An additional $500 million of funds will be authorized to remove perishable farm items from the market to prevent price declines. Once more, in sum, everything is to be solved at the expense of the general taxpayer.

The soil bank does have one advantage over the previous system. Up to now, when his acreage was restricted on one crop, the farmer usually planted this acreage to other crops on which there were no restrictions. As these substitute crops were usually feed grains, the result was a stimulus to livestock production, which helped to depress the prices of cattle and hogs. But this evil could have been cured simply by removing existing price supports and acreage restrictions. The government’s accumulated surpluses could have been got rid of, with greater advantage all-around, by offering them below world market prices to the American farmer himself in proportion to his previous production, leaving it to him to dispose of them at whatever profit he could obtain.

Now that we have the so-called soil bank, it is impossible to see politically how we will ever get rid of it. The present farm-control fiasco should stand as a classic illustration of how government economic “planning” leads to ever-wider and contradictory interventions in the vain hope of correcting the evil consequences of previous intervention.