To End Farm Surpluses

August 15, 1960

The details of Nixon’s farm program have not yet been revealed, but his announcement of July 31 did not sound promising. He repudiated Secretary Benson, who has tried to move toward sense and sanity. “We must develop a massive program,” said Nixon, “which is not concerned with budgetary costs year by year.” As the government had put the farmer in his present fix by its wartime policies, “obviously the government must pay the cost of getting him out.”

This “new” farm program may turn out to be a serious political blunder, of which Kennedy has already taken advantage. Nixon cannot repudiate the record of the Eisenhower Administration in a major field. And an airy dismissal of “budgetary costs” would undermine his own main case against this year’s Democratic platform.

In any event the foreshadowed program sounds like a major economic error. What does Nixon mean by a “massive” program? Isn’t a cost to the Federal government of $5.5 billion a year, mainly to pile up unsalable crop surpluses, massive enough to suit any taxpayer? Would more massive payments do anything but pile up more massive surpluses?

The best farm program would be one to end “farm programs.” The major farm problem today is that created by the government itself.

SUPPORTS CAUSE SURPLUS

The constantly repeated contention that present crop surpluses are the result of a “technological revolution” on the farms is untrue. These chronic surpluses have occurred only in the crops under which the government has stuck price supports. The crop surpluses were built up by setting government price floors higher than the prices farmers could obtain in a free market. This caused the farmers to plant more than otherwise or to pour in more fertilizer to get more per acre. The higher prices also cut down the market demand. If support prices were stopped, farmers would raise less and consumers would buy more. Surpluses would cease to pile up.

What about the surpluses that already exist? That problem too could be solved in a single growing season. The government need merely sell back to the farmers themselves the surpluses it acquired from them. Before the new planting season for each crop of which the government holds a surplus, it could offer each grower his prorated share (figured on his previous acreage allotment) at a price set below the expected world market price and below the farmers’ own average cost of production. The government might issue to each farmer transferable certificates entitling the bearer to buy so many pounds of cotton or bushels of wheat at this bargain price. The farmer could then either turn in the certificates with the required amount of cash if he wanted to buy the crop to hold for later resale, or he could sell the certificates themselves in the open market. They would naturally sell at a price equal to the amount by which the free market price exceeded the low purchase price set on government holdings.

OPERATION DISPOSAL

Few farmers, except those with unusually low costs, would be foolish enough to plant more of that crop that year. They would know in advance that it would not pay them. From their sale of certificates they would get on the average a net income equal to what they would have received if they had planted a crop. They would have the choice of allowing their acreage previously planted to that crop to remain idle, or planting it to some other crop in which there were no accumulated surpluses.

As a result, the surpluses would be disposed of. The farmers would be free of regimentation and all acreage control. The government would, it is true, take a bookkeeping loss on stored crops held at its artificial cost prices. But instead of paying out more billions in cash, it would be receiving billions in cash from world consumers from the sale of surpluses.

After that Operation Disposal, the government should get out of the whole price-support fiasco and stay out. The price-support scheme has been a mainstay of the welfare-state sleight of hand which, as Wilhelm Röpke puts it, “robs nearly everybody and pays nearly everybody, so that no one knows in the end whether he has gained or lost in the game.”