Ld 1 pals g - R76 [ 7} fy 4 £3 AGRICULTURAL RELIEF (EXPORT DEBENTURE PLAN) — ep —_ ATE HEARINGS BEFORE THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES SEVENTIETH CONGRESS FIRST SESSION FEBRUARY 8, 9, 10, AND 14, 1928 Serial E—Part 5 UNITED STATES FOVERNMENT PRINTING OFFICE \WASITINGTON ] 1)*) 0 COMMITTEE ON AGRICULTURE House oF REPRESENTATIVES SEVENTIETH CONGRESS, FIRST SESSION GILBERT N. HAUGEN, Iowa, Chairman FRED S. PURNELL, Indiana. JAMES B. ASWELL, Louisiana. T. S. WILLIAMS, Illinois. D. H. KINCHELOE, Kentucky. C.J. THOMPSON, Ohio. MARVIN JONES, Texas. JOHN C. KETCHAM, Michigan. F. B. SWANK, Oklahoma. THOMAS HALL, North Dakota. H. P. FULMER, South Carolina. HARCOURT J. PRATT, New York. THOS. L. RUBEY, Missouri. FRANKLIN W. FORT, New Jersey. THOS. A. DOYLE, Illinois. FRANKLIN MENGES, Pennsylvania. JOHN McSWEENEY. Ohio. AUGUST H. ANDRESEN, Minnesota. CHARLES ADKINS, Illinois. JOHN D. CLARKE, New York. CLIFFORD R. HOPE, Kansas. VICTOR K. HOUSTON, Hawaii. L. A. DARNELL, Clerk Statement of— Mr. Louis J. Taber______ Hon. Tom Connally ________ Mr. Albert S. Goss___. Dr. Charles L. Stewart___. Mr. Jesse Newsom_______. Mr. Carl S. Vrooman__________. Mr. A. P. Snracue__. Page 304 402 324 333 359 301 394 397 AGRICULTURAL RELIEF House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Wednesday, February 8, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. The CuarMaN. The committee will be in order. (The committee thereupon proceeded to the consideration of H. R. 10568. which is as follows:) TH. R. 10568, Seventieth Congress, first session] . BILL To foster agriculture and to stabilize the prices obtained for agricultural commodities by providing for the issuance of export debentures upon the exportation eof such commodities Be it enucted by the Senate and House of Representatives of the United States of America in Congress assembled, DECLARATION OF POLICY SectioN 1. It is hereby declared to be the policy of Congress— (a) To afford to those agricultural commodities of which surpluses above jomestic requirements are produced in the United States the same degree of protection which is afforded to industry in the United States by the tariff, and to prevent such surpluses above domestic requirements from unduly depressing the prices obtained for such commodities, and from causing undue and excessive fluctuations in the markets for such commodities, and to these ends— {b) To provide for the payment, upon exports of such commodities and of products of such commodities, of export premiums, by means of export debentures, sufficient to equalize the difference between the cost of producing such ommodities in the United States and the cost of producing such commodities in competing foreign countries. NATIONAL ENYPORT DERENTURE BOARD Sec. 2. A national export debenture board is hereby created, which shall ronsist of the following members ex officio: The Secretary of Agriculture, who shall be chairman; the Secretary of Commerce; and the Secretary of the Treasurv. Two members shall constitute a quorum. GENERAL POWERS Sec. 3. The board— (a) Shall maintain its principal office in the District of Columbia and such ther offices in the United States as it deems necessary. (b) Shall have an official seal which shall be judicially noticed. {c) Shall make an annual report to the President and the Congress of the United States. . » (d) May make such regulations as ure necessary to execute the functions rested in it by this act. (e) May (1) appoint and fix the salaries of a secretary and such experts and, ln accordance with the classification act of 1923 and subject to the provisions of the civil-service laws, such other officers and employees; and (2) make such expenditures, as may be necessary for the execution of the functions vested in the board \ 300 AGRICULTURAL RELIEF (f£) Shall meet at the call of the chairman or upon call of the other two members. (g) Shull keep advised, from any available sources, of crop prices, prospects, the probability of the existence of a surplus of any agricultural commodity or any of its food products. The board may advise producers through their organizations or otherwise in matters connected with the distribution and marketing of any such commodity, in order that the producers may secure the maximum benefits under this act. (h) Shall advise producers through their organizations or otherwise in the development of suitable programs of planting or breeding, in order that they may secure such benefits, EXPORT DEBENTURES Sec. 4. (a) On and after the 1st day of July next following the approval of this act the Secretary of the Treasury, under the regulations prescribed by the board, shall, subject to the limitations of this act, issue to any person in respect of any quantity of a debenturable agricultural commodity, or of any quantity of any debenturable product of such commodity, that is exported from the United States to a foreign country by such person, an export debenture in an amount computed at the debenture rate for such commodity or product, effective at the time of the exportation. (b) In order to procure the issuance of an export debenture, such person shall, within a reasonable time prior to the exportation to be prescribed under regulations of the board (1) make application for such debenture, and (2) submit proofs satisfactory to the board either that the quantity of the debenturable agricultural commodity to be exported was produced in the United States and lias not previously been exported therefrom, or that the agricultural commodity used in making the quantity of the debenturable product to be exported was produced in the United States and the agricultural commodity and the debenturable product have not previously been exported therefrom. (¢) Any export debenture, when presented by the bearer thereof within one year from the date of issuance of the debenture, shall be receivable at its face value by any collector of customs, or deputy collector of customs or other person authorized by law or by regulation of the Secretary of the Treasury to perform the duties of collector of customs, in payment of duties collectible against articles imported by such bearer. (d) Title to any export debenture shall be transferable by delivery. DFBENTURABLE COMMODITIES AND PRODUCTS Sec. 5. For the purposes of this act, wheat, corn, rice, fruit, swine, cattle, poultry, cotton, tobacco, and any other agricultural commodity which is designated by the President under section 6(b), shall be known and are referred to as debenturable agricultural commodities. Any food product of wheat, corn, rice, fruit, swine, cattle, or poultry, or any manufactured product of cotton, tobacco, or any other agricultural commodity designated by the President under section 6(b), shall be known and is referred to as a debenturable product if a debenture rate is prescribed for such product in section 6(b) or is prescribed for such product by the President under section 6(e). EXPORT DERENTURE RATES SEC. 6. (a) The following export debenture rates are hereby prescribed : (1) Swine, one-quarter of 1 cent per pound; fresh pork, three-eights of 1 cent per pound ; bacon, hams, shoulders, and other pork, prepared or preserved, 1 cent per pound; lard, one-half of 1 cent per pound. (2) Cattle weighing less than one thousand and fifty pounds, three-fourths of 1 cent per pound; cattle weighing one thousand and fifty pounds or more, 1 cent per pound; fresh beef and veal, 1% cents per pound. . (3) Corn or maize, including cracked corn, 7% cents per bushel of fifty-six pounds; corn grits, meal, and flour, and similar products, 15 cents per one hundred pounds. | (4) Paddy or rough rice, one-half of 1 cent per pound; brown rice (hulls removed), five-eighths of 1 cent per pound ; milled rice (bran removed), 1 cent per pound; broken rice. and rice meal. flour. polish, and bran. one-quarter of 1 cent per ponnd AGRICULTURAL RELIEF 201 (5) Wheat, 21 cents per bushel of sixty pounds; wheat flour, semolina, crushed or cracked wheat, and similar wheat products not specially provided for, 52 cents per one hundred pounds. (6) Cotton and cotton waste, 2 cents per pound. (7) Tobacco, 10 per centum ad valorem. (b) If the President finds, from the report of the board hereinafter provided for, or from any other source, (1) that the cost of producing in the United States any agricultural commodity which is not designated in section 5 and of which a surplus above domestic requirements is produced in this country and in respect of which a tariff duty is imposed by the tariff act of 1922, as amended, or any law supplementary to, or in substitution for, such act, is greater than the cost of producing such commodity in competing foreign countries, and (2) that the domestic prices for such commodity is unduly depressed by world prices for such commodity, he may, by proclamation, designate such commodity as a debenturable commodity and may prescribe such export debenture rate for the commodity as he finds sufficient to equalize the difference between the cost of producing such commodity in the United States and the cost of producing such commodity in competing foreign countries. Nuch export debenture rate shall not exceed the rate of tariff duty applicable in respect of such commodity. It shall be the duty of the board to make investigations, under regulations prescribed by it, to assist the President in determining the need for designating ander this subdivision any agricultural commodity as a debenturable agricultural commodity and in determining the amount of the export debenture rate for the commodity. No proclamation under this subdivision shall be issued by the board until such an investigation has been made and a report thereof has seen submitted by the board to the President. {c) The President, upon recommendation of the board, may prescribe a lebenture rate for any manufactured product which is made wholly or in part of a debenturable agricultural commodity, and for which no debenture rate is prescribed in subdivision (a) of this section. Such rate shall bear the sane ratio to the debenture rate for the debenturable agricultural commodity from which the product is made, as the tctal quantity of the debenturable agricultural commodity contained in such product bears to the total quantity of materials contained in such product, as ascertained and determined by the President. FLEXIBLE RATE PROVISIONS SEC. 7. (a) Whenever, under section 315 of the tariff act of 1922, any change in the rate of tariff duty upon any debenturable agricultural commodity or iebenturable product of such commodity is made, and the President finds, from the report of the board hereinafter provided for or from any other source, that in other effectively to carry out the policy declared in section 1, an increase or decrease in the existing export debenture rate for such commodity or product is necessitated by the change in the tariff rate or by the conditions which are responsible for such change in the tariff rate, he shall by proclamation prescribe such increase or decrease in the existing export debenture rate as he finds to he necessary. Such increase or decrease shall become effective upon the date fixed in such proclamation which shall not be less than sixty days from the date of the issuance of the proclamation. {b) In order to regulate the foreign commerce of the United States and to "arry out the policy declared in seciton 1, whenever the President, upon investization of the difference between the cost of producing any debenturable agricultural commodity or any debenturable product of such commodity in the United States and the cost of producing such commodity or product in competing foreign countries, finds, from the report of the board hereinafter provided for or from any other source, that the existing export debenture rate for such commodity or product does not equalize such difference, he shall, by such investigation, ascertain such difference and shall determine and by proclamation prescribe such increase or decrease in the existing export debenture rate as ne finds ot be necessary to equalize such difference; except that the aggregate increase made in the export debenture rate for any commodity or product by proclamation in force under this subdivision shall not exceed the rate of tariff duty applicable in respect of such commodity or product. Such increase or decrease in the export debenture rate shall become effective upon the date fixed in such proclamation which shall not be less than sixty days from the date of the issuance of such proclamation. 302 AGRICULTURAL RELIEF (¢) Whenever, prior to the commencement of a fiscal year of the United States, the President finds, from the report of the board hereinafter provided for or from any other source, (1) that the total amount of the export debentures which will be issued during such fiscal year will in his judgment exceed 50 per centum of the total amount of the tariff duties which will be collected during such fiscal year, and (2) that reductions in all export debenture rates are necessary in order to restrict such total amount of the debentures to 50 per centum of the total amount of tariff duties which will be collected—he shall, by proclamation issued less than thirty days prior to the commencement of such fiscal year, prescribe such reductions in the export debenture rates as he finds to be necessary. Such reductions shall becoine effective upon the commencement of such fiscal year and shall remain in effect throughout such fiscal year. At the end of such fiscal year the export debenture rates which were in effect immediately prior to the commencement thereof shall become effective again unless the President under the provisions of this act prescribes a change in such rates. The reductions under this subdivision in the export debenture rates shall be fair and equitable as between the debenturable commodities and products and shall be made with due regard for the comparative volumes of exports of such commodities and produc:s. (d) In order to prevent undue stimulation in the production of any debenturable agricultural commodity, whenever the President finds prior to the beginning of a crop year from the report of (he board hereinafter provided for or from any other source, that the probable production of any debenturable agricultural commodity during such crop year will exceed the average annual production of such debenturable agricultural commodity for the preceding five years, he shall by proclamation prescribe that the export debenture rates for the commodity and the debenturable products of such commodity shall be veduced by the percentage fixed in subdivision (e) for the amount of the increase in production which the President finds will occur during such crop year. Such reductions shall become effective on the date fixed in such proclamation, not less than sixty days from the date of the issuance thereof, and shall remain in effect throughout such crop year. At the end of such crop year the export debenture rates for such debenturable agricultural commodity and the debenturable products of such commodity which were in effect immediately prior to the commencement of such crop year shall become effective again unless the President under the provisions of this act prescribes a change in such rates. The term “crop year,” as used in this subdivision, means a twelve months’ period beginning at a time designated by the President. (e) Reductions in debenture rates under subdivision (d) of this section shall he made in accordance with the following percentages: (1) For an estimated increase in nroduction of less than 20 per centum, there shall be no reduction. (2) For an estimated increase in production of 20 per centum but less than 40 per cenium, there shall be a reduction of 20 per centum. (3) For an estimated increase in production of 40 per centum but less than 60 per centum, there shall be a reduction of 50 per centum. (4) For an estimated increase in production of 60 per centum but less than 380 per centum, there shall be a reduction of 75 per centum. (5) For an estimated increase in production of 90 per centum, or more, there shall be a reduction of 99 per centum. (f) In computing reductions in export debenture rates fractions of a cent less than one-eighth shall not be used. (g) Investigations to assist the President in determining, under subdivisions (a), (b), (c), and (d) of this section, the necessity for increases or reductions In export debenture rates, shall be made by the board under regulations pre-SN i. No proclamation under any such subdivision shall be issued by Soot oh dent until such an investigation has been made by the board and a such eo Submitted by the board to the President. In the conduct of any A oy ion the board shall give reasonable public notice of its hearings ‘asonable onnortunity to parties interested to be present and to be heard. ADMINISTRATIVE AND PENALTY PROVISIONS SEC. 8. (a) Pending the enactment of legislation providing a tariff duty on cotton, regulations requiring that metal tags or other appropriate markings be placed on all bales of cotton produced in foreign countries and allowed transit through the United States for exportation. mav be prescribed by the board. AGRICULTURAL RELIEF 303 Every person who violates any such regulation of the board shall be liable to a civil penalty of $100 for each such offense. Such penalty may be recovered in a civil suit brought by the board in the name of the Untied States. (b) The board shall prepare and issue, or cause to be prepared and issued, all export debentures, and shall prescribe the terms and conditions in respect of export debentures. The Secretary of the Treasury, upon request of the board, is authorized to have such debentures prepared at the Bureau of Engraving and Printing. (¢) Export debentures issued under authority of this act shall be obligations »f the United States within the definition in section 147 of the act entitled “An act to codify, revise, and amend the penal laws of the United States,” approved March 4, 1909, as amended. (d) Any person who shall make any false statement for the purpose of rraudulently procuring, or shall attempt in any manner fraudulently to procure, he issuance or acceptance of any export debenture, whether tor the benefit of such person or of any other person, shall be fined not more than $2.000 or moprisoned not more than one year, or both. COOPFRATION WITH EXECUTIVE DEPARTMENTS Sec. 9. (a) It shall be the duty of any governmental establishment in the swwecutive branch of the Government, upon request by the board or upen Execuive order, to cooperate with and render assistance to the board in carrying yout any of the provisions of this act and the regulations of the board. The hoard shall, in cooperation with any such governmental establishment, avail tself of the services and facilities of such governmental establishment in order ro avoid preventable expense or duplication of effort. (b) Upon request by the board the President, by Executive order, (1) may ransfer any officer or employee from any department or independent establishment in the executive branch of the Government, irrespective of his length of service in such department or independent establishment, to the service of the board, and (2) may direct any governmental establishment to furnish the board with such information and data pertaining to the functions of the bvard as may be contained in the records of such governmental establishment, and may prescribe such limitations as to the use of the information and data as he deems desirable. WFFINITICONS Sec. 10. As used in this Act— (a) The term ‘ person” means individual, partnership, corporation, or assoration. (b) The term “ United States,” when used in the geographical sense, means rontinental United States. (¢) The term “fiscal year of the United States ” means the twelve-month period ending June 30. (d) The term “tobacco” means leaf tobacco, stemmed or unstemmed. SEPARARILITY Sec. 11. If any provision of this act is declared unconstitutional or the applicability thereof to any person or circumstance is held invalid, the validity of the remainder of the act and the applicability thereof to other persons or Mircumstances shall not be affected thereby. ADMINISTRATIVE APPROPRIATION Sec. 12. For expenses in the administration of the functions vested in the soard by this act, there is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $50,000 to be available to the board for necessary expenses incurred prior to July 1, 1929. Mr. Xercaam. Mr. Chairman and members of the committee, ander the order of the committee this day and possibly some subsequent days have been set aside for a hearing upon the so-called export debenture plan, H. R. 10568. It is not my purpose at this time to take the time of the committee in making any statement 304 AGRICULTURAL RELIEF concerning the provisions of the bill. But we have with us to-day and will have in the succeeding days men who, with myself, have given this considerable thought, the others more than I; and I am cure the committee would very much prefer to hear these witnesses who are here and who are very much interested in this proposition. So I shall not take up any time in making a statement concerning the provisions of the bill. But I want to take this opportunity to introduce to the members of the committee Mr. Louis J. Taber, of Columbus, Ohio, the master of the National Grange. But before Mr. Taber takes the stand, Mr. Andresen desires to ask a question. Mr. AnpreseN. Mr. Ketcham, is your bill similar to the Adkins bill that was considered here during the last session? ~ Mr. Kercaam. The simple idea of H. R. 10568 is the export debenture plan. Mr. Swank. Is your bill like that of Mr. Jones, Mr. Ketcham? Mr. Kercaam. They are along the same lines. I have not had an opportunity to read carefully Mr. Jones’s bill. But the central idea, the debenture plan, is the real heart of the so-called Adkins bill, the Jones bill, and H. R. 10568. We have not included the cooperative features; and then H. R. 10568 is, so far as an equalization fee is concerned, a substitution for that feature of H. R. 7940. Mr. AsweLr. What happened to the Adkins bill last year? Did we ever pass on it? Mr. Kercaam. I desire to present at this time Mr. Louis J. Taber. STATEMENT OF LOUIS J. TABER, MASTER NATIONAL GRANGE, COLUMBUS. OHIO Mr. Taser. Chairman Haugen and members of the committee, to save questions later, I will state that I am here representing the National Grange, a farm organization that commenced its existence in the city of Washington 61 years ago. It now has approximately 800,000 members; 8,000 subordinate branches, or local organizations, found in 33 States. I am saying that not boastfully, but with humility, because it brings responsibility. That organization has never been dormant, but has always been active in affairs and has to-day a larger dues-paying membership in good standing than in any other previous period in the last half century. We begin with the community unit. These community units have educational programs and hold regular meetings. Matters of importance are first discussed at these local units. Then they are referred to the county organization and discussed there. If their merit is sufficient, they come to the State organization and are discussed there. Then, if there is sufficient merit in them they are referred to the national organization. We are a bit more deliberative than some organizations, in that regard. All matters that are considered in the National Grange must first be read on the floor and then referred to a committee; hearings held in the committee, and referred back to the body for passage. We take 10 days to consider problems of agriculture. _1 hold in my hands a copy of the Journal of Proceedings of the National Grange; and in this we are again different from some other organizations. Our journal of proceedings is printed and distributed AGRICULTURAL RELIEF 305 back to every subordinate grange in the Union and there is the lecture hour the decisions of the national body are made tovics of consideration. { am mentioning that only to indicate that snap judgment is not very often taken by the organization, and its conclusions and its convictions usually translate into resolution form the best collective judgment of the membership. I am saying that because I want to discuss our attitude on farm relief in order that there may be no misunderstanding. The Grange has tried to be constructive and helpful; it hopes not to be destructive. In the farm relief situation it is not new with us. We commenced the fight in 1868. We were active in the seventies, the eighties, and the nineties, and down through the years. We have tried to support the propositions that would favor agriculture as a whole. In this particular instance our organization has not opposed legislation upon which there was a strong farm organization movement, and I am only going to ask one favor of this committee, and only one: I do not want this committee to attempt to put me in the attitude of opposing some particular piece of legislation that other farm organizations honestly in their best judgment favor. The Grange wants team work and cooperation, we hope that the rommittee will not question and will not require us to point out why we do not favor legislation urged by other groups. We want to present to this committee the reasons why this organization believes that our program is a program that should be adopted, and along that line we shall try to direct our attention. Coming directly to the legislation pending, I will say frankly that our organization has not favored the legislation that has received the endorsement of this committee. That the record may be clear and we may be understood, will state that our executive committee in 1924, in the emergency that then appeared, went on record favoring the passage of the then McNary-Haugen bill. That matter was referred to the National Grange at its Atlantic City session, and the action of the executive committee was not sustained. - I am mentioning that in order that our position may be clear. It has never been obstructive; we have not sought to inject our program or to interfere with some other program, but we have endeavored to do something that would relieve the agricultural inequality. Mr. Kixcurnoe. Has the executive committee endorsed the Me-Nary-Haugen bill? Mr. Taser. Grange law provides that between session of the National Grange the executive committee is the legislative body for the National Grange and acts for it on matters on which the grange has not gone on record. Our organization has never gone on record for or against the principles of the McNary-Haugen bill. There has been introduced in the last Congress by Mr. Adkins what we might call the rough draft of the export debenture idea. There has been introduced in Congress by Mr. Jones—and I want to pause to say that our distinguished friend from Texas has shown a more sympathetic appreciation of the basic problems affecting agriculture, as we understand them, than many Members of Congress, and there Is much in the bills he has introduced. And I notice, Mr. Jones, that you have a still further improved copy of your bill. 306 AGRICULTURAL RELIEF We are directing our attention to-day toward a bill introduced by Congressman Ketcham (H. R. 10568) because it brings to bear on this question more of the principles that we believe are essential than any other bill so far introduced. T.ct me make this clear: The grange is never going to be in the position that the only kind of a bill that can be passed that will benefit agriculture is * our ” particular bill, without any amendments or without the dotting of any “i’s” or the crossing of any “t’.” We realize full well that we are not perfect. We realize that this committee will have to perfect and work out changes and plans; and the grange—and I repeat again, speaking for its 800,000 members—is extremely anxious for the passage of legislation by this session of Congress, that removes at least some of the inequalities that burden the American farmer—we do not say all of the inequalities, we say some of them. We are not presenting a perfect piece of legislation that reaches all the problems and all the ills of rural life. We are just attempting to do one thing—and I am addressing all my remarks to that one thing—to removing the inequalities in price that the legislative and commercial fabric of this Republic has built during a century and a quarter as relates to American agriculture. Mr. KincHELOE. You do not, then, come in the spirit that we must take the Ketcham bill or leave it at our veril. I am glad to hear you say that. Mr. AswerL. -That is very consoling. Mr. Kincuerok. I say you do not. You do not answer that question. That is true? Mr. Taser. We do not intend to dictate. My distinguished friend from Kentucky, I hope you may know us better. as we are going to organize granges in Kentucky. Mr. Kincnzeror. I hope you do. It is a mightly good organization. Mr. Taser. We hope to do nothing in the way of dictation. We want to cooperate and not dictate. Mr. Crarke. You are not taking the position, either, that you must have this or nothing, are you? ] Mr. Taser. We are not. We are supporting it because it is the est. Mr. Crarge. Certainly. Mr. Taser. We will prove to you it is the best, but we are not going to say it is the only thing that will do the trick. Mr. Witrtams. Leaving to the Committee on Agriculture the responsibility to determine what is the best thing should be done? Mr. Taper. I would say, not as a compliment but as a fact, that there is no group of 21 men in America that knows as much about all the problems of rural life as do the gentlemen around this committee table; and we accord to you the duty and the honor of working out that solution. Mr. PorNELL. I think the committee agree with vou unanimously, Mr. Taber. Mr. Taper. I am most delighted. I never had a committee to agree with me so unanimously before. I think the best thing for me to do right now, Mr. Chairman, is to stop short, because as we progress I am confident that the opinion will not be unanimous. = Mr. Aswerr. Did you ever say that to any other committee ? AGRICULTURAL RELIEF Mr. Tager. I never talked to such a distinguished committee before. [Laughter.] oe ; ; ; I am in a very fortunate position this morning. It is not necessary for me to take the time of this committee and paint a picture and hang it on the wall of the depression and the bad features of agriculture. You know about it. Every speaker who has preceded me has helped build part of the platform upon which I am standing this morning. Every speaker who has preceded me, almost without exception, during the seven years of your hearings has indicated that we have built a legislative and commercial fabric that has placed the American farmer at a disadvantage in comparison with our commercial and industrial life. We all agree to that, and it is unnecessary for me to spend any time painting a dark picture. I am going to paint a picture that is a little bit different. I want you to leave that in your memory if you forget everything else I have said, that the grange does not spread blue paint. We are not saying that agriculture is going to the dogs; we are not saying that peasantry is around the corner for American agriculture. But we are in trouble and we are going to get out. , But there is not any peasantry ahead for folks on the farms of America. We have got troubles and we have got problems. But 1930 and 1940 and 1950 will find on the hills and the valleys and the homes and the prairies of America red-blooded, real men and women on the farms, not peasants—upstanding, clear-thinking, liberty-loving folks, fighting for their own liberty and getting the things that are coming to them just in proportion as we fight to defend them. We are in bad shape. I could paint a very dark picture. I could tell of seeing the other day a friend standing by the courthouse with tears in his eyes as the old homestead was sold at sheriff's sale. We could go on and paint those pictures—not from my State but other States. But we have had too much gloom, we have had too much pessimism, we have had too much whining about troubles and not enough constructive thinking about the problems before us. You can not talk this farm situation away. We have got to think it away; we have got to fight it away; and I am old-fashioned enough to believe we have got to do a little praying. We come to-day and lay before you a bill that we think starts in the right direction. A century and a quarter ago, when the policy of this Government was being established, there was conflict between the great ideals of that day—one group had felt that we must remain agricultural ; another group that we must try to become industrial. The Inspiration for our program came in this early day and from Alexander Hamilton, the father of American finance. He was not the friend of the farmer—and I will speak perfectly frankly and say he was the friend of industry—he was the friend of capital. But he was air, We have had a lot of men who have been friends of industry and of capital that have not been fair. Alexander Hamilton realized 3 protective policy in America would build up American industry and American transportation and American finance. But he realized that if we did that at the expense of the basic producer the Nation would suffer. So Alexander Hamilton proposed—not the National 307 308 AGRICULTURAL RELIEF Grange, not David Lubin, not the distinguished economist, Doctor Stewart, of Illinois—but Alexander Hamilton pointed out that the first step in the tariff system was the other half of the tariff. We have just had a half tariff system a century and a quarter, and we penal-1zed agriculture by having half of it. As master of the National Grange I am not going to discuss high tariff, I am not going to discuss low tariff, and I am not going to discuss free trade. The grange will take its chances and the farmers of America will take their chances under any one of those three systems, provided he gets a fair onl, But the farmer is going to insist on something he has not yet had. As an individual I have very strong convictions. The first political speech I heard was made by the great statesman, William McKinley who talked 2 hours and 10 minutes, and as a boy who stayed from school to listen to that speech we enlisted for life. From the standpoint of the National Grange, high tariff, low tariff, free trade—we never discuss them. But 40 years ago the policy was laid down from which we have not deviated: “Tariff for all or tariff for none.” We farmers used to be thin-skinned when we were told we were talking politics. Oscar Underwood made the change from free trade, while in Congress, to advocate high protective policy. Oscar Underwood did it because he was representing his constituents; they had ceased to think in terms of politics and began to think in terms of business. Mr. Crarke. The man who succeeded in the McKinley district is now a distinguished member of this committee. Mr: Tourn, I am well aware of that fact. Ir. CrargEe. Congressman McS itt ( noted Dome. g cOweeney, sitting near the wall, a Mr. Taser. We only hope that Mr. McSweeney in the years ahead renders that same distinguished service to the public that the beloved McKinley rendered. He comes from a great district Bus going back to this problem, and I am taking more time than I In ende to develop it, but the point I am trying to make clear is pat we are trying to bring the farmer under the tariff and to bring develope within the industrial and commercial svstem we have Going back to Hamilton: He clearl i Naud overtale us as we porlized the baie: edocs. “oT Ne ow a be Teale gon Later on 3 13s not care to discuss it to-day. ME. JOXES. oI fac £ ion 1 his message in 1791 In the reps’ o 2 Ina te that recommendation in Ad be as e lreasury to the Congress, Mr. Taeer. You are ri ht. Th ion i i great document, and I on profonadly glad to den nan hat an "1 1 : ne 1 ona 1) ope a lot of other people will read it, because you will find in Tha me surprising things, some surprising prophesy. fariffs com, pass over a long period of development. Protective s came and went. Agricul £ . could not be brought inte ure requently suffered because it mist agrees that the [otetin rs wou WW Ar sedieg ably affect the price of that modity SF thoatty can not favor. rls, wale hr at commodity if there is an exportable monopoly control of the commodity. Unfor- AGRICULTURAL RELIEF 309 tunately business by management, the manufacturer by managenent—and I commend him and congratulate him for it, and hope we vill learn some lessons from business, from labor—the task of the farmer must be to gather some of this information and put it in practice. But through management and by management our friends in industry can have an influence on the surplus and upon the output and upon the product. oo Agriculture, for climatic and other reasons, has that possibility; consequently, we sometimes have the benefit of the tariff on paper vithout the benefit in the pocketbook. Consequently, we direct ourselves again to this proposition: The Grange’s 40-year-old deciaration was carried out by putting higher schedules in the various tariff acts. They helped at times—they may have helped on some -ommodities, but take such products as wheat, of which there is a great exportable surplus. There has not been a direct benefit, because of that exportable surplus. Liverpool, as you have been told again and again, and not America sets the price. Almost 40 years ago David Lubin, a great prophet and idealist, a ‘hinker and profound scholar, a man who had amassed wealth in commerce, developed what is known as the Lubin idea—another approach to what we are coming to to-day. Darid Lubin founded the [nternational Institute of Agriculture at Rome, interested the kings and queens in Europe in a great movement, and lost his enthusiasm for tariff reform. Mr. Adkins, Doctor Stewart, Mr. Jones, Mr. Ketcham, and a number of others have been finding an idea that was needed, and we to-day should translate that idea into law to bring the tariff to the farmer. {Vhen we come to the question of the export debenture bill, H. R. 10568 or some other bill with the same principle, we find in the simplest barnyard English—of course, I know this committee would prefer to have the philosopher and the student discuss these questions, and we will let Doctor Stewart and Mr. Goss come later—but in the barnyard English that we understand out in the country. The export debenture plan, in the simplest language, is an attempt to bring tariff benefits to farm commodities of which there is an exportable surplus. It attempts to bring the farmer under the tariff; it attempts to do it in harmony with established precedents, and I believe, and we hope we can prove to you. that it will do it: and it does it with real simplicity. [he Grange has some old-time notions. We believe that there are enough people now.on the pay voll of the United States. Every thirteenth man in America is drawing pay from the Nation, the State, the county, the township, or the school district; and that is enough. Consequently, we are not seeking high salaries; and we propose a bill without added salaries. That is a new thing to present to Congress. We provide an ex officio board—Dbecause we have explained that it does not require a board so, without salaries, without expenses and, still more marvelous, without appropriation, save $50,000 for incidentals, we propose to lift the income of American agriculture at least a billion dollars per year. We propose, in the simplest English, that as we set up our ex officio board—and I again nause : Mr. Albert Goss, of Seattle, Wash., who has been collaborat- 310 AGRICULTURAL RELIEF ing with these others in this work, hn Jollow and sspiain Driefly this bill. I am not going to explain 1t, for the reason tha wan to the background and the broad foundation. We hope for relief now, not in 1931, not In 1932, not after a presidential campaign, not pen a congressional election Let me say ¥ ou centlemen, we like this committee. u am not concerne about who is President of the United States, or whether we pass legislation that brings you back or keeps you away. We are concerned in legislation that benefits agriculture. We are not concerned a rap about the political angles of legislation or the salary angles of legislation. Relief to agriculture is our only concern and our only program, and I do not like the word “ relief ”; I like the word “equality.” The farmer does not want relief; he just wants the same advantages—he wants no advantages, no privileges—just what the other fellow has; and to get it he may have to have different machinery and a little different equipment. I come to the question of providing for the issuance of export debenture certificates by a nonsalaried board, and we are hoping for them to be issued for the 1928 crop—not some other crop. These export debenture certificates will be issued through the export debenture board, which will be later explained. They will be instrumentalities of the Government, receivable at parts of entry for customs duty. Money will be deflected from the Treasury, but that point will be handled a little later, and indicating our eliesion from the Treasury is just the same. Mr. Jones and every other person who studies the plan will agree with me it is just the same as deflecting money from the Treasury under certain types of legislation now set forth. , These export debenture certificates, being acceptable for import duties, give the export debenture certificate face value minus exchange rates. Mr. Kincueroe. Have they any other value for any other purpose? Mr. Taser. No; they have no value for any other purpose. I am hoping that the wisdom of the committee—we have not included that 5 the bill—will find a way whereby the Federal reserve banks can handle this without cost, except interest charges. But that 1s e are not discussing now. We provide, for example, that the exporter or cooperative organization out i Doon Aswell’s district ship through Galveston 10.000 ushels of wheat, for example. We do not want to start on theory; we want to start some place, and we start with 50 per cent of the tariff on certain designated commodities—we include all commodities upon which there is a tariff and one commodity upon which there ought to be a tariff. But I will discuss that in a moment. We start with 50 per cent of the tariff. Mr. Aswell, for example, ships hye 10,000 bushels of wheat—T expect it would be something se in his case. Mr: AswerL. There is no tariff on the cotton which I will ship. q r. Taper. I am ‘going to prove to you and to this committee hat Sar organization is fair, because much of the benefits that we provide go to sections where our membership is the weakest. AGRICULTURAL RELIEF 311 Going on to wheat, for example, 10,000 bushels of wheat going abroad, upon which there is an export debenture value of 21 cents per bushel. They issue the cooperative a debenture certificate of £2,100, which is acceptable at New Orleans or other port for the payment of import duties. ~ Mr. AsweLr. Upon what—anything Mr. Taper. Upon anything upon which there is a tariff. Consequently the cooperatives get the Liverpool price for their wheat plus 21 cents; there goes back to the cooperative 21 cents minus the expense of cashing the debenture. Mr. KiNcHELOE. Let me interrupt you right there, because you are getting right down to the meat of this thing I have been thinking about. That assertion is all right where the deal is by cooperatives. But suppose I am a wheat grower out in Kentucky and I sell to another man, who exports it himself? Mr. Taper. Competition between exporters will give the farmer the added value. Mr. KincueLok. I am interested in this fellow who does not belong to the cooperative organization, not to any farmers’ organization, who sells to the individual who exports. How are you going to help him ? [ am merely seeking information. Mr. Taper. The cooperative can get 21 cents; the exporter can get 21 cents in debentures so the price level of wheat in America steps up to 21 cents. Why? The cooperative or the exporter can get the Liverpool price plus one-half the tariff. Mr. AsweLr. What would that mean if you were talking about the man who already sold it? Mr. Taper. If he sold before the operation of the law he might not participate. Mr. Kixcueroe. He would not participate; that is the trouble about it with me. There are a whole lot of these poor fellows who can not sit around until the 1st of July. They have got to eet some bread. I want that developed right here. Mr. Taser. I will develop it right now. Mr. KincaLeoe. All right. Mr. Taser. It would be in operation continuously after the 1st of July, or after the 1st of March, if that was the date stated in the law. Mr. Kixcurroe. You are dealing so far in the illustrations you have given with cooperatives, and I will agree with you if we could get 100 per cent of the farmers of this Nation to act as a unit they vould not need Congress or anybody else to assist them. Mr. Jones. Might I suggest there, if you will permit me to interpolate, that in the last bill introduced, and which I see has not come up, I provide that the board may organize an export corporation as a sort of “mascot behind the door,” so that if those exporters get the full benefit or if there is not cooperative organization adequate for handling it, the board may give power to this export corporation and let it handle the product, limiting the debenture, if necessary. Mr. KiNcHELOE. Are you going to give the export corporation bower to buy all the certificates? Mr. Jones. Any of these commodities. R6160—28—SFR E. PT 5H— 312 AGRICULTURAL RELIEF Mr. KincueLog. Suppose the fellow down in the country does not sell wheat to a corporation but to Doctor Aswell. oo Mr. Jones. If the export icorporation or any other organization has the right to pay $1.25 for wheat there is nobody going to sell for $1.05, and that will automatically bring the market up. oo Mr. KincuerLoe. Who is going to back up the export corporation with that guarantee? Where are you going to get the money to carry it out? Mo. Jones. Provided the Government furnished the money—but the board may in any way it sees fit limit to the export corporation by the issuance of these debentures or giving them anv advantages it sees fit. Mr. Kincueror. I understood him to say there was no appropriation in the bill. Mr. Jones. I do not think it would be necessary to use it. Mr. Taser. Doctor Kincheloe—— Mr. KincHELOE. You can leave off the doctor. I am not a doctor. I am trying to assist the farmer. Mr. Taper. Then, Mr. Kincheloe. The Liverpool market now determines the price, does it not? Mr. KINCHELOE. Yes. Mr. Taper. Your man in Kentucky has the same chance to get the market price as anyone. We have raised the market price 21 cents; he has the same chance. So much for our volume of wheat. - We have touched only part of the commodities on the schedule, because it indicates that we provide a board that may study these problems and may place a debenture upon commodities upon which there is a tariff. We want to make it clear just what this program will do, and 1 have provided a schedule in accordance with the bill. We have taken the five-year tabulations of the Department of Agriculture on the seven main exports of agricultural commodities, and taking the fiveyear average with half of the tariff we find that the operation of this bill would direct from the Treasury—would keep out of the Treasury on the last five-year basis 21 cents a bushel on wheat to the amount of $29,000,000; export on flour to the amount of $14,000,000; export os corn; $5,000,000: rice and rice flour. $1.800.000; leaf tobacco. 4 3 ) . Mr. Kincaeroe. What do you mean when you use the expression “by reason of the tariff already on it”? ’ Mr. TaBER. By the proposed debenture schedule. NS Sacre, By reason of the tariff on tobacco? r. Taper. Yes. 0 Gm Wait a minute before you get any further. The wy Tid 1 Lobaceo that has anv tariff benefits at all is the cicar-Mr. Taper. My friend, just hold on—— Mr oy Ng Wait a minute. Your tariff on tobaccc—— AM ER. You do not understand me. The debenture plan will br ing the tariff to the tobacco farmer, fohar i ha Om, Yar foi on tobacco is just as much a fraud on as much, and corn on eat; as you say, it has helped just about carte r commodities which has an exportable AGRICULTURAL RELIEF Mr. Taser. The debenture plan will make it operate effectively to the tune of $15,000,000. Mr. KincHELOE. As a matter of fact, so far as tobacco is concerned, { fear it will not help it, and it is nonsense to be talking about a tariff on this dark tobacco or any other tobacco that is exported. Mr. Taser. My friend, you do not understand what I am driving at; you do not understand our plan. Mr. KincHELOE. No; I do not. Mr. Taser. I am trying to point out that the export debenture ralue on tobacco would have been $15,000,000 in America each year for five years. That is what I was trying to say, and I am trying to say, that the export debenture value as fixed by the bill—our rates are not perfect—may be too high or too low, but we think they are right, and they have been worked out very carefully. Mr. KixcHELOE. Would it work? Mr. Taser. If you will turn to the schedule, which will be exblained to you to-morrow, you will see it will work. It will raise—— Mr. Aswerr. Without a tariff? Mr. TaBer. There ought to be a tariff. Mr. AswerL. I say, does it work without a tariff % Mr. TaBer. It can be made to work without a tariff. Mr. AsweLr. If there is no tariff, how will it work? Mr. Taser. I did not want to get into that detail, Mr. Aswell, but ve will do it. Mr. AsweLL. You raised the question and I want you to explain it. Mr. Taper. We provide under the bill—may I read section 8, pace 132 [Reading :] 313 Pending the enactment of legislation providing a tariff duty on cotton, regculations requiring that metal tags or other appropriate markings be placed on all bales of cotton produced in foreign countries and allowed transit through the "nited States for exportation may be prescribed by the board. That is to prevent cotton coming in and drawing a debenture value that was not n*~luced on ap American farm. Mr. Swaxg Mid vay eay there ought to be a tariff on cotton ? Mr. Taper. [ vr." ceason it would simplify the operations of the bill very muc Mr. Swank. The rents a pound. Mr. TaBer. Yes; they provide 2 cents a pound. Mr. Swank. That would be % cents whether any tariff was on zotton or not, would it not? Mr. Taper. If there were no fraud, it would worx. Mr. Swaxk. How much now on cotton ¢ Mr. Taser. About $69,000,000. Mr. Kincueroe. Whenever the domestic price becomes higher than *he world’s market without a tariff 2 Mr. Taner. By requiring at the ports of entry the tagging and the stamping of every bale of cotton that comes in and then providing a heavy penalty for removing those tags, it could be made to work. There ought to be a tariff on cotton to prevent Egypt an long-staple ~otton replacing American cotton. Mr. KincHELOE. As I say, do you know how we are going to keep but imports into this country upon which there is no tariff whenever the domestic price becomes hicher than the world’s price? EW. 314 AGRICULTURAL RELIEF Mr. Taser. Require at the ports of entry that no man can import cotton into the United States until he does certain things. Mr. Kincueror. Of course, that is equivalent to a tariff. Mr. Taper. He has got to put a metal tag on that cotton and stamp the bales of cotton in such a manner that they can easily be distinguished from an American-grown bale. He can not get his cotton into the United States unless he does certain things. Mr. KincarLOE. Suppose he does that and it does not cost him anything. What becomes of it? Does it not come in competition with domestically grown cotton? Mr. Taper. We provide in our bill for transportation through the United States for export. We do that because certain cotton comes in from Mexico and goes through the United States. Of course, if Doctor Aswell does not like the cotton schedule it could be taken out, simplifying that bill and reducing the cost. Mr. Aswerr. I do not want it taken out. Mr. Taser. It would save $69,000,000 to take it out. Mr. AswerLL. If cotton was selling at 11 cents it would not help very much. Mr. Jones. That two cents would be the profit. There was not any profit at 11 cents; it would be additional. Mr. Taser. Here is the schedule I am going to file in the record: Fresh beef and veal would add $50,000; swine would add $36,500; fresh pork would add $121,699. The total amount of money prevented from getting into the Treasury would be $146.183.341. Mr. KincueLoe. That is a year? Mr. Taper. That is the five-year average from the figures from the Department of Agriculture. (The statement submitted and referred to by Mr. Taber is as follows?) Averane amount over 5-year period of debentures under Ketcham bill [Computations made from figures supplied by Bureau of Agricultural Economics, United States Demartment of Agriculture? Wheat co ________ Wheat flour meen CONN eet tt Cv ——— Rice (flour, meal. ete.. included) _ meme Leaf tobaceO— mm. ee. COE ON ee em Cattle mo. eee Fresh beef and veal ___________ ___ oo em SWIC Fresh pork________________ SE Canned pork _____ __________________ Pickled pork___________._. —_—— Bacon. Hams_______________ ee Yard $29, 431, 248 14, 548, 264 5, 006, 925 1, 875, 185 15, 095, 240 69, 042, 000 157, 500 50, 520 36, 500 121, 699 35, b70 335, 530 3, 209, 650 2, 969, 410 4. 268. 100 i 146, 183, 341 You say it is a good bit of money. It is. And that raises the question, How are you going to fill this hole in the Treasury? In Le et place, we have a number of agricultural commodities that iy not now have a tariff that they should have. It is quite possible at there should be some increases along that line. But prosperity AGRICULTURAL RELIEF 315 brings revenue. If this particular schedule raises, on the Department of Agriculture figures for the 5-year average on Anierican crops approximately a billion dollars a year, that billion dollars a year income in revenue and inheritances would go a very great way toward filling up this hole. Mr. AsweLL. Yes; but we can not get the tiiiff discussed under this administration. They will not ...1" Mr. Taser. We talk about it. Mr. ASWELL. You are not a Member of Congress. Mr. Taser. Be that as it may—— Mr. Aswern. I am serious about it. You say the tariff is needed. How are you going to get it on unless you can discuss it in Congress? Mr. Taprr. I am going to discuss the tariff a little bit later. But that does not relate to the particular bill at this time. Mr. Aswern. Oh, ves; it does. You said we have to put a tariff on the whole. How are you going to discuss it? Mr. Taser. It will be discussed ; it will have to be. Mr. Aswrrn. You will guarantee that? Mr. Taper. No; I will not. But I am going to say I think it will he discussed. Mr. KincareLoe. There has been a cood deal of talk here around the committee table ever since this hearing started about the practicability of getting a bill that has a chance of becoming a law. Mr. Taper. You are talking my language. Mr. Kixcurror. That does not disturb me at all. T have a responsibility myself that I am going to carry out, and let it go where it will. That does not disturb me. But do you think the President of the United States will sign a bill that reduces the tariff of this country $146,183,000 a year? Mr. Taser. I do not think it will reduce the revenue that much, and [ do not think it will reduce the total revenue at all—I have tried very earnestly to sell the President of the United States this idea. Mr. Aswerr. Did you succeed ? Mr. Taper. He listened eloquently. [Laughter.] Mr. AsweLL. You are not in position to make any promise for him yet? Mr. Kincueroe. I am asking that bearing on the proposition of the probability of this bill becoming a law. Mr. Kercuam. If Mr. Taber will permit me, in answering your question of a moment ago, you said, “ Do vou think the President will sign any bill that will reduce the tariffs $£146,000.00072 Mr. Taser. It does not lower the tariff. Mr. KincaerLoE. I understand it does not. Mr. Joxkes. It keeps the tariff right where it is. Mr. Kixcaeroe. He did not say “tariff 7; he said “revenue.” Mr. Taper. He has raised a point I did not bring in. I am going to just bring it in a little later. I am going to answer Mr. Kincheloe and I presume he voted for some of the schedules. I know many men around this table voted for these schedules. Mr. Kixcueroe. What schedules? Mr. Taser. I am now going to discuss. You are raising the quesion about this deflectine money from the Treasury. ch 316 = AGRICULTURAL RELIEF Mr. Kixcurroe. Oh, no; I am not asking you that. I am talking of the possibility of this bill ever being signed by the President if it went over, and I am asking your opinion, if vou think he would sign it. Mr. Taser. That is a question that is not germane to the discussion. Mr. KincHELOE. I do not think it is germane around here. But when they talk about the McNary-Haugen bill, that is the first thing that comes, “ Will the President sign that?” If he will not stand for the McNary-Haugen bill, let us get something the President will sign. Mr. Taper. This bill answers every feature of the veto. Mr. Kincueroe. If you are going along that line, you had best gest something the President will sign. Mr. Taser. Could we get two-thirds vote in Congress to pass it? Mr. KincHELOE. I do not know. Mr. Taser. I think we can. Mr. Kercaam. And if he did veto it he certainly would be put on record as against something for which he has stood during his whole life, namely, the maintenance of a protective principle. That would be a square-toed proposition. I think no lawyer I have ever heard of has ever raised the question of the constitutionality of this bill. Mr. KincHELOE. No; and they do not on the tariff. But there is a policy that involves a good deal more than constitutionality. Mr. Taper. Mr. Chairman, I hope that they do not ask me foolish questions, and a plain farmer is not supposed to know anything about the President of the United States. ir KincuaELOE. 1 hope you will not give any foolish answers either. Mr. Taper. Mr. Chairman, we are raising the question of deflecting revenue from the Treasury, and I wanted to place in the record here as an exhibit statistics showing fully that the export debenture method is no more a subsidy, is no more an agency to deflect the Fv from the Treasury than are now on the statute books and in operation, The first exhibit I give you will be D-1, which relates to butter. I am giving you that because I am a dairyman and milk Jersey cows. We raised the tariff on butter in the closing days of 1922. 1 have the figures for the United States Tariff Commission of the butter imports at 8 cents per pound from January 1, 1923, to April 1, 1926, at 8 cents a pound. During that period 50.226,406 pounds of butter came into the United States for consumption. The tariff on this butter was 8 cents a pound, or a total of $4,018,113, an average tor all the months under the 8-cent tariff of $103,029. A. - And I want my distinguished friend to remember that under the operation of the flexible provisions of the tariff a proclamation by the President of the United States was issued raising the tariff on Pitan Soom 8 cents to 12 cents; that it went into effect in April, Toil my memory serves me correctly. But the figures of the rit Commission show that during the 21 months, since the 12-cent jeri went into effect, that there has been imported for consumption ins Ae United States 11,907,428 pounds at 12 cents, yielding $1.428.-892, or $68,043 per month. Mr. KixcureLoe. Then. you do not think— AGRICULTURAL RELIEF 317 Mr. Taser. Just a minute—a net loss per month of $34,986, or a total net loss in 21 months of $734,706 in revenue. I am for it. [t saved the American dairy industry great losses. It was of valve to the farmers. But I first want to show that by raising the tariff so high that butter does not come in we will keep money out of the Treasury, and you do it under the operation of the tariff. I will take up another exhibit—— Mr. KincueLoE. Take wheat. You admitted awhile ago you did not think a tariff on wheat at 42 cents was effective to the American farmer ¢ Mr. Taser. I did. Mr. KixcueLoe. What are you going to do in this bill? Are you going to raise it higher? Mr. TaBer. No; we are going to make the tariff effective under the export debenture. Mr. KercaaMm. You would not go so far as to say the tariff is not effective ? Mr. TaBer. No; I would not say that, but it is not 42 cents effective. But the point I want to get over there is that high protective rates—my friend Fort will agree you can raise a rate so high that vou keep goods away; and when you have the rate sn» high that vou keep goods away you keep the revenue out. (The statement submitted by Mr. Taber, D-1, is as follows:) Effect of high tariff rates on total duty-collected butter—Imports for consumption "1 'ZR LU CENTS A POUND TARI:" 18. Tariff Commission} ax 92 928 1926 ... “IY Fa) mborts nnder Rf cents rate Pounds mported 20, 809, 638 9, 279, 309 6, 861. 435 1 278 024 +i. Value of imports 37, 543, 698 5,958, 372 2, 533, 219 i 1A Av 31 a7t Duty rollected $1, 664, 771 L542, 345 548, 915 2,2 IR? 15 Kquivalent ad valorem rate 22.07 22. 17 71. 50 0) 66 50,226,406 pounds inported at 8 cents a pound yielded $4,018,113 for a period of 39 months Average monthlv revenue under 8 cents a pound rate—3103.029. JDERI12CENTS A POUNDTARIFFE 1926 (9 months). ___ 1927 .__.. Total imports under 12 cents taritr Pounds mported Value of \mports Duty ollected Fquivalent ad vaorem ate 59 32 11,907, 423 pounds imported at 12 cents a pound yielded $1,428,892 for a period of 21 months. Average monthly revenue under 12 cents 8 POUNd TALE. - «coo oem ae eee eo memoeee me $68,043 Average monthly loss to Treasury under 12 cents rate as compared with 8 cents rate... ........_ 34,986 Loss to Treasury for 21-month period 734. 706 318 AGRICULTURAL RELIEF Mr. Taper. I am going to turn to another subject, the question of aluminum hollow ware. I may mention that in 1920 the value of imports for consumption coming into the United States was $422,000, and the revenue on that $105,000; in 1921 the revenue was $168,000. In each case the average ad valorem duty was 25. In 1922 a large influx was coming in to try to get ahead of the tariff, and $345,000 in revenue was paid; or, during the last three years, under the old law on aluminum kitchen ware $619,149 was collected in revenue. Under the new schedule during the last three years we collected only $298,009. Ir other words, the net loss in revenue—and the majority of this committee voted for this schedule and the President signed it, was $391,140. You benefited the aluminum manufacturer but you keep money out of the Treasury. Mr. Swank. You remember how the Republican Party members voted for that. Mr. Taper. I said the majority. I do not know your politics. Mr. Kinocmrroe. The majority in numbers, do you mean? In other words, that is practically a prohibitive tariff for the benefit of the industry in this country. Do you think that was a good provision ? Mr. Taser. I am not discussing the provision. Mr. Kincueror. I was just wondering whether that helped the housewives of America, the farmers’ wives that used aluminum. ; Mr. Taser. I am talking about a system to bring the tariff to the armer.. . (The statement submitted by Mr. Taber, D-2, is as follows:) Effect of high tariff rates on total duty collected—Aluminum hollow ware [U. 8. Tariff Commission] aa L127 | —— 1921. 199° TTTTTTRTTT TmmromommomomoEnmes Value of imports $422, 024 672, 239 =oN £02 Duty rollected $105, 506 168, 060 DAF EO Equivalent ad valorem rate 25 25 45. 43 C 1925... 1926. ____. 1097 77.19 78.30 oa 2 N00 Net loss in revenite £201 140 We will take up another schedule. During the three years—1920, 1921, and 1922—under the low schedule on pocketknives and penknives we received in revenue $1,278,652, and the average ad valorem equivalent was 57 per cent. We raised the tariff resuting in an average ad valorem equivalent of 115, and the revenue was $923,868, a net Joss to the Treasury of the United States of $354.784. AGRICULTURAL RELIEF (The statement submitted by Mr. Taber, D4, is as follows:) 319 Effect of hioh tariff rates on total duty collected, pen or pocketknives, all types [U. S. Tariff Commission] 520. 921. Q929 1925. 926 eeee an 10927 my _ Value of imports 585, 376 797, 543 036. 448 Duty rollected 300, 706 362, 351 “RA AOR” Equivalent ad valorem rate 51 56 63 5 Net loss in reventie. $354.784 Mr. TaBer. I have taken three schedules that I know something about—butter, because I benefited as a dairyman and was for it. Understand. the grange and farm organizations asked for this in--rease in the tariff. Mr. Kincueroe. On butter? Mr. Taser. Yes; on butter. This Congress voted for the three schedules I mentioned. and each me of them kept money from the Treasury. But the point I am trying to make is, first, that this bill is no more a subsidy than the high protective schedules in the tariff. It keeps no more money out of the Treasury than the protective schedules of the tariff; and itis no more a subsidy than the equalization fee contained in one of the bills—I am not going to discuss that except just to indicate it is no more of a subsidy than that. I had a friend count up the other day the advance in railroad stocks and bonds since the passage of the Esch-Cummins Act, and it looks like billions, not millions. I am mentioning that not in criticism of Congress but to show the effect of legislation. You can help agriculture in one of two ways: Reduce the tariff, eliminate immigration restrictions, interest charges on railroads, and other legislation that may be destructive and causes dislocation. Mr. KincueLos. You think that if some of the provisions of the Fordnay-Malhnnber. conpandities were reduced it would be destructive? Mr. Taper. Some provisions could be reduced. I am not discussng the tariff. It is here as a part ofthe commercial fabric of the country. Some schedules are too high unless we bring the farmer under the system. Mr. Kincueroe. The tariff that you mention in those schedules was put there for the purpose of protection, not for the purpose of vetting revenue. You do not think the people who are the benefi-“iaries under the aluminum tariff had any idea about revenue when they put the higher tariff on it? I agree with you on that proposition. 320 AGRICULTURAL RELIEF Mr. Taper. As for the butter tariff, I am not objecting. Mr. KincHELOE. You are talking about being here for the farmers; [ am talking about being here for the poor farmers back home who have to seil all their stuff in the world’s market, and practicall every manufactured thing they buy they must purchase In a rotec. tive market, while the beneficiaries are making millions out ye. th sweat and toil of these farmers you are supposed to represent; ot you want to tell this committee that you are opposed to the reduction of a cent off the tariff on these things already prohibitive? | Mr. Taper. I am saying plainly and emphatically that if you can not bring the farmer under the protective tariff you must oh it Mr. KincueLoe. What is the reason Congress could not do it on commodities that have got a world monopoly ¢ ! Mr. Taser. That might be necessary. The point I am trying t me ! io we have 2 condition and not a theory. VINE 10 Ir. KincueLoE. The reason I interrupted i you think to lower these tariffs would be destructive? that you suid Mr. Taser. I included a number of other things. You have got to do more than lower the tariff. Doctor Friday ‘Was talking at th Ohio Farmer’s Week a few days ago, and put on the wall the a erage price level for the last six years in the United States on manufactured commodities, on agricultural commodities, on labor, and on t x ti on: Teas stand at 235; labor at 201; manufactured "woods about, 169; pt agricultural commodities for the 5-year average a great deal The thi 0 . 3 . . . ” ha e thing rn ne to emphasize is that taxation is a factor, s to labor costs and the farmer— i our colution is not to reduce labor costs or Be labor Ee heat consumer that the American farmer has is the well- a k Shot have either got to be destructive and pull woe 1 he» NE Be cee 2 Sow wy ought to be pulled down—we J else down and somebody else down or bui as a general policy that we rill he a. i horal orice level of the things that agriculture consime vou general un aguiculture’s price level. And experience pos steno that a armer alway it i i Ri ths Our debts Ho ey ot the ti § Snel OF Bn potas vl position. We are a creditor nation. We wa ro We dame a Silt producing nation, and we want to b high oo be prety he ; Cs o be a high-tariff nation. That is a r. McSwer Ve alr. MoS EENEY. Would not this affect the allied debts in small Mr. TaBEr. i a oop Ib would nag offers the allied debts at all. produced abroad to be rl pres oh opportunity for commodities Mr. Taper. It might and St might bY Fs as is Tut benture certificates are ust th ght not. You see, these export dedollar bills for & definite na © same as money, just the same as 20-paid last year; we provide For $146 "4 S00 1 SUB 000000 In tanif ink it would stimulate imports: it ha in debgpinres L000 Germany and Swedes, wo ports; it has not been the experience in wold Toh Lr ere this plan has been in operation. It Ss. because of the cash value of the de- AGRICULTURAL RELIEF penture, unless we did some unwise things, and we have checked this danger in our bill. I have taken more of your time than I intended. I want to cover one or two points about the test of farm-relief legislation. The first test is, can it be passed—and I say * passed ” not in the terms of veto, but in the support of Congress. We believe that a proposition of this kind is so fair, so simple, brings new sources of support, brings new forces that it can be passed by this Congress and become a law. The second is, will it work? There has been no complaint anywhere, no charge made by anyone that the export debenture idea would not raise price levels. It brings the farmer under the protective system, whether tobacco or wheat, to the extent of the amount of the debenture, and raises general farm-price levels. No one denies this. We want to be absolutely frank about it. We know it is going to cost the Government something. But if the Government in its wisdom has built up a legislative and commercial fabric that discriminates against one group, it is the responsibility of the Government to remove as much as it may those inequalities. The third test, is it constitutional? The drawback provision of the tariff, to which this is very similar, has been tested in the highest courts of the land. It has been in operation for generations. The remitted tariff-duty provision has had congressional approval year after year, and has had Supreme Court interpretations. And I pause to remind you that in the last 5 years, under the drawback provision of the tariff, we have paid back to the American munufacturers sums varying from $14.000.000 to $35.000.000 per year. And I call your attention to the fact that under the remitted taritfduty provision we have remitted on the last 5 years on Cuban sugar alone $135,000,000; in the last 19 vears we have remitted on Cuban sugar $375.000.000. Mr. Pcryewn. I suppose you have made a rough estimate as to how much money this would keep out of the Treasury? Mr. Taper. I just stated it would be $146.000.000 based on the last >-vear average under the rates of the bill, according to the ficures f the Department of Agriculture. Mr. KincueLoE. Speaking of this drawback, have you got statistics to show how much drawback the millers have on their products on wheat that came from Canada? Mr. Taper. We have that worked out. but it is long and complicated. Mr. KixcueLoe. I thought probably vou had it there. ~ Mr. Taser. I have not it in my papers here. But we can get it, if you want it. Mr. Aswerr. Mr. Taber, I did not quite see how you arrived at that sum. We exported 11,000,000 bales of cotton, and at $10 a oale that would be $110,000,000. Mr. Taper. I am talking about the last 5-vear average. Mr. CLargE. All these figures ought to be in the record. Mr. Taser. I am putting them in the record, and we will be glad ro work out any special table you desire. Mr. KincHELOE. I wish you would put in that miller proposition. Mr. Taper. All right. I will ask our statistician to work out the drawback on flour and put it in the record. 321 322 AGRICULTURAL RELIEF But the point I am making—let us get the picture before us: We have had the tariff and, whether we like it or do not like it, we have been talking about free trade; we have been talking about high tariff and low tariff. But there has been some bunk and some gold bricks handed out and the farmer has gotten more than his share. Let us face the issue fairly. In a century and a quarter we have never been on an absolutely free trade basis. We have approached it. The protective poliey is now the policy of the country. It possibly will remain so; I don’t know; I am not discussing that. 1 do not want to discuss it, because it has no relation to this question. If we are going to have the tariff, bring the farmer under it: and we believe this is the first and best method. Tf the drawback provision of the tariff is constitutional, if we can legislatively deflect $375,000,000 over a 19-year period, from the Treasury for the benefit of the Cuban planters—the consumer gets some benefit; we do not deny that—we certainly could deflect some money to benefit the American farmer. We believe there is no question about the constitutionality; and it is fair. It will raise some wholesale prices. I see by Washington figures that oat of an 8-cent loaf of bread the farmer gets 1.15 cents, so it is plain retail prices need not be raised. We insist the 21-cent raise in the price of wheat need not affect the retail price of bread and need not affect the retail price of many commodities. There are some conumnodities it might possibly cause some retail advance. Cooperative marketing, economy and efficiency might eliminate some of it. It simply says to the American consumer that farm products will be treated the same as other products, and that the advantages that accrue through the high wage, through restrictions, and through tariff regulation will be more evenly distributed. : The thing I want you to remember is that the debenture plan will stand up under each test. It can be passed we believe. It will raise farm prices. It has the advantages of constitutionality, as the drawback provisions and other provisions have been tested in the courts. It is fair to the consumer and the farmer. Mr. Aswerr. In Germany the debenture certificate is good for only 90 days. How long do you propose to have it good for ¢ Mr. TaBer. One year; on account of seasonable exportations in such matters as cotton. Mr. XercaaMm. In giving away to other witnesses. if desired, you will come back for further questions? Mr, Taper. If desired, we will be recalled for testimonv and crossquestioning at any time. In conclusion we want to make it clear to the committee that we appeal to this committee and to the farm organizations of America. We are willing to surrender some preconceived notions and our personal ideas if it will assist the American farmer. Let us forget Sienlinral politics and think in terms of agricultural statesmanship. © grange wants to demonstrate its interest and desire to cooperate. brine RT 1aber, will you or one of the other witnesses cute will ba Suk att we James of this export debenture certifio oi Oe en hae ta he origina producer. whether he 1s a AGRICULTURAL RELIEF 2323 Myr. Taper. Mr. Stewart will answer that particular question. I refer it to him now, because I want to give away to another witness who wants to testify this morning. Mr. Aswerr. May I ask you one more question? In Germany, when the wheat is exported the debenture certificate, called the sinferchien, applies only to products of wheat. Whv do you make it apply to every product? Mr. Taper. It has been suggested that we make it apply only to agricultural products. That has certain disadvantages. so we make 't apply to everything. Mr. Aswert. Why? Mr. Taner. To be certain every product will have debenture advantage. You would not say to apply it only to cotton, because there is no tariff on cotton. It would not be fair to have it anv other way than to make it apply to all commodities. Mr. Kincureroe. Doctor, before this hearing is over, so far as I am concerned, I want to hear somebody who knows discuss the proposition of how this debenture is going to help the products upon which there is no tariff or upon which there is a tariff that is not effective to-day. Mr, Taper. We will point out—there is a provision in the bill that allows the board to adjust the debenture to the difference in cost of production. That will be discussed. Any point that you have will be answered either by this witness or another. Mr. Kincaeroe. What do you mean by giving them power to levy a tariff or something similar to that? Mr. Taser. Do not confuse the tariff with the export debenture program. Mr. Kixcueroe. The debenture is not confusing. I do know something of the economic proposition that whenever you make the domestic price of any agricultural commodity higher than the world’s price there are going to be importations of that; and the only way they can get the advantage is the difference in the tariff; that is all. Mr. Jones. I suggest this in that connection, however, that whatever force there is to your objection applies equally to the McNary-Haugen bill. Mr. KixcaerLoe. I am not objecting; I am just asking for information. Mr. JoxEs. The gentleman voted for that bill, and, of course, there is that measure of defi: in ny of these bills as to any commodity that does not carry = turf. However, with the little cotton that is growing abroad, I think the advantage of the increase would be a very great one. Mr. KincueLoE. I am open minded upon this proposition. But there is some information I want about it. Mr. Kercaam. Mr. Chairman, we have two witnesses that I would be very glad if we could hear this morning. One of them only wanted a few minutes, and the other I certainly wanted to hear for a half hour, because he has to leave; and I am sure we will not feel ‘hat all we could learn will be learned unless he did occupy the stand. So far as the present witness is concerned, I am sure we are very happy to have him here. I do not know that this is to be his farewell address to this body, but it is his farewell visit to this par- 324 AGRICULTURAL RELIEF ticular committee; and I can think of no more delightful subject upon which to hear a valedictory from this very charming valedictorian than a discussion of the debenture plan by Hon. Tom Connally of Texas. [Apvlause.] STATEMENT OF HON. TOM CONNALLY, REPRESENTATIVE IN CONGRESS FROM TEE STATE OF TEXAS Mr. ConnarrLy. Mr. Chairman and gentlemen of the committee, I thank you for your indulgence for just a few minutes and for this Ketcham, for giving me this opportunity to make a few observations sense of the term anywhere. I hove to be around these parts for a long while yet. Mr. Harr. In higher degree. Mr. Connarry. I thank the gentleman from Michigan, Mr. Ketcham, for giving me this opportunity to make a few observations in reference to agricultural legislation. Probably most of you know I voted against the McNary-Haugen bill. I have been abused by many cooperative representatives here who are drawing pretty handsome salaries. But I have been trying to vote for the farmer, whether he belonged to a cooperative organization or not; and what I wanted to suggest to the committee this morning is that it seems to me as a Member of Congress that 1t is about time for this committee and for the Congress to quit fooling the farmer and really pass some practical measure that stands some chance of becoming a law. We know when the Haugen bill was up before a lot of gentlemen said that the President would veto it; a great many others just as solemnly, who had been down and eaten some corn cakes with the President a few mornings, were just as sure he was going to approve it. It was easy for those who voted either way to console themselves. But we know now that he did veto it and we know now that if he did have the nerve to veto it once he has got nerve enough to veto it again. It would be very easy for us to come along and say, “ We will have the McNary-Haugen bill or nothing, and we will take it over and put it on the President’s doorstep and let him veto it if he wants to.” That will get you some farmer votes probably; it will get you the loyal devotion of some cooperatives, and a lot of them that do not understand the situation will still vote for you. But for the farmer who is on the farm that really wants some action, that 1s not going to get you very far as soon as he finds out the truth about the thing. That is what the “co-ops” did last year. They demanded the Haugen bill or nothing and they got nothing. I have been down mixing among the farmers. They are not fools; they are not all being fooled by these maneuvers of political farmers up here in Washington. There is a whole lot of difference between a high-salaried lobbyist, whose job will play out as soon as real relief ts Franted, and the farmer back home who works on the farm with I know something about farming. I have got a farm myself; my Wits Ss got a farm; and I have been on that farm this fall and up N pr ety recently terracing it and looking after it and trying to put and to make it productive. You will not fool those 325 farmers. It seems to me, as I say, that the time has come to really pass some bill that can pass, one that will not be vetoed. Well, now, what is that bill? I want to indorse it—I want to go a little farther than the bill of the gentleman from Michigan, Mr. Ketcham; and I want to indorse in very large part what the master of the grange has said this morning. I do no agree with him about tariffs. I am a low-tariff man. But, be that as it may—he did not state his own view—the bill T have here does not look like the attitude of these farm relief fellows from Iowa, Mr. Haugen and Mr. Dickinson, who stood in the halls of Congress and wept copious tears over the high tariff running and robbing the farmer. And yet a few days ago when they had an opportunity to vote for the McMaster resolution to reduce the tariff, they wrapped their snug garments of political fealty about themselves and voted to not have any reduction of the tarff. [Laugher.] They wept and shed tears last year about the misery and the poverty of the farmer and said it had been caused by high tariffs, and only the other day they voted to confirm him in that misery and consign him to several more years of that misery and that poverty. So, we are not going to get anything through tariff reduction as long as we have this farm-relief crowd from Iowa running the Government. [Laughter and applause.] Now, let us pass something practical; let us pass something that will give real relief. What will do it? I want to commend the bill of ny colleague, Mr. Jones of Texas, which is similar to the Ketcham ill. I want to say. that I was very much pleased this morning to hear ‘he master of the grange pay my colleague, Mr. Marvin Jones, that splendid compliment that he had shown a grasp of the farm situation that few Members of Congress had shown. I would go still farther. T recently had an article in Texas Farm and Ranch, a leading farm magazine of the United States. in which I proposed this sort of a plan, and I think my colleague has the very plan in mind. [ proposed the establishment of an export corporation, with a revolving fund of $300,000,000 or $400,000,000, or whatever is necessary, out of the Treasury, on the same plan as the McNary-Haugen bill. Then I tied into that plan—I would tie into that this export dedenture system. So that if the exporter would not pay back to that producer you were talking about, Mr. Kincheloe, the fellow who lid not belong to the cooperative, the fellow with 15 kids and 10 bales of cotton, who has got to sell those 10 bales of cotton and can not hold them; he can not wait; he does not belong to a cooperative; he can not wait until next summer; he has got to sell it now; the corporation would give him a market. I would have this export corporation, with sufficient capital, so that when the price fell below 1 reasonable ficure, based on the cost of production, that that export corporation would get into the market and buy cotton and hold it, and then that export corporation when it exported that cotton could ‘ake the export debentures and either import the manufactured voods back on its own account or it could sell them to importers and ‘ake the money from the export debentures and put it into this revolving fund as capital account—— Mr. Kixcurroe. You would have those debentures negotiable, would vou not ? AGRICULTURAL RELIEF 326 AGRICULTURAL RELIEF Mr. ConnarLy. Absolutely negotiable. That plan would bring a raise in price to every farmer, whether a member of the cooperative or not, because that export corporation would afford healthy competition with all other exporters; 1t would afford a competitive market, and if the exporter bought that cotton or that wheat he would have to pay the price that would move 1t away from the export corporation itself. Then I would, under the debenture system, allow the exporter and the cooperatives to have the same privilege of getting the debentures that the export corporation would have; and the reason for that is that you would then be setting up competitive agencies there, each one bidding for the farmer’s product, and naturally that would stimulate the price and make it go to its highest possible level. } Mr. Jones. Mr. Connally, do you not think it would take an export corporation or something similar to that to take care of this individual farmer? Mr. Connarry. That is what I was saying. 1 want the export corporation tied right in here with the debenture system. Mr. Jonzs. I think the gentleman is exactly right. I am thinking along the same line. Mr. Connarry. I understand Mr. Jones has a bill that provides that in a way. Mr. Jones. The gentleman is giving some new suggestions in connection with it, and I am glad to hear him on it. Mr. Connarry. That is my idea and my plan. That is workable. Let me show you why: The export debentures, according to the master of the grange here, would probbaly supplement that revolving fund of $150,000,000 a year, would it not? And every farmer in America would get a reflection of that advance in price. That plan would add $140,000,000 annually to the price of farm products, and on cotton 2 cents per pound, or $10 per bale. It would not be confined to the cooperatives, because it would raise the whole commodity market. The man would not have to wait until next summer to get his returns. That would be the direct result, but the indirect result in stimulating the market would be still greater. Let us get to one other point. Why did I vote against the McNary-Haugen bill? I voted against the McNary-Haugen bill, gentlemen, just like a great many of you voted against it, because it had that equalization fee in 1t. The Attorney General of the United States has said that equalization fee is unconstitutional. The law makes the Attorney General the adviser of the President on legal questions; and do you suppose any President with any selfrespect is going to approve a bill that the Attorney General tells him has got a clause in it that is absolutely unconstitutional? If you think that Mr. Coolidge is that kind of a man, you are simply a Spt Science farm-relief man. You think you are for farm ive : really thnt not. [Laughter.] That is all there is to that, and i hi. that he 1s not going to do it, you don’t know; mot inet 2 he 1eves he is believes in ghosts. [Laughter.] He So, now, bid fst situation, what do you want to do? * - He says he is going to do that way, anyway. AGRICULTURAL RELIEF 327 Mr. CoxnaLrLy. The governor says he is going to do that way. So, what are you doing to do? Are you going to fool the farmers—are you going down home and make that same speech you made all over your district last year, painting the picture of the farmer in disaster and all that, and say, “ We tried to do something.” Oh, yes; “We tried to do something; and the President would not let us do it.” You can go down there and make that speech. but you are not fooling all of them. Mr. AswerLr. Three times. . Mr. Former. May I ask you a question, Mr. Connally ? Mr. CoNNALLY. You may; yes. Mr. FoimEer. In stimulating the price under your proposition, would you not naturally stimulte production ? Mr. ConNaLry. It would not stimulate production any more than it would stimulate it under the McNary-Haugen bill. Mr. FouMmer. That is right. Do you have anything in this bill— Mr. Jones. I will state to the gentleman that there is a provision in both bills here presented for a reduction of these debentures in the event there is an increase in production. Mr. Coxnarry. There is a clause in both the bills to regulate the debenture certificates in amount. If it stimulates production too much you lower the debentures. Mr. JoNEs. And you may take it off altogether? Mr. CoNNaLLy. Yes. That has a tendency to slow it up. Whenaver a man makes the statement that he wants to raise the price of the farmers’ product and tries to avoid the fact that that is going to stimulate producion, of course, he is in error. But what are all these bills trying to do? Raise the price, are they not? That argument that it 1s to raise the price is going to meet every one of you on every plan you have got, because if you were not trying to raise the farmers’ price you would not be up here in this room to-day. What else about the equalization fee? I say it is unconstitutional, and I voted against it. We tried to get you to limit the bill to $25 per bale on cotton, but you would not do it, and gave the board power to fix it at any figure it might choose. Gentlemen, that equalization fee is beautiful in theory. The gentleman from South Carolina asked a question there which is splendid, because the theory of the equalization fee is that this omniscient allpowerful, all-wise board is going to know just exactly when the market requires that they pop on the fee so as to reduce production and regulate it. That is a beautiful theory. But, gentlemen, it will not worl; it is not workable. To tax each bale of cotton from $10 to $23, and turn the farmers money over to some one else to spend will not relieve the farmer of anything except his money. You tell me that the farmer who goes up to sell a bale of cotton or who goes up to sell a bushel of wheat—I am not talking about these professional farmers, these book farmers. who draw big salaries to agitate and propagandize. But I am talking about the fellow who raises wheat and corn and cotton. You can not tell me that he favors the equalization fee. I am talking about the man who does not belong to the cooperatives. If he wanted to join the cooperatives he would join it. But a great many people in this country do not believe in that: R6160—2R-—8ER E. PT 5——2 328 AGRICULTURAL RELIEF they want to run their own business: they want to sell their own stuff in their own way. I can see that fellow in Texas who has raised only about three bales of cotton. In the fall he takes a bale of it up to the gin and gets it under the sucker and begins to scratch the cotton up the blowpipe. About that time a Government inspector comes out to collect the equalization fee. He says, “ Hold on. Don’t begin to gin this cotton yet. Have you paid the equalization fee? ” The fellow says, “What? What did you say?” “ Why, the $10 to $25 equalization fee on this bale of cotton,” or $15 or $20. “What is that for?” «That is the new farm relief provided in the farm relief bill.” [Laughter.] He says, “ What did you say—farm what?” “Farm relief; farm relief bill” “I never joined nothing like that.” “No; I know you didn’t, but your Congressman joined for vou.” [Laughter.] “The devil he did.” [Laughter.] Gentlemen, you can laugh all you please about that; but that is a fact. That is not workable. It will not work. What else does it do? The equalization fee would create an army of employees. You can not dodge that. It would create an army of employees and bureaucrats. And who is going to pay for them? Who would pay all these salaries? Gentlemen, it would come out of the farmers; it would come out of the equalization fee. And what are you planning here? You would absolutely consume him with this army of employees and hangers-on and understrappers; and that would come out of the farmer’s own pocket, and you know it would. It would come out of the $10 or $25 the farmer would pay on each bale of cotton. Let me tell you something. The boys who are not members of these cooperatives are not for the McNary-Haugen bill; and let me tell you why they are not for it. They are beginning to find out that under the McNary-Haugen bill every man who sells a bushel of wheat or bale of cotton or any other agricultural commodity under that bill has got to pay the equalization fee, whether he belongs to an organization or not. What goes with that fee? These farmers that run their own business are beginning to learn; these farmers are beginning to find out that their $10, $15, or $20 on a bale of cotton and 25 cents or 50 cents on a bushel of wheat is going tobe thrown into a fund, and turned over to whom? Turned over to the cooperatives. That is the truth. They are finding it out. They are going to turn over the money collected from all of the farmers and put it into a fund and turn that fund over to the cooperatives to handle and manage and speculate with and carry their cotton and their wheat, and such other as they choose to buy; and they are not for—they are not for it, and I as a representative of all these farmers who do not belong to the coops am not going to vote for a law that makes him— I mean that—makes them join the cooperatives whether they want to or whether they do not. And if he does not do it I am not going to tax him and take his money and turn it over to the cooperatives to exploit and practice on. One other thing. They say you must not have a subsidy. I submit that under this debenture plan there is no subsidy. It is shown Sg that the Treasury would not get so much money 1n tariff duties. t is true. But in the case of aluminum. these farm-relief fellows of AGRICULTURAL RELIEF 329 [owa, when they voted to give Andrew Mellon a monopoly on the aluminum business they kept out of the Treasury, according to the department’s figures, $300,000. Three hundred thousand dollars would have gone in there if they had not raised the tariff on aluminum, and by the same token took several millions out of the pockets of the farm wives, the city wives, and all other housewives in this country in added cost of the aluminum ware they use. So it is no more a subsidy than the raised tariff on aluminum. I submit that all this is going to be more or less of an experiment. I'he whole project of farm relief is going to be an experiment. I think 1t is worth several hundred millions, even if you do go into the Treasury and take it out, to demonstrate either the success of some of these plans or the failure of some of these plans. They talk about the railroads. When you turned the railroads back to their stockholders, for that six-month period in which they were granted a certain income, where did it come from? It came out of the Treasury of the United States; it did not come out of any equalization fee levied on the railroads themselves, did it? No. The Cramman. That is what this bill will do; it will take the money out of the Treasury. Mr. CoxnNarry. The gentleman voted for the Es<ch-Cummins law, did he not? The Cramrman. I did not. Mr. ConnNarLy. You have been asked that you do for the farmer what has been done for the railroads. Under the Esch-Cummins law you did that for the railroads. Now, why is it not fair, according to lheir own doctrine, to do the same thing for the farmers? Suppose we spend $200,000,000 or $300,000,000 in the experiment and find out we have made a failure; we can quit, can we not? The Treasury is not so badly off that it can not afford it. This is a great industry. and it is worth the experiment. Let me tell you about the equalization fee. This country is supbosed to be still a country of free men and free industry. "The Me-Nary-Haugen bill with that equalization fee would build up the most autocratic tyranny in an industry that could be conceived of in this country. Here is a fellow who has a farm out here and he goes out and raises a bale of cotton or a bushel of wheat. He raises it with the sinews and the muscles of his own hands, out under God’s own sunlight, tilling it with his own implements in his own soil. If when he produces it and comes up to the markets of the world with a bale of cotton in one hand and a bushel of grain in the other, the McNary-Haugen bill says, “ You shall not sell it. You shall not exchange the fruits of your toil and the fruits of your soll, brought together there by the mystic elements in Nature’s laboratory, under God's sun. You shall not sell either one of them until you pay tribute in the form of an equalization fee.” What for; to run the Government? Oh, no. To maintain armies in the national defense ¢ Oh, no. To keep the Navy afloat to protect the national honor # Oh, no. What for? To maintain the courts? No. To punish crime? No. Why, to turn it over to some little board selected by a group of particular organizations, representing only 7 or 8 per cent of the entire farmers of the United States. Are we going to say to the farmer that “ You shall not sell your product until vou pay this 330 AGRICULTURAL RELIEF tribute to this group and let them dissipate it in their unwisdom, as they may dissipate it ”¢ Gentlemen, 1 can not take up all of your time. I do not want to take up much more of your time. But here is the Grange, as I understand it, the largest and the oldest agricultural organization on the earth advocating this debenture doctrine. I approve the plan as outlined in my remarks a few minutes ago and substantially that of my distinguished colleague from Texas, Mr. Marvin Jones, and that is the establishment of an export corporation with sufficient capital or a revolving fund out of the Treasury, to be replenished from time to time by the debenture, and then tied into that system this debenture plan; and it will operate for the benefit of every farmer that produces a bushel of wheat or a bale of cotton anywhere in these United States. And you will not have this great army of employees and fee collectors and inspectors and auditors and officials. You will have a very small organization. It will not cost the Government a dollar, except in the method of this debenture system. And I submit that it is workable; it 1s a practical system and it really offers some hope of relief. While everybody knows who knows anything that the McNary-Haugen bill as it was in the last session with the equalization fee, even if it passes both Houses, can not pass the White House. And we are mad—we are mad or else we are insincere and we are mountebanks— we are either mad or mountebanks if we try to bunco the American farmer again with the Mc-Nary-Haugen bill with the equalization fee in it, that you know is going to be vetoed the moment it is laid on the President’s desk. The man who insists on passing the Me-Nary-Haugen equalization fee when he knows it will be vetoed does not want any farm relief. He is merely trying to fool the farmer. The Cuairman. Do you yield for a question? Mr. CoNNALLY. Yes. The CuammaN. Something was said about fooling the farmer. Let us examine the two measures before us and see which one fools the farmer. Let us assume that we export wheat to the extent of 200,000,000 bushels, where under the debenture plan it would cost the Government $42,000,000. Under the equalization fee plan, if you advance the price 50 cents the equalization fee would be 1235 cents, which would leave the farmer 3715 cents net. The farmer would be receiving 871% cents instead of 21 cents, which is 1615 cents above the debenture plan. Hence, a profit to the farmer of 1614 cents a bushel over the debenture plan, or $300,000,000 net, and the cost to the Government under the debenture plan would be $42,000,000. Mr. ConnarLy. I thought the gentleman was asking me a question. The CraRMAN. I want you to tell the committee which plan has the best values for the farmer. Mr. Connarry. You ask me to tell you. and I am telling you. I want to answer your question. The CrammaN. Which plan is the better for the farmer? The equalization plan that pays $300,000,000 net, or the debenture plan that pays $168,000,000 with $42,000,000 at the expense of the Treasik the equalization plan which gives the farmer 3714 cents, or the debenture plan which gives him 21 cents; the equalization plan giving him $300,000,000 net, or the debenture plan giving him 000.000 at an expense of $42,000,000 borne by the Treasury? As AGRICULTURAL RELIEF a result, under the equalization plan the farmer would be ahead $132,000,000 and the Government would be ahead $42,000,000. The farmer and the Federal Treasury would be $174,000,000 ahead. Mr. CoNNaLLY. I never have understood what the gentleman’s question is. I do not understand it. The CaairMAN. Turn your attention to the two plans. Mr. ConnaLrLy. I know about the two plans. The CHAIRMAN. Two hundred million bushels of wheat exported would cost the Government $42,000,000—— Mr. Con~arry. I shall be glad to answer a question, but every time I start to answer the gentleman starts again and I can not do it. The Cirairmawn. I am going to show you which plan would give the most to the farmer. oo Mr. Coxsrry. The gentleman arbitrarily assumes that his bill will do things that can not be proven. } The CmamrmaN. If you do not want to answer the ‘question, we vill take it up later. Mr. Connarry. I will answer any questions the gentleman may ask. I do not want to be discourteous. The Crarmax. I asked this question—it is a simple one: Under the debenture plan, if 800,000,000 bushels of wheat are marketed or sold and 200,000,000 bushels exported, the cost to the Government would be $42,000,000. Assuming that the price would advance 21 cents a bushel, the producers would receive from the Government 21 cents a bushel on the 200,000,000 bushels exported—that is $42.-000,000; and 21 cents a bushel on the 600,000,000 bushels—that would be $126,000,000, a total of $168,000,000. Under the equalization plan, if the price is advanced (the tariff of 42 cents and 8-cent cost of bringing to our port of entry, or total of 50 cents) and 200,000,000 bushels are exported, the equahization fee would be 1215 cents, which would leave the farmer 3714 cents net, or 1614 cents above the 21 cents received under the debenture plan; and ‘he producers’ net profit would be $300,000,000 or $132.000.000 more than under the debenture plan. In other words, under the debenture olan, the producers would receive $168,000,000, of which $42,000.000 would be at the expense of the Federal Treasury; and under the equalization-fee plan they would receive a net gain of $300,000,000. In other words, the debenture plan not only makes a raid on the Treasury to the extent of $42,000,000, but pays the producers $132,-000,000 less than under the equalization plan, where the cost is paid hy the producers themselves and no burden placed on the Treasury. Mr. Conyarry. Is that your question? The Cramrman. That is the question. Is that fooling the people? Mr. CoxnarLy. Let me say to the gentleman that I do not think anybody, unless it be the gentleman from Iowa, believes that the McNary-Haugen bill would raise the price of wheat 30 cents a bushel. In the past the gentleman voted for a tariff of 42 cents a bushel on wheat, and he told the House at the time it passed that all we had to do to raise the price of wheat 42 cents a bushel was lo pass the bill. Now he comes back in the McNary-Haugen bill and says it does not raise the price 42 cents a bushel, and you have to devise some other artificial contrivance to do what he said would be done by the 42 cents a bushel tariff. He may be just as much in OITOT a0a1n. 331 332 AGRICULTURAL RELIEF The Cirarrvax. It has never been declared that it' would advance the price 42 cents a bushel. nor has a vote ever been taken to fix the tariff at 42 cents. Mr. Coxnapiy. It is a beautiful theory, but it will not work. It has not worked. Let me ask the question. Does .the gentleman believe the President will approve the MeN ary-Haugen bill? The C3amyan. I am not so much concerned about that. Mr. Coxxarry. I know you are not, but 1 am. I want the gentleman to answer my question. If you really want farm relief, you ought to be concerned whether it will be vetoed. The Ornatraan. I think everv member should vote as his conscience dictates. Mr. Coxxariy. Does the gentleman want a bill or a veto ¢ The Ciratrsrax. I do not think the President would have any respect for me if I should do as he might direct. I have a higher conception of my duty than that; I have a higher regard for Members of Congress than to suggest such a thing. Personally, I would not want it said that I am serving as a bellhop for the President or anybody else. Mr. CoxxarrLy. Do you think the President is going to be your bellhop and approve this bill if you pass it? Mr. Kurceras. Mr. Chairman and gentlemen of the committee, a situation has developed, it is easy to see, where we can not finish to-day, but I am sure the gentlemen of the committee will not want to miss the testimony of Mr. Goss. I want him to be presented, and then make any statement in regard to filing any statement he nay desire. Mr. Kincurror. I would like to hear this gentleman, but it is after 12 o'clock. Mr. Kercrmay. The point I am making is that he has to leave and desires to file a written statement. Mr. Goss. In the limited time I could not say anything. The CratearaN. The committee will stand at recess until 10 o’clock to-morrow morning. (Thereupon, at 12.30 o’clock p. m., the committee adjourned to meet to-morrow. Thursday. February 9. 1928. at 10 o’clock a. m.) House oF REPRESENTATIVES, CoMMITIEE ON AGRICULTURE, Thursday, February 9, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. Mr. Havcex. The committee will kindly come to order. Are you ready, Mr. Ketcham? . Mr. Xercmanm. Mr. Chairman and members of the committee, I want to present this morning as the first witness a representative of the grange, coming from the Pacific coast, who will speak not only with respect to that particular section of the country but will speak with particular emphasis upon the details of the bill and, I think, will undertake to answer questions that may be propounded by various members of the committee concerning the basis of it, if you would like to have information upon it. AGRICULTURAL RELIEF I take pleasure in presenting Mr. Albert S. Goss, master of the Washington State Grange and member of the executive committee »f the National Grange. STATEMENT OF ALBERT S. GOSS, MASTER WASHINGTON STATE GRANGE AND MEMBER EXECUTIVE COMMITTEE, NATIONAL GRANGE. SEATTLE. WASH. Mr. Goss. Mr. Chairman and members of the committee, as Mr. Ketcham says, I come from the State of Washington. Mr. Taber told you yesterday something of the attitude of the grange. I can tell you of the attitude of the granges on the Pacific coast, where we are very strong in proportion to the number of farmers we have. Washington, Oregon, and Idaho Granges have indorsed this measure practically by unanimous vote. I am not advised of the action of the California State Grange, since it met just prior to our national convention. But the chairman of the legislative committee of the California State Grange has attended our national convention and has been in Washington since, and has indorsed this program. So we feel that we can speak fairly accurately of the standing of the grange members and of the farmers on the Pacific coast. Mr. Taber pointed out that we did not claim this bill to be a cureall by any means. It attacks just one phase of the question. We think that it is a sound solution for that phase of the question. There are other problems of agriculture. There are problems of transportation; there are problems of taxation; there are problems of distribution, which no bill can handle. We recognize that fully. But we fell in this measure that we hit at the fundamental cause of low prices, and in the interest of clear thinking I am going to ask you to review with me the trend of our agricultural development for the last hundred years or so. It is one hundred and thirty-odd years ago when Alexander Hamilton, making his report on manufactures to President Washington, expressed this principle—I can not quote, will not attempt to quote, it in his language; but in just plain English it was that if we pursue a policy of protection by means of a protective tariff and other protective legislation, that the costs of our standards of living would all be raised and the costs of agricultural production would be raised, and that a well-rounded policy of protection should contemplate the protection of agriculture as well, with a system of export bounties, which he outlined. A speaker who will follow me will go into that more fully. I wanted to call your attention to the trend that agriculture took from that time on. Congress adopted the protective-tarift policy. It did not adopt the ther half of the tariff policy, the protection to agriculture; and it so happened that agriculture did not need it at that time; for shortly after that our population broke over the mountains down into the Ohio and the Mississippi Valleys, and there they found the most fertile farm lands in all the world, just ready to be plowed out, virgin soil; and under those conditions they produced the most bountiful crops ever produced in the history of the world at costs lower than any other place in the world, because of the virgin soil and just the 2onditions under which the crops were raised, and agriculture did 334 AGRICULTURAL RELIEF not need that protection to enable it to compete with the rest of the world. Gradually, as our population expanded and went on westward across the Rocky Mountains and came to the Pacific, our problems began to increase. During that time agriculture had thought itself making profits, but actually had lived by robbing the soil of its fertility ; and we came to the end of our free land about the time of the World War. We came to the time when we had exhausted a very large part of the fertility of our soil, complicating the situation about the time of the World War. And with the war came a change in conditions. The Government had for many years followed a policy of agricultural expansion, encouraging production. With the war the encouragement was redoubled, until at the end of the war we found ourselves producin the greatest crops in the history of the world; and we also found this, that our standards of living had advanced—roughly, had doubled. Our cost of production roughly had doubled; and at the close of the war we found that our markets were gone, because we were forced to compete with nations where the cost of production had not been doubled; in fact, it had declined, and our profitable markets were taken away from us. We found ourselves, roughly with a surplus of from $1,000,000,000 to $2,000,000,000. of export farm products which had not been a surplus prior to those conditions. In other words, the condition was that our raising of the standards of living had increased our costs so high that we could not reach world markets; and that is the condition we find to-day. It is a condition of surplus due to higher costs. Those higher costs are due to our higher standards of living, which, in turn, are protected by protective legislation, such as our immigration laws and the tariff; and the remedy which we seek to apply is to enable agriculture to meet the difference in cost of production between home and abroad, thus enabling it to reach foreign Now, roughly, that is the picture of our problem—this problem of surplus. There are three methods of attack. The first method is thy of cooperation or orderly marketing. We are entirely in sympathy mith [that method, ] infact, the Grange marketing program TE presented and defended for a number of years atempted to attack it in this way. We feel, however, that it is not entirely adequate, and we have thought that the two methods were that (Lad closely eough to put into one measure. We have felt eserve attention as two separat 1t1 they attempted to attack the problem from oe Dt an y be case wae second method of approach is that of the an fee. Ye have no quarrel with the equalization fee. We have some misgivings as to its operation, whether it can be laid equitably, and whether it can be laid without evasion or double collection. B t have no quarrel with the equalization fee at that. We but feel that, we are approaching it from a more scientific angl dl sounder method. Qur approach the third way i gw oe bl ave a meet the difference in cost of production b ho rest of th production between America and the § e world. We feel that if our troubl 1 1 if this surplus is largely due—to the diff hiss are Trgely Jue kt that that is the pomp of e difference in cost of production, point of attack. We hove to enable the farmer to AGRICULTURAL RELIEF 335 meet the increased cost of production, and if that is met, then once more we can take our place as exporters and can compete with any nation on earth. So we have framed our measure with that in view. Now, you have the measure before you. I just want to call your attention to the mechanical set-up of the organization and the machinery of the organization with which we propose to carry that into effect. Mr. Kincueroe. Which bill are you talking about, the Ketcham hill ¢ Mr. Goss. The Ketcham bill, H. R. 10568. I am not going to read all the sections to you, but I do want to read the first section, because [ think it expresses our aims and purposes. Mr. Aswern. What is the number of that bill? Mr. Goss. H. R. 1056. [Reading :] [t is hereby declared to be the policy of Congress— fa) To afford to those agricultural commodities of which surpluses above domestic requirements are produced in the United States the same degree of protection which is afforded to industry in the United States by the tariff, and to prevent such surpluses above domestic requirements from unduly depressing the prices obtained for such commodities, and to these ends. (b) To provide for the payment, upon exports of such commodities and of products of such commodities, of export premiums, by means of export debentures, sufficient to equalize the difference between the cost of producing such commodities in the United States and the cost of producing such commodities in competing foreign countries. There is the complete outline of the bill. Running down through it, in section 2 we provide for the creation of an ex officio board, consisting of the Secretary of Agriculture, the Secretary of Commerce, and the Secretary of the Treasury-—no salaried positions. In section 3 the board is given the usual general powers which I believe are included in practically every bill which comes before your committee. One subsection of this section 3 provides for the board giving advice as to the distribution and marketing of crops, and another subsection provides for the board giving advice as to planting and breeding, aimed to assist in orderly production. Mr. KinxcreLoe. May I ask you this question: The Ketcham bill does not seem to have provided for an export corporation ? Mr. Goss. No. Mr. Kixcnewoe. Let me ask you this: Of course, the purpose of all this farm legislation is to in some way dispose of the surplus. Now, in the absence of an export corporation, how could you under the Ketcham bill provide for the storing of surplus in this country for future use? . Mr. Goss. Under the Ketcham bill it could not be done. Mr. Kixcueroe. That is what I am talking about. Mr. Goss. That is another attack, Mr. Kincheloe, upon the problem I referred to, that of orderly marketing, with which we are in full sympathy. We have felt that there were two approaches to the same problem, and our approach has been a simple one, aiming to meet the difference in the cost of production, and we think that another bill covering orderly marketing is certainly meritorious. Mr. KincuHELOE. You will admit that it is absolutely necessary to store surpluses of nonperishable commodities in the [United States for our own benefit. will vou not? 336 AGRICULTURAL RELIEF Mr. Goss. Yes; and we have had a bill before Congress two ot three sessions ago aiming to do that. We are in entire sympathy with that method of approach, but we have not made any attempt to incorporate that in this bill. It is aimed at just one thing. Mr. Kincueroe. I do not see why you could not take a few lines in there and make a provision in the way of export corporation or some agency to not only store but to hold a whole lot of surplus in this country for the benefit of the American people. : Mr. Kerouam. We entirely agree with that. Mr. KincHELOE. I just suggested that. Mr. Goss. Just a word as to our attitude on that, Mr. Kincheloe. Mr. Crarke. That is included in the Jones bill. Mr. Kincueroe. I understand. Mr. Goss. Just a word as to our attitude on that. We are merely trying to bring to this committee the sound principles of an export debenture. Whether they be incorporated in another bill, or whether other things be added to this bill which will bring in some other sound principle, makes no difference to us. We do believe in the sound principle of the export debenture. It is designed to enable us to meet the difference in cost of production between home and abroad, just as the tariff enables other industries to meet the difference in the cost of production between home and abroad. That is the one principle which we are bringing to this committee, and we have full confidence that this committee will do as they have in the past—when all the facts are laid before them, all the information, that they will choose and sift and take the best, and put out a bill which in their judgment will best meet the situation. We are not trying to cover the whole field, Mr. Kincheloe; just this one thing we are trying to cover. Mr. Kixcurroe. I think piecemeal legislation is not satisfactory. We hoped you had them both. Mr. Goss. We are in entire sympathy with what you bring up. _ Section 4 provides for the export debentures. Mr. Taber went into that, I think, quite fully, telling you just what the export debenture consisted of and how it was applied. Mr. Aswerr. If the export debenture remains at full par value during the year—— Mr. Goss. I did not get the question. “Mr. Aswern. I say, how do you think that those debenture certificates would remain full par value during the life or the vear. or would they have to be sold at a discount? Mr. Goss. There is no question but what the debentures would have to be sold at a discount equal to the rate of interest needed for carrying them, which economists—and one of them will follow me—will discuss. But the economists have told us—and some of the officers of the Treasury Department with whom we have discussed this have assured us that it is their belief that the discount would be nominal. We have protected that, Doctor Aswell, in this way, as you will see a little later on in the bill. When I come to that 1 will touch on that, Doctor Aswell. as we come to that section the bill AGRICULTURAL RELIEF 23% Mr. Kercaay. Before you leave that, you would consent to a very moderate discount? Would you be willing to state what you think the range of the discount might be? } Mr. Goss. That would be merely an expression of opinion on my part. The debentures are redeemable within 12 months from date of issue. Mr. MENGES. Who would determine the amount of debenture ? Mr. Goss. The amount of discount would be determined by the demand for the debentures; that is no question about that. Our tariff duties now must be paid in American exchange. Much of our imports are now brought in by exporters. Of course, in that case there would be no exchange. But there is a demand for American exchange, and if the importer could buy American exchange at onehalf of 1 per cent off, that is a saving which no sound business man, no man of sound business judgment would overlook. The rate of interest would depend upon the length of time between the issue of the debenture and the application of the debenture on the payment of import duties. Undoubtedly they would be discounted for a period of a few months, until the organization got into operation and the flow of debentures determined the approximate length of time in which the debenture would remain at issue. Mr. Me~cEs. Does the so-called law of supply and demand come in there ? Mr. Goss. The matter of supply and demand would determine it. Mr. Me~xges. You would have the law of supply and demand imposed upon your wheat and upon your debenture ? Mr. Goss. I did not get that question. Mr. Menges. You would have it both on the product von sell and smn your debentures ? Mr. Goss. That is true. Mr. Harn. What would be the objection to issuing a cash bonus without the debenture idea at all? Why not issue them an order on the Treasury for so much cash? Mr. Goss. I would prefer—— Mr. Harn (continuing). Avoiding the speculation that would naturally occur in the handling of those debenture certificates? Mr. Goss. I would prefer to have one of the speakers who is to follow me answer that question, because it involves a constitutional -nhibition or restriction that he is prepared to answer and that I can not discuss as intelligently as he. But he is in the room and he will make a note of that and will answer it when the question romes up. I feel it is particularly pertinent. Mr. A~preseN. The bill provides that the export debenture shall oe paid to the exporter. I am not particularly interested in the exporter, but I want to know how is the money to go back; where is this export debenture going to be reflected back to the individual producer ¢ . Mr. Goss. Let us take the question of wheat, which, I note in astening to hearings before this committee, is the commodity usually considered. This measure provides for an export debenture at the rate of 21 cents per bushel on wheat. Now, we must concede that the exporters of to-day are not doing business without a profit. 338 AGRICULTURAL RELIEF They are making a margin of profit on every bushel of wheat, which is limited only by the number of the exporters in the field. That is a sound position, I believe; and by adding an export debenture is not going to reduce the number of exporters by one. There will be just the same exporters and they will be making just as large margins and no more, because competition determines the amount of margin which they shall make to-day. Now, as a farmer, knowing that I can get the price at Liverpool, which we will assume is a dollar, plus 21 cents, I am not going to be willing to sell in Amercia for less than $1.21; and when I say as a farmer, I mean the wheat growers of America are not going to be willing to sell in America for less than they can get by exporting it; and they have this great aggregation of exporters to turn to. And unless you contend that the exporters will perfect an organization to restrict trade to the point where they can take a larger margin than they are taking to-day, the contention that the whole price level in America will not rise, must fall. : Mr. KixcreLoe. What would you do if England was to put on a retaliatory tariff there of 21 cents? Mr. Goss. I think that question would arise in the case of any measure which might be passed. There is no reason why a. tariff should be set up against such a measure. for this is not a dumping measure. :. Myr. Kinoneroe. I understand so, but it would be sold in the world market and you get a debenture back by exporting and selling in the world’s markets. Take Liverpool, for example; suppose England would put a tariff of 21 cents a bushel on American wheat coming into that country, and let Canadian wheat come in. free. I was just wondering what effect this bill would have on that situation. : Mr. Goss. I think, Mr. Kincheloe, that you are rather getting the wrong slant on just what this measure does. Mr. KincuELOE. 1 am trying to find out what it would do if that happened. 25 Krrcaan. It would not raise the price of wheat to England at all? Mr. Goss. It would not. Mr. KincareLoE. I understand this will not, but on general principles, suppose England would put on a retaliatory tariff of 21 cents a bushel in order to protect Canadian wheat? Mr. Goss. They might do that to-day, and there is just as much cause for them to do that to-day as under this bill. My. KixcurLok. I think so, too. Mr. Goss. This is not a dumping measure. This bill starts with world markets, and that is the basis of the price making. There is no price fixing; it just takes the world markets, and adds to that price the difference in cost of production between home and abroad. Mr. Kixcueroe. Have you figured out what is the average debenture rate in per cent on these commodities? Mr. Goss. It will vary. Me KiNcHELOE.- I mean the general debenture rate. - one. Toss. ve oi say this, Mr. Kincheloe: We have taken roughly dian e tariff. We have varied it in some things, but roughly » taken one-half of the tariff as a place to begin. AGRICULTURAL RELIEF 339 Mr. KincueLoE. That is the reason I asked you. Do you not think that is too high in order to be a popular measure and probably to meet the approval of the President; do you not think that 1s too much of a reduction of the tariff; that is what I am getting at. Mr. Goss. You mean we have made it too low; that we should have gone closer to the tariff. Mr. Jones. It is not a reduction of the tariff at all. Mr. KincHELOE. I mean your debenture rates: do you not think you have got them too high ¢ Mr. Goss. I think not. We have said this. The bill provides that the board, after investigation, may establish an export debenture rate on any other tariff-protected commodity, based on the difference in cost of production between home and abroad, but not to exceed the amount of the tariff. That demands thorough investigation. We have not had the facilities for making the thorough investigation to determine the difference in the cost of production which, of course, is always approximate, between home and abroad. But we have estimated as closely as we could what that difference might be. Mr. KincaELOE. Of course, the higher your debenture rates the more money that you will take out of the Treasury, and I was just wondering if you put it too high and it ever got to the President whether he might not veto it. Mr. Goss. That will be a matter, of course, for your committee carefully to consider—the rates of debenture which we have established in this bill. There must be some place of beginning. We at one time considered naming no rates in the bill whatever, but leaving it up to the board to establich the rates, after thorough investigation. But we did not follow out that course of procedure for this reason: We felt there were some crops which have been in distress for a number of years, and we thought we should establish something to start it. Mr. KiNcHELO: establish the rate. .. ‘'t, that is all. Mr. Goss. That was our idea. We established it as in our judgment appeared best; and then the provision is incorporated in the bill, that as conditions change those rates may be lowered or they may be raised. Mr. Fort. You said to Mr. Kincheloe—and I did not quite get the answer to the question, that you took the world’s price as a basis, anmd then put the debenture on top of it. That is not strictly ‘rue, 1s it? Was not that a slip? Mr. Goss. I did not mean to say that. I meant to say this, that ~hat the farmer would receive for his crops, of which we have an exportable surplus, which are now dependent on the world’s markets, would be based on the world price plus the amount of the export. lebenture ; and as the world markets went up and down according to ‘he supply and demand, the price which the farmer received would co up and down. But he would always get that difference in cost f production between home and abroad to which he is entitled secause of our higher standards of living. That difference is represented by the export debenture. ‘aR 340 AGRICULTURAL RELIEF Mr. Fort. May I ask you another question right there? And then I will yield, Mr. Kincheloe: Would you still feel that the debenture should be awarded when there was a world shortage in wheat or in our cotton crop when the price in the world market was already substantially above our production cost or anybody else’s? : Mz. Goss. The bill provides that under conditions of that kind the board may reduce the debenture or eliminate it for a limited period or eliminate it entirely. The bill works on this principle. Mr. Fort. In other words, you have no relation to the price at all, except—the only relation your board has to the question of price in the world market is that when the price exceeds production costs the debenture would disappear or could disappear. Mr. Goss. Yes, that is the idea. Mr. Fort. In other words, there is no price regulation or consideration of that feature whatever in the bill? Mr. Goss. I think not. I do not know just what you have in mind when you ask that question. Mr. Fort. The board would have no consideration of the subject on world prices, except when those prices reached a point above American production costs. Mr. Goss. The bill plainly states that when an emergency exists wherein, by reason of a surplus, world prices dominate American markets, holding them at figures below the cost of production, these rates shall be applied. In other words, the discretion is left with the board to establish the rates to fill the emergency gap on crops which are distressed by reason of world conditions. 1 Me, Forr. So that then it would only operate when prices were own? Mr. Goss. If in the judgment of the board that was the only time: it is left entirely to the judgment of the board, Mr. Fort. Mr. Fort. To their unrestricted judgment? Mr. Goss. To the unrestricted judgment of the board. ~ Mr. AnpreseN. That plan would work out the same as the scheme: in the McNary-Haugen bill, would it not? If you should take the money out of the Treasury and substitute a revolving fund for the equalization fee and it would work out in principle the same way. Mr. Goss. No. There is quite a little difference. It is not my purpose to discuss the McNary-Haugen bill. It was just this particular measure, but the McNary-Haugen bill does not of necessity aim to meet the difference in the cost of production between home and abroad ; the McNary-Haugen bill would provide an export corporation—I do not know just how it is worded—to buy up the surplus. The corporation might buy up the surplus to a point where it would raise the price a dollar above the world’s markets, or any other amount, but it would not of necessity be just the difference m cost of production between home and abroad. The people who A te Za of surplus which would be taken off of the Kel 1 C y-Haugen bill would determine just the amount of aise. In price. Mr. ANDRESEN. And the purpose of the McNary- ill i &% the farmer the full benefit of the tarift RA Hangen tall is to pe a Yes; the purpose is the same; the machinery is quite AGRICULTURAL RELIEF 341 The CuamrMAN. Do you contend that the bill before us would give the farmer the benefit of the tariff ¢ Mr. Goss. Yes; we do. oo The CrairmaN. The tariff is 42 cents and you give 21 cents under the bill. Mr. Goss. We give the benefit of the tariff from this standpoint, that if the tariff is soundly established under the flexible provisions of our tariff act, it is based on the difference in cost of production between home and abroad. Those are the instructions which are given to the Tariff Commission by the Fordney-McCumber bill, to establish the tariff at a point to meet the difference in the cost of production between home and abroad. Taking up the cost of production, our bill establishes 50 per cent of the tariff as a point from which to begin operation, and if the tariff board actually established the tariff on the basis ordered in the tariff act, it would be established at the same point as the export debenture rate would be established by the board, for both rates would aim to meet the same conditions— the difference in cost of production between home and abroad. The CmamrmaN. Twentv-one cents on wheat. How much on cattle ? Mr. Goss. We have two different classifications on cattle. The Cmamrman. On cattle it is 1 cent and you give them twothirds of that. Do you believe that the tariff is too high? Why do you cut the tariff in two? Are you people in favor of the tariff? Mr. Goss. We are in favor of the tariff. The CrairmaN. The existing tariff ¢ Mr. Goss. We are in favor of the existing tariff except that we do not know that the rates of the existing tariff are sound. The existing tariff rate on wheat is supposed to be the difference in the cost of production between home and abroad. We know that the Tariff Commission is away behind with their investigations. The CramMman. That is the finding of the Tariff Commission Mr. Goss. That is the finding of the Tariff Commission—42 cents. The CuairmaN. That would be 42 cents a bushel. Now, you propose to cut it in two, do you not ? Mr. Goss. If the tariff rate of 42 cents a bushel is the actual difference in cost of production between home and abroad the rate of export debenture should be set at 42 cents a bushel. We have given to a special board the power to make those investigations, because we have felt this, that the tariff on wheat. for example, has not been operative in the fullest extent. The CuarrmMAN. Are you getting the benefit of the tariff on wheat? Mr. Goss. Very little. The CHAIRMAN. Are you getting any? Mr. Goss. I should say that there is probably some benefit coming from the tariff on wheat. The CaamrMaN. Ten cents a bushel above? Where does the tariff come In? Are the producers getting no benefits from the tariff ? Mr. Goss. Very, very small benefits. The Carman. They are entitled to 42 cents and you propose to rive them 21 cents? ~ Mr. Goss. We proposed to set up a board to give them 42 cents if that is found to be the difference in cost of production, but we have named 21 cents as a place to start in. 342 AGRICULTURAL RELIEF The CrarrMaN. Are you for the bill, for cutting the tariff in two Are you in favor of cutting the tariff on wheat from 42 cents to 21 cents? Mr. Goss. Not until investigation has been made. The CramrmaN. And the finding of the Tariff Board is that they are entitled to 42 cents a bushel ? Mr. Goss. I think that probably you misunderstood me. The Cuamrman. Are. you repudiating the findings of the Tariff Board ? Mr. Goss. I think probably you misunderstand just our attitude. By establishing the rate of export debenture it does not interfere with the tariff rate at all. The tariff rate will remain at 42 cents a bushel. The CuamrMan. I am talking about this gratuity to be forced on the farmers, which they object to. You proposed to give them 21 cents instead of 42 cents. Why do you not give them all that they are entitled to, 42 cents, according to the finding of the Tariff Board? We have a bill under the equalization fee; it would give the full benefit of the tariff, minus the equalization fee. Any schoolboy 10 or 12 years old can tell us exactly what the equalization fee would be, and what the benefit would be. Take for an illustration: It is suggested here in marketing 800,-000,000 bushels of wheat, of which 200,000,000 is exported, to take out of the Treasury before it is put in $42,000,000 and turn it over to the farmer. Under the equilization plan, exporting 200,000,000 bushels and advancing the price equal to the tariff and cost of bringing the wheat here to 50 cents a bushel, would net the producers 3714 cents profit, or, in other words, $300,000,000. The farmers would get $300, 000,000 instead of $42,000,000 to be extracted from the Treasury and paid over to the farmers. Under the equalization plan the farmers would be ahead $258,000,000 and the Treasury would be ahead $42,-000,000. Are we fooling the farmers by giving them $300,000.000 instead of $42,000,000¢ Mr. Goss. As I stated, it was not my purpose to discuss .the Mec-Nary-Haugen bill. - The CrmarmaN. I would like to have you discuss it. Mr. Goss. But, I think you have not stated the proposition correctly, Mr. Haugen, in that you have stated that the farmer would receive but $42,000,000. under this. You have not figured that the farmer would also receive 21 cents a bushel on the 600.000.000 bushels marketed in America. The CuamrmaN. Under the equalization plan, they would get 50 cents a bushel on the 800,000,000 bushels, minus 1215 cents, cost of equalizing the price, or net 3714 cents a bushel. Under the debenture plan, assuming that the price would advance 21 cents a bushel, on the whole 800,000,000 bushels, they would get 21 cents a bushel on the 200,000,000 bushels exported, out of the Treasury, or $42,000,000, and 21 cents a bushel on the 600,000,000 bushels sold on the domestic market or $132,000,000. The difference between 21 cents under the depentire plan, and 3715 cents under the equalization plan would be 16 1 cents or $132,000,000 in favor of the equalization plan. In other words. the difference hetween the $42.000.000 out of the Treas- AGRICULTURAL RELIEF 343 ary and $126,000,000 the profit on the 600,000,000 bushels or a total of $168,000,000 under the debenture plan, and the $300,000,000 net profit under the equalization plan. would be $132,000.000 in favor of -he equalization plan. Mr. Goss. I want to pursue your course of reasoning to carry to the committee just exactly what you propose. Under the plan which you have proposed of establishing an equalization fee of 50 cents a bushel, the American people would pay 50 cents a bushel on 800.-000,000 bushels of wheat, or $400,000,000. The CHARMAN. The consumers pay on whatever is consumed ip this country? Mr. Goss. Yes; that would be $400,000,000. The Carman. The increase of 50 cents a bushel on the 600,000,000 bushels sold for domestic consumption would be only $300,000,000. The cost of wheat going into a pound loaf of bread is less than 2 cents, and the price of bread generally remains stable regardless of the fluctuations in the price of wheat. The producers would not have to pay, but, on the contrary, they would receive a profit of 3714 cents a bushel. They are willing to pay freight and expenses of marketing and to accept the 50 cents per bushel which, under the findings of the Tariff Commission, is justly due them. minus the 1214 rents cost of equalizing the price. Mr. Goss. If the price of wheat is raised 50 cents a bushel somebody has to pay $400,000,000. Under our plan, if it was found that the difference in the cost of production between home and abroad was 42 cents a bushel and the export debenture rate would be raised to 42 cents a bushel, the American public would pay six hundred million times 42 cents, or $252,000,000, plus the debenture total of $84,000,000; or it would cost $336.000,000, if I have not made a mistake in arithmetic, as compared with $400.000.000. In the one case the consuming public has paid $400,000,000; in the other case the consumin public has paid $252,000,000; the public as taxpayers have paid $84,000,000. But the net cost to the public is $64,000,000 less than ander the equalization fee, even if you could charge the public 8 cents more than the tariff protection. which you couldn’t do. Mr. KiNncHELOE. It is your hope that this bill will bring to the farmer the world’s price, plus the debenture? Mr. Goss. That is the idea. Mr. KincaeLoe. Will you not take out of that your freight in vetting it to the world’s market when you export it ¢ Mr. Goss. That is taken into consideration now, Mr. Kincheloe: ve get the world’s price less freight now, do we not? Mr. KixcHeLOE. I understood you to say awhile ago in answer to my question that the retaliatory tariff of any other country on any commodities would not affect the debenture proposition—the price the farmer got over here. Mr. Goss. It would affect it just as it does under the equilizationfee plan or any other plan. Mr. KixcuEero. I thought so. I understood you to say it was not. Mr. Goss. Oh, it would. The point I was trying to convey was that there was no more reason for establishing a retaliatory tariff "han there is to-day. because it is not a dumping measure. Mr. KincreLok. I agree with you there. RG160—28—Q¥R ¥ PT Bu 344 AGRICULTURAL RELIEF Mr. Fort. I have been interested in that phase of this thing. Are you familiar with the action of Canada a year or so ago in increasing ts tariff on butter when Australia put a 4-cent tariff export on butter ¢ Mr. Goss. No; I am not, Mr. Fort. My. Forr. As I understand it, two years ago, when Australia gave a 4-cent export bounty of some kind on butter, Canada, although they were both parts of the British dominion, instantly increased the tariff on butter from Australia 4 cents, making it an adverse tariff. So that we really had a preference of 4 cents in the Canadian market over Agee Pues You have not considered that phase of it? r. Goss. No: ave not been familiar with what Canada has done. Mr. Aswerr. Mr. Goss, may I ask you a question ? Mr. Goss. Yes, Doctor Aswell. Mr. Aswerr. In Germany the debenture certificate is good for 90 days only, as you know. After 30 or 60 days its value is very low, relatively. Near the expiration of its existence the price is still lower. And bun would apply in this country. If they have it a a year, it would be relatively the same. Suppose I export 1,000 bales of cotton from New Orleans and that [ got 8 a bale. T would get a receipt for $10.000, would T not? r. Goss. Yes. Mr. AswerL. I would sell that receipt in the best ket : Would not the best market be mporters of dinmonds or of conse. that had a very high protective tariff; and would not the farmer on the things he purchases get very little or no value from my export receipt Would not I naturally turn to the importers of diamonds or Jace x ig or something like that? r. (Goss. o not see why you should, Doc s the importer of diamonds, if fe had a Aswell. because Mr. AsweLL. Would pay me more. Mr. Kincarrok. No; you would only get 22 cents for it. a ASWELL. At that time it will not be worth over 14 cents. oor Ir. Goss I think you have misunderstood this certificate of ex-DO en tres, Doctor Aswell. When vou have been issued the e— Mr. AsweLr. What I have i i S . . me from the beginning, So She a ea a Tht Tou fo make the debenture certificate apply to Ue things the farmer a to buy in the lowegaril brackets. . ELOE. It is supposed to reflect under this bill Mr. 18 8 s bill. i h Sowers hat Jo will lose Js value. Let me get this clear. be as great the last three months i was i. Fl Ce Td it Lo hee st. would 1t, becaus bars would not be as fh chance to use it? Mee limits the eli re Sowell, we have a provision in this bill which I will come to that section in a fo De I uti. vision there will alu Te 2 ew moments. And under that prothere are debentures ay Le figs as much market for debentures as FOR eh 1 Corti ty of op ye at market. You are assuming that bales of cotton? $10. on the exportation of a thousand Doctor Aswrerr, Yes AGRICULTURAL RELIEF 345 Mr. Goss. That certificate of $10,000 will be expended in the payment of $10,000 worth of duties, whether they be diamonds or steel or anything you want to import, it does not make any difference. Mr. AsweLr. I know that is true. Would not the diamond importer pay me more than a low-tariff importer? Mr. Goss. No; because he has to go out and buy exchange. He is probably paying one-eighth to one-fourth per cent discount in buying exchange now, whatever the market is; and it does not make any diiference to him what he is importing; he has got to have $10,000 worth of cash or its equivalent to pay his import duties, and this is cash or its equivalent. It does not make any difference what he is importing; he has got to have the cash. Mr. Fort. Mr. Goss, right there: It is cash or equivalent. The only difference between it, as I see, and direct cash present at the point of export, 1s that it is not instantly available for anv purpose rxcept the payment of customs duties. Mr. Goss. That is the only difference. Mr. Fort. It 1s practically issuing a legal currency that will be accepted as legal currency for the payment of import duties, but for no other purpose? Mr. Goss. That is it; it is negotiable, of course. Mr. KincHELOE. Doctor, let me ask you a little further: You said awhile ago it is the purpose of the proponents of this bill to raise he debenture prices of these basis commodities—the price of the debenture above the world price. Well, what makes you think it will do it? The tariff does not do it on wheat to-day. Mr. Goss. No; because it is just the opposite of the tariff. Mr. KincuELOE. If the tariff will not do it, if the American farmer does not get the world’s price, plus 42 cents a bushel by reason of the tariff to-day, why will he get it on the debenture? Mr. Goss. Let us take 42 cents, since that has been quoted. Mr. KincHELOE. That is the law. Mr. Goss. And assume that your committee will establish the rate at 42 instead of 21, because I presume if your committee should write this into a measure that you will establish your own rates. Let us assume that you establish it at 42 cents. The farmer to-day does not get 42 cents tariff because he is selling on the Liverpool market, and the tariff does not help him. But the farmer to-day, if he knew that he could continue to sell on the Liverpool market and get a certificate of debenture of 42 cents a bushel for every bushel he sold, he would not sell for less than the Liverpool market plus 42 cents. Mr. KixcHeELOE. You would be exporting all of the wheat out of the country if you were going to get that and the world’s price. Mr. Goss. No. Mr. KixcHELOE. Everybody would want to sell over in Liverpool. y Mr. Goss. No; because they can get the same price richt here at ome. Mr. KincueLoe. That is what I want to get ot. Mr. Goss. All right. Let us assume that the Liverpool price, less freight, is $1 a bushel. We are wheat raisers. We know that we can sell at $1 a bushel plus 42 cents and get $1.42 for our wheat. ess any—— Je. KixcueLoe. How do you know? That is what I am talking anbont. 346 AGRICULTURAL RELIEF Myr. Goss. Because you can get the debenture and your debenture is good for cash. > Mr. Kincueroe. You do not get the debenture without exporting. Mr. Goss. No. Mr. KincueLoE. Would not everybody be wanting debentures and running 600,000,000 bushels out of the country? Mr. Goss. If they run 600,000,000 bushels out of the country they would get about $5 a bushel on what is left in 1t. oo | Mr. KiNcHELOE. But, there would be importations coming In and paying that 42 cents from other countries of the world. We have a world surplus. Mr. Goss. The tariff protects us against importations to the extent of 42 cents. That is the reason the board 1s not allowed to go above 42 cents. Mr. KincueroE. Then, if it does—that is what I am talking about, and I am asking something as an economic proposition: The farmer does not get the benefit of the 42 cents a bushel by reason of the 42 cents a bushel tariff on wheat, does he? Mr. Goss. No; not the full 42 cents; not to-day. My. Krwcmpoe. If it will not work on that, what legerdemain is there about this debenture proposition that is going to give the farmer a world’s price plus the amount of debenture—I do not get that—if the tariff does not work. Mr. Goss. The tariff does not work now. But if the farmer were able to get 42 cents a bushel over the world market immediately, the tariff would begin to work and would keep Canadian wheat from coming into America. Does not that answer your question? Mr. KixcaeLoE. Not mine. The only way of getting that 42 cents is to export it. How are you going to get that 42 cents debenture? ah only way to get that debenture is you have to export it out of the country. ‘Mr. Goss. The only way to get the debenture is to export it out of the country, but you can get the price of $1.42. Mr. KincuELoE. Your idea about that is that when it is sold it is ooing to reflect back and the price will be the same at home? Mr. Goss. It absolutely will. Mr. KincueLok. I was just wondering how it would do it. Mr. Goss. I want to see if I can not explain that to you, Mr. KK incheloe. ou know as a wheat raiser that vou can get vour $1.42 if you export it. Mr. Kincurroe. If T pay the freight and there is any market to send it over there to. and get the $1.42 by reason of going to the customhouse and getting 42 cents, I see that. TT Mr. Goss. Every exporter of wheat in America knows he can get S142 hen he exports it, and why should anybody sell for less when t now they can get $1.42 by selling to the exporter ¢ r. KiNcurLoE. If you export all there is in the country, there would not be any left. They would all run to get the 42 cents. I was wondering how strong you were on that reflection proposition and how much it was really going to reflect. ’ Mr. IForaer. Under this bill v r ; , ? Mir Goss. That 1s ot. is bill you propose to put 2 cents on cotton? Mr. Frommer. What would ha i i ] ppen in case we had a cotton cro like we had in 1926. when we had 18.000.000 bales and the price. be AGRICULTURAL RELIEF 347 cause of having a surplus, was depressed down to about 10 or 11 cents? Under your bill you would simply add 2 cents to that price? Mr. Goss. That and nothing more. Mr. Foumer. And there would not be anything in your bill to take care of the surplus or to bring about a fair price? Mr. Goss. I explained before you came in, Mr. Fulmer, that we are in hearty sympathy with that method of orderly marketing which has been mcorporated in a number of bills which have come before you. We have had bills ourselves. But we have felt that there were two distinct principles, and we have not put them both into the same bill. We believe that cotton can be served well by some system of orderly marketing just as you have pointed out, here. Mr. Former. In other words, if you simply add 2 cents to the 11-cent price you would still be perhaps 5 cents a pound under cost of production of the cotton? Mr. Goss. That is correct. This bill does not aim in any way to establish orderly marketing. If in the judgment of the committee it seems wise to provide those conditions under the same bill, it is entirely acceptable to us. We have felt there were two subjects which should be in two different bills, and it was not my purpose to discuss that question here further than to say that we are in hearty sympathy and in accord with the principles of orderly marketing which are in a number of bills which have been presented. Mr. Forumer. I say, unless there is something to take care of the surplus so as to bring about orderly marketing and a fair price, it would not help the cotton situation very much. Mr. KincueLoe. You have your debenture here on tobacco at 10 cents ad valorem? Mr. Goss. Ten cents ad valorem. Mr. Kixcueroe. The tariff on tobacco is at different rates on difterent kinds of tobacco. I was just wondering why vou just put it flatly on 10 per cent ad valorem? Mr. Goss. The reason for that, Mr. Kincheloe, was this: Some of the tariff rates on tobacco are so high that if it were put on the per pound basis it would result in exporting some of the lower grades and the collection of debenture on those grades of a value more than the value of the tobacco. So we have put it entirely on an ad valorem basis; and it might be well if in the judgment of your committee they thought so, to establish an ad valorem price on evervthing for the purpose of simplicity. Mr. KincHELOE. 1 think if it ever becomes a law vou would have to divide this tobacco up specifically in some language. 1 think it pught to be amended. Mr. Goss. That is probably true: but those are details that would have to have the consideration of your committee in the utmost detail in the question of tobacco. It is the main principle that we are trying to bring before you; and we have written the rates in the bill, which, we feel. without adequate investigation, are nearest to the fair rates. Mr. KincHELOE. I think it would work out less on tobacco than any other commodity, do you not? Mr. Goss. You mean there would be more difficulties in the way of tobacco 2 348 AGRICULTURAL RELIEF Mr. KincaeroE. The debenture would be of less benefit to tobacco than any other commodity. Mr. Goss. It all depends on the rate of debenture you would establish, of course. Mr. KincaeLog. There is this circumstance—I want to develop that a little further—the dark-tobacco districts of west Tennessee, western Kentucky, and southern Indiana export 80 per cent of their tobacco per se. Itisnota question of surplus. They have to depend on foreign markets for 80 per cent of the sale of that tobacco. 1 was just wondering how that was going to help the tobacco grower down there when 80 per cent of it is exported. Mr. Goss. If 80 per cent of tobacco is exported and the producer gets 10 per cent ad valorem in the form of export debentures, if that represents the difference in the cost of production at home and abroad, that helps him by just that much; and the result would be a general rise in the price level of 10 per cent. Mr. Kincreroe. That is the whole thing. That is what they say about the tariff. The tariff ought to be at such a rate that it will equalize the cost of production at home and abroad: but it don’t do it. Mr. Goss. Where we have not an exportable surplus it, does. This is supplemental to the tariff, because the tariff does not work where we have an exportable surplus; and here is the opposite side of the tariff which will work if we have an exportable surplus. That is what we are trying to do—to establish a well-rounded tariff policy which will lie ‘equitably upon all industrv in America. including agriculture. Mr. KincueLor. Let us take an example. Here is a little tobacco tenant, say, in Tennessee. He has got a little patch of tobacco, probably producing 2,000 or 3,000 pounds. There 1s no competition in the sale of tobacco that is sold down there, because the big tobacco trusts monopolize it. It is not a question of supply and demand as to the price this poor little tenant gets. It has been shown several times in my district where they have put the same basket of tobacco on the floor and sold it three times the same day, and it brought a different price every time. The American Tobacco Co. and the Imperial and the Regie and the other people, and all of them have got a monopoly on tobacco. There is not any competition on the floors when you sell it down there, and I was wondering how this debenture of 10 per cent ic going to help that tobacco grower down there when he has to take whatever the trust says and not its market value—how this debenture was going to save him. _— Gross. It would raise the general level of prices on tobacco Mr. Kincueroe. How wo i ise it, in vi the Tobacco Trust buys it vould it ase ih In view of the fact that Mr. Goss. I say the general level. Now, if the growers of tobacco are not equipped to take advantage of that raise bec there 1 trust which governs the local market th i 1 ion which ill Bly, Carn Tooth er, , there is no egislation which that. T which will curb that trust from doing Mr. a Bor pe 2 ok poration with a revolving fund to h r a Government expert av. o handle just such cases. and which AGRICULTURAL RELIEF 349 would have the power to buy and export and orderly market that commodity, give them the full benefit of the proposed plan? Mr. KiNncHELOE. Hold it for the purposes of orderly marketing ¢ Mr. Goss. I am inclined to think that if that export corporation were included in it, and it had its branches out so it could reach the little fellow in the tobacco warehouse in the State Mr. Kincheloe represents, it would do it. Mr. Jones. If it went to buying tobacco it would reflect back just as the other commodities in your bill ? Mr. Goss. If they went in your territory and went to buying tobacco, but if they went two or three counties away and began buying tobacco, and that little fellow knew nothing about it. it would not help him. Mr. Jones. He would find that out. Mr. Goss. But it probably would assist greatly in the case of tobacco and some other crops. Mr. Jones. At least it might be of advantage to have that as a sort of club or protective whip. Mr. Goss. I think it would. Mr. Jones. It could be considered in case such a condition as you mentioned arose. Mr. Goss. I think it would. I think it is an excellent provision to go into the bill, to give that additional weapon to hold over the heads of speculators. That if they are trying to do as Mr. Kincheloe has pointed out, that here is a market for tobacco or any crop that they can reach. I think it is an excellent provision. Mr. MexgEs. You have no such provision in this bill? Mr. Goss. In this bill it is not incorporated. And, once more, Mr. Menges, I would say that this committee is going to have many suggestions. Mr. Jones has brought us an admirable one, which will make the application of this bill or any other bill presented to you more equitable than in the original bill. We have no pride of authorship. We have no objection to adding or taking from it, where the bill will be improved. All we are trying to do is to bring the principle before your committeee. Mr. Me~ces. The statement Mr. Kincheloe made in regard to the sale of tobacco, that the trusts regulate the price, takes place right in my district. But I want to say to you, it does not take our fellows very long to find out if there is any way of getting away from that fellow who holds the market under his thumb and squeezes out every penny to be squeezed out; they will get out from under that thumb Just as soon as they can. and then are might quick to know about how to do it. Mr. Kixcreroe. You do not mean your farmers have whipped the trust? If they have, I would like to tell my growers about it. In my country, for years the practice has been for these trusts to lay off the territory, and have a gentlemanly understanding that nobody competes in each territory. I was wondering how this bill in the absence of some arm of the Government was going to help these fellows to take this crop and orderly market it; how it is going to lo them any good. Mr. Menges. I do not see that it will, Mr. Kincreroe. I do not either. 350 AGRICULTURAL RELIEF The CaAamMAN. I understand you to say that you would be in favor of any amendments to strengthen the bill Mr. Goss. Yes; we do not claim the bill is perfect. The CHAIRMAN. Let me ask you this question: Would you be in favor of minimizing the speculation waste in marketing commodities, doing away with the speculation, the manipulation of prices, and doctoring of grades and all those things ¢ Mr. Goss. I would net be able to take snap judgment on the wording and say which is best. We are trying to carry to vour committee a definite principle. The Criarman. Are you opposed to it? Would you be in favor of legislation that might do away with the fraudulent practices referred to in the Federal Trade Commission report and the press reports of the dealings on our exchanges through price and grade manipulation? I have noticed that has been left out of the bill and I was wondering why it was left out. Most of the farmers think they are being imposed upon. Mr. Goss. If, in the judgment of the committee, it will be possible to curb manipulation by incorporating a feature in that bill to do so, I see no objection to do it. in Cram. But the question is whether or not it shall be put in or left out; that 1s the 1dea. ou sa 1 1 did you leave that out? y vou drafted the bill. Why Mr. Goss. Because our attitude has been to hit at one evil and not try to correct everything in this one bill. The Cuamman. Do you not consider that an evil, speculation? Mr. Goss. It certainly is; and there are evils of the tariff, evils of taxation, and evils of transportation which could be—— The Caamrman. If it is an evil, why did you leave it out? Mr Goss. Because we attempted to reach one evil only. : 22 (mniss. Only one evil? Would it not be well to take care of all the evils? [Laughter.] Why did you leave it out? Mr. Goss. We would like fo take care of them, but we do not feel competent to remedy all the evils at one stroke. e Crarman. It can be taken care of; all you would have to do te put it in the bill. Are vou for it. or against it, that is the Mr. Goss. If the committee can elimi i i there would be no objection hatover tin : in % ation, The Cuamman. Of course, unless we try, it can t be a : Mr. Goss. There would be ho objection you can do i one: The Cmamrrman. I will ask you another jon t Wo i A ; question: Would it preetl geous domestic markets for such commodities, do you elieve in advantageous markets for domestic products ? Y . Mr. Goss. Te x the bill accomplishes {hat and as far as the g goes, Mr. Haugen, I can no - paragraph here and a section there : and me 4 ay and oat 3 We feel that is within the province of the conmitt . All in the bil. ing to do is to bring the main principle bef e vo A SNE have it Jrorded so as to accomplish that ore vou © think we e Cramrmav. I understa is hi and I notice a number of hime aim ton Yond 1 a A re whether that was intentional or trintentional 2 wanted to inquire AGRICULTURAL RELIEF Mr. Goss. In the first place, I did not draft the bill, Mr. Haug. The CramrMAN. I did not think you drafted it. I think you are, friend of the farmer. I do not think you would impose on them tc the extent of cutting the tariff in two. I do not believe you are in favor of making a—— Mr. Jones. Does the Chairman mean to take the position that the present tariff law is of practically no benefit to wheat? The CaairmaN. Not on the wheat—not on any commodity of which there is large exportable surplus. Mr. Jones. I am glad to see the gentleman taking the democratic position. The CuamrmaN. Yesterday we had a proposition from the gentleman from Texas, who said cut out the tariff. They get $2 a hundred on cattle weighing 1,050 pounds, and the suggestion is to wipe it out. Mr. Jones. 1 congratulate the chairman on his democratic position. The CraairMAN. Now, we are the tariff basis, and the Tariff Commission found the farmers in America are entitled to 42 cents a bushel more than they were across the line. This bill proposes to give the farmer the benefit of half of it, or 21 cents instead of 42 cents as found by the Tariff Commission. Mr. Jones. That would be a good deal better than what they are getting now, according to the chairman’s position. Mr. Goss. Mr. Haugen, I would say that we have no objection to raising the rate of debenture on wheat to 42 cents if in the judgment of the committee that meets the difference in cost of production at home and abroad. We have given these figures at half, because we thought after going over the tariffs, without any scientific investigation, it was approximately the correct basis. The CuarvaN. If vou will go one step further. What about eliminating this speculation? Are you in favor of that amendment? [Laughter.] I think in this bill we would have just as much of that as in any other. We are trying to do away with objectionable practices by a number of people in Chicago and various other cities. If vou read the report of the Federal Trade Commission, you will find out all about it. Mr. Goss. I would not attempt to put my judgment up against the judgment of the committee as to whether it was better to incorporate a great many things in the bill, each one of which might draw a certain amount of opposition, or whether it were better to take one thing at a time and let each bill go through on its merits. That. we feel, is a matter for the committee to decide. We want a number of things, however. We want freight reductions; we want tax reforms; we want a number of things which can be done for agriculture. We have attempted to bring only one up for Joni enaiion for discussion at this time, and confine our attention 0 that, The Cmarryan. The bill eliminates the provision for the encouragement of cooperative marketing ? Mr. Goss. We are whole-heartedly in favor of it. Whether it is Wise to incorporate it in this bill or to have two separate bills is a matter on which we certainly would defer to the judgment of the rommittee. 351 352 AGRICULTURAL RELIEF ir. Kercaay. That is to say, if the cooperative provision of the M:Nary-Haugen bill were placed in this bill you would have no articular objection to it? Co / Mr. Goss. No; that is right. If the cooperative provision of the bill were soundly drawn—and mind you, I do not claim to be an authority on the principles of the McNary-Haugen bill, or, for that matter, an authority on this. But any sound cooperative principles, and I believe those in the McNary-Haugen bill, as I have gone over them roughly, are sound, if they were incorporated in this bill, we would have no objection. We do feel, however, that a board to handle this proposition of difference in cost of production in the most economical way is a separate proposition, and a very direct and economical way of handling it. The CHAIRMAN. Let me ask you another question: Would you be in favor of the provision that the powers of the board should— be exercised in such manner, and the marketing agreements entered into by the board during any marketing period shall be upon such terms as will, in the judgment of the board, carry cut the policy declared. * * * Do you believe in the board carrying out the policies declared by Congress? Mr. Goss. I certainly believe in the board carrying out the policy declared. The Crammax. Are you willing to insert that: in the bill? Mr. Goss. I think it is covered in the bill, Mr. Haugen, possibly not in just the language. you read. I do not know from what bill you are reading. The CuairMaN. I am reading from the McNary-Haugen bill Mr. Goss. I can but state again, Mr. Haugen, that we are trying to bring one principle here, and if there are provisions in the McNary-Haugen bill which would improve this bill, you will not find any opposition on our part. The CramrMaN. You have no objection to going the whole length? Mr. Goss. You can appreciate my position, Mr. Haugen, in having you read sections out of your bill and asking me to say whether they applied to this bill, that I can not do so without sitting down and studying them. The Cuatrmax. I was just calling your attention to a number of things eliminated from my bill, which we have had under consideration, and I would like to have your views on it. Mr. Goss. We have not tried to draft this bill by taking sections from another bill or eliminating them; we have tried to build from the ground up on its own merits, without considering anv other bill that might be before the committee. Mr. KixcueLok. In order that all your time may not be taken up answering these questions that are not in the bill, would you mind taking up the provisions that deal with the control features and emphasize them? You have already mentioned that once or twice, but I should be very glad to have you elaborate on that some. . 1 In hi I was trying to go through the bill section by section. unk I can do it if not interrnpted too much before the time expires. far unomay, This is only about 20 minutes left, and I was a rac Jou not get to that feature. which I regard as very AGRICULTURAL RELIEF 353 Mr. Goss. Taking up sections 5 and 6, we have a list of debenturable commodities and also provide that any agricultural commodity carrying a tariff may be placed under the provisions of this act, and an ‘export debenture rate declared on it by proclamation of the President on the advice of the board. We have included seven commodities in order to put it into operation. We have included the commodity of cotton, which does not have a tariff on it at this time. Section 6 also provides that manufactured products using debenturable commodities may have a debenture rate established on then in proportion to the ratio which the debenturable commodity used, bears to the total commodity used in the manufacture of the product. Section 7 is a flexible provision which gives the President, on the advice of the board, the right to proclaim a change in the debenture rates either up to the amount of the tariff, or down to the point of elimination. That is to be done, first, if there is any change in the tariff which would necessitate a change in the debenture rates, or if there are conditions which brought about the change or necessity of a change in the tariff rates, it 1s the duty of the Loard to examine into them and report to the President. Second, if there is an emergency under which an American agricultural crop is thrown on the world market by reason of a surplus, and it is found that the emergency causes an undue depression in price, that the board may examine, and if they find a difference in cost of production, they may establish a debenture rate up to the amount of the tariff. Mr. KixchHELOE. Just there, on the question of cotton. I think probably that is the only commodity mentioned in the bill that has not some kind of a tariff. If this gets into operation and the American raiser of cotton is going to get his full price plus the debenture, how are you going to keep the importers of cotton from bringing their cotton into this country and getting it onto the market? Mr. Goss. That is a very pertinent question, Mr. Kincheloe; and we will say now that this measure or no measure like the equalization fee—no measure which tends to raise domestic prices. can work 100 per cent to perfection without a tariff. Mr. KincuELOE. That is true. Mr. Goss. We have covered that as best we could over in section 8. which will be found on page 13. which savs: Pending the enactment of legislation providing a tariff dury on cotton, regulations requiring that metal tags or other appropriate markings be placed on all bales of cotton produced in foreign countries and allowed transit through the United States for exportation. may be prescribed by the board. Mr. KincHELOE. You have already admitted that on products of which there is an exportable surplus that the tariff does not affect it? Mr. Goss. It would: if we had an export debenture rate it would protect it. Mr. Kixcreroe. It would, to keep out imports; yes. Mr. Goss. Yes; and to that extent only. Let us see just about how much evasion there would be. This section 8—— Mr. Kixcueroe. It is not a question of evasion at all; it is just a Juestion of the raisers of cotton over there, saying “ These American cotton growers are getting the world price plus the debenture. I am going to ship mine over there and sell it.” 354 AGRICULTURAL RELIEF Mr. Goss. I just want to call attention—— Mr Kixcreroe. I was just asking how are you going to keep it out; that is what I had in mind. Mr. Goss. I am going to call your attention to the trend of prices which would have more effect than the provision we have here for putting on metal tags on every bale imported so that it could not be imported and shipped through the country. Mr. KixcueLor. There is nothing in that. That metal tag just simply says “ Was not raised in this country.” Mr. Goss. Yes. Mr. KincueLoE. It does not keep them from selling it in this country and getting the benefit of the world’s price plus debenture. Mr. Goss. That would probably be a very small proportion of the imports. Our imports of cotton are long-staple cotton, which is coming from Egypt. We have to pay the world’s price at Egypt plus transportation to America. If a debenture rate is established on cotton—let us see what it would do on that 2-cent debenture rate on this long-staple cotton. We will assume that the world’s price in Egypt is, I will say, 20 cents, just for a figure. Mr. KixcurLoe. 1 do not care what it 1s. Mr. Goss. Let us suppose the expense of bringing it to America is 114 cents. Istablishing a debenture rate of 2 cents a pound on longstaple cotton would not raise the price the whole 2 cents, because the world market price is lower than the American price. ‘Mr. KivcHELOE. If you are going to help the farmer, do not do it piecemeal. Why not put a debenture on there that will help him. Mr. Goss. It will help the grower of American cotton. Mr. Kinceror. You have got things I can not really understand. If you are going to help the farmer, if this is going to reflect back down on that grower, which I hope it will if it becomes a law, because I do not want to vote for a bill that is going to help the exporters only—if that will do that, then I would put on enough debenture here so that it is going to help the farmer. Let me go a little further: If you put this debenture on there high enough it is going to help the farmer the higher you put it; and, of course, the more revenue, you will admit. it is going to take out of the Treasury, will you not? Mr. Goss. Yes. ~ Mr. KincuELOE. Of course, I do not see any difference in keeping i out of the Treasury than there is in appropriating it out of the Lreacury after you get it in, in principle. But I think the debenture, if you are going to help the farmer. ought to be high enough so that it will really help him. - To a, Dog 3, Binhel, J will help the farmer on one oc-Gan, a, Hu hen the American farmer is on the world marton is 14 wheat or cotton. We will assume that the price of cot-4 nl Sous In America and 12 cents in the rest of the world, and enture would not help the American farmer—the cotton grower, because he could only get 12 cents in the European market plas a alent debenture, and he could sell here for 14 cents. or. NCHELOE. Then you sav it will not help the American Mr. Goss. It will not if the price i ica is hi ; 1f the price in America is higher than in the rest of the world: and it is not aimed to do that. es is aimed to AGRICULTURAL RELIEF 355 do just one thing, and that is to raise the price on American products above the world market by the difference in cost of production at home and abroad. If our prices are already above the world market, the debenture will immediately become inoperative and will not cost the Treasury anything, because nobody will export if it is above the world market. Mr. KincHELOE. I can not understand what is the difference between issuing these debentures and paying in cash. If you have these debentures you are going to kite all over the country, and the growers and speculators are going to get them, and the poor devils are going to have to discount them. I do not see why when this transaction is completed you do not pay him out of the Treasury. Mr. Goss. Mr. Hall raised that question, and I asked if he would not let this be answered by the gentleman following me, because it is a constitutional question that I can not discuss as intelligently as one who has all the law and constitutional points and can bring them to you. Mr. KinxcHELOE. I do not think there is much of a constitutional question to it. Mr. Kercuam. Have you got down to the question I wanted you to cover? Mr. Goss, I got down to it and I got off of it. Mr. Kercaam. The section that gives the power to the board to lower the debenture rate when there is evidence of overproduction. Mr. KincHELOE. The same power is given the President under the Fordney-McCumber tariff bill, is it not? Mr. Goss. There is one other provision I would like to cover, Mr. Ketcham, before I reach that in section 7. It comes under (c), page 10, and this provision is designged to assure against an overissue of debentures. It provides that whenever there is an indication that the amount of debentures issued is likely to exceed half the total amount of tariff receipts during the coming fiscal year the board shall present a report to the President, and he shall reduce ratably the amount of the debenture rate on all commodities so that it will not exceed 50 per cent; and the purpose of that 50 per cent is to assure ample margin so that the debentures would always be immediately redeemable. Some think it might be higher. After experience has demonstrated just how these provisions are going to work out it probably would be wise to raise that, if it seemed advisable. But to start with, it provides against overissue of debentures. [t is plain that there would be a demand for twice as much exchange to pay import duties with as there are debentures issued, thus avoiding the condition thdt Doctor Aswell raised here, where the debentures would be discounted: and we give 12 months in which to redeem ‘hem. The provision which Mr. Ketcham has referred to to curb overproduction is found in subsection (d), section 7, on page 11. It provides, first, that if the President finds at the beginning of the crop year—and the crop year is defined as follows: The term “crop year,” as used in this subdivision, means a 12 months’ period reginning at a time designated by the President. If the President finds at the beginning of a crop year that the probable production of any debenturable acricultural commodity during 356 AGRICULTURAL RELIEF the year wiil exceed the five-year average, the debenture rates will be cut on 60 days’ notice by a percentage which is in inverse ratio to the increase, roughly. The table of reductions in rates will be found in subdivision: (e), section 7, on page 12, and are as follows: If there is a 20 per cent increase there is no reduction ; if there is an increase of 20 to 40 per cent there is a 20 per cent reduction; if there is an increase of some 40 to 60 per cent the debenture rate will be cut in half. Mr. Kincueror. Do 'you mean by that that all over of a certain crop that exceeds an average of five years that you are not going to pay any debenture on that? Mr. Goss. No; the whole crop. The whole debenture rate will be cut on the whole crop. Mr. Kincuerog. That is what I mean. You propose to say to the farmer that “if you raise any over an average of the last five years of any one commodity that we propose to reduce the debenture rateably ? Mr. Goss. Give him a leeway of 20 per cent. Mr. KrNCHELOE. The economists who are supposed economists have been before this committee time and again and have told us that there 1s no such a thing as a surplus over a period of five years on these asic commodities. Mr. Goss. There is a difference of opinion as to what constitutes a surplus. Mr. Kincaeror. Over and above the basic requirements; that is what I mean by “surplus.” Mr. Goss. Over and above the domestic requirements? Mr. KinceELOE. Yes, Sir. Mo. Goss. This would provide against building up a surplus. The argument, as you know, Mr. Kincheloe, is often raised that if you raise the price of wheat 21 cents you are going to bring a lot more on es Ji production, and this is to provide that if they bring more than per cent acreage into production the debenture rate will be Mr. Kincueroe. That is 20 per cent over the five years? Mr. Goss. That is 20 per cent over the five-year average. Mr. KincuaELOE. If those economists are correct there is no surpl over five years? oT rR Mr. Goss. It is not a surplus. Ie lig ro mean world surplus? r. Goss. Noj if the total ion i . ‘ rer: for five oars by 90 por Lota production is greater than the average Mr Kixcaeror. In the world or United States? iy Ges, The United States. Ir. KincueLoE. That is what I thought Mr. Goss. The rates ar i 2 you Fagan. and they would go into 02 Senthil be wh They are mandatory, lutelv ia elim hio / point where the debenture absoely is eliminated if you double production Mr. For. Mr. Goss, on that subject, have y out the operation of this thing in oll ave oe ziternypied by work for example, 20 per: cent increase in ou ee To you make no reduction in debt r wheat production for which bushels a year. would it not e entures would be, rouchly. 160.000.000 Mr. Goss. Yes a AGRICULTURAL RELIEF 357 Mr. Forr. One hundred and sixty million bushels a year would be three hundred and twenty-odd millions bushels additional. Mr. Jones. May I suggest there is a provision in your bill that on any increase in production you provide for corresponding reduction in the debenture rate? Mr. Fort. That is 20 per cent and above. Mr. Goss. The question has been raised with us, if it might not be well to establish a different rate of increase on different commodities. The 20 per cent increase in some crops is not so great as in others. Mr. Fort. Here you go up to 40 per cent on wheat, which would be 320,000,000 bushels, or bring our crop up to 1,120,000,000 or 1,130.000,000 bushels, which is more than we ever raised in the history of the country; and for that you are only going to take 1 cents off the debenture. It seems to me that scale would not even constitute a threat. Mr. Joxes. But there is a provision they can construe in conneclion with that, by which they can reduce the debenture any amount hey want to, even down to nothing. Mr. Goss. This is mandatory. Mr. Jones. But they have the right, privilege, and authority to reduce that debenture just as far as they see fit, even down to zero. Mr. Fort. But the psychological effect of your legislation that the farmer will feel if he plants 11.000.000 more acres of wheat—— Mr. Jones. I do not think so. That board is going to exercise a little judgment. Mr. Goss. The rates of reduction is in the judgment of the board. If they do not start early enough and are not drastic enough they can be changed. We strongly believe, however, that there should be an automatic scale providing for rates of reduction. Mr. Former. You understand that the farmer has no control whatever over his production, or very little, since he can plant a smaller acreage and the production will sometimes increase ? Mr. Goss. Yes, Mr. Fulmer. Of course, we understand that; but on the average, intelligent planting will bring results a whole lot better than haphazard planting. Mr. Former. Take the instance of the cotton crop in 1926, when they produced 18,000,000 bales, or about 5,000,000 bales above the average for five years. Then, under your bill the debenture plan would not apply on cotton when the crop was 5.000.000 bales above the average for the past five years? Mr. Goss. Oh, yes; it would cut down the debenture rate on cotton. There is an automatic reduction in the debenture rate when the production is as high as that; and possibly the scale which we provided is not drastic enough. Mr. Friyzr. In other words, if the cotton farmers happened to be blessed with a good crop which reduced the price below the cost of production, because of being blessed with a good crop they would not get any benefit out of this plan at all? Mr. Goss. The debenture rate would be reduced by the size of ‘he crop; that is true. Usually the cost of production is also reduced by the size of the crop, and in the case of that kind, such as vou have pointed out. the remedy which would best be applied is the 358 AGRICULTURAL RELIEF remedy of orderly marketing, taking the surplus off the market, as we see it. But, as 1 have said a number of times, we felt we did not want to incorporate that all in one bill; we wanted just the one principle in one bill. Mr. Kerceanm. Is that all, Mr. Goss? Mr. Goss. I just wanted to call attention of the committee to the set-up of the bill; that it has merit in its low cost of operation; that every dollar under it .goes to ‘the farmer. because there 1s not any oi, expense in its operation. Mr. KincreLoE. There would be if you had an export corporation. Mr. Goss. If we had an export corporation. there would be some expense. } Mr. Kixcurroe. There would be millions appropriated out of the Treasury in order to buy this stuff. Mr. Goss. I am speaking simply of the set-up. There is no possibility of evasion; there is no possibility of burden lying on a person more than his just share. There is nothing artificial about it. So this is an attempt to go directly to the cause of our agricultural depression, which we believe is our higher standards of living and higher cost of production; and removing that cost by establishing a system which will enable us to meet the difference in cost of production between home and abroad; and we know there are many, many proposals before your committee having great merit, and we have the utmost confidence in the judgment of the committee that they will consider all of them and will accept from the proposals the best there is and incorporate them in a bill which will bring us the kind of equalization which we need. Mr. Menges. How much time do you think Mr. Mellon, Mr. Hoover, and Mr. Jardine could give to the enforcement of this operation after they had done their other work? You appreciate they would have to employ somebody to do this work for them? Mr. Goss. There would have to be an executive secretary, together with enough clerks, to look after the establishing and control of these rates of debentures; and that is about the extent of the cost. We have provided for an appropriation of $50,000, which we believe would be ample to cover the expense of that operation. Mr. Kercaam. Mr. Goss, just before you leave the stand, there is one other feature of this plan, that it would not disturb the present systems of distribution; it simply fits in, takes them as they are, COoperatives and all, and unless the export corporation idea is incorporated in the bill it would leave the situation as it is? ‘Mr. Goss. You are correct, Mr. Ketcham. There is no system of distribution that is now in effect or that has been proposed that this would disturb in any way. I doubt if there is a program of farm relief that could not be put into operation when this is in operation. However we feel that most of them would be unnecessary. We feel if we met the difference in the cost of production that the flow of our surplus over world markets would automatically pick up and relieve us of this problem of great surplus which is bearing our market. Mr. Kercuam. Before we close, I just want to say, for the benefit of those here and the members of the committee, that the plan now is to have three other witnesses appear, and the time they consume will depend upon the interest shown and the questions asked. Fol- AGRICULTURAL RELIEF 359 lowing Mr. Goss will be a farmer from Indiana, Mr. Jesse Newsom, a man whose family has lived upon the farm he now resides upon for the last 100 years. Following that will be Professor Stewart, who will present the economist’s view, and following that will be a farmer of some acres, of wide acquaintance, and some very high national reputation, Mr. Carl Vrooman, of Illinois. Mr. Fort. It Mr. Goss through? Mr. KercuaM. Mr. Goss is still here. Mr. Fort. This 1s the first time this problem has been presented, and I hope these gentlemen will stay around so as to be available, because I would like to read over both of these statements, and then have some questions to ask. I have not attempted to analyze the bills and I would like to do so in the light of what has been said. Mr. Kercuam. That is the idea. Mr. Goss. We will stay here as long as necessary, Mr. Fort. I myself will leave on Sunday, but there will be others here, who can, [ feel, present the matter from a much more scientific standpoint than I, because I am just a plain farmer. who looks at it from the farmers viewpoint. Mr. Fort. From the talk you gave I was not so sure you were just a plain farmer. Mr. Goss. I want to thank the committee. The CuamrmaNn. It has been suggested that when the committee adjourns on Friday we will adjourn to meet on Tuesday following. The committee fill now stand at recess until to-morrow morning at 10 o’clock. (Thereupon, at 11.55 o'clock p. m., the committee adjourned to meet to-morrow, Friday, February 10. 1928. at 10 o’clock a. m.) House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Washington, D. C., Friday, February 10, 1928. The committee met, pursuant to adjournment, at 10 o'clock a. m.. Hon. Gilbert N. Haugen (chairman) presiding. Present: Representatives Haugen, Purnell, Williams, Thompson, Ketcham, Hall, Pratt, Fort, Menges, Andresen, Clark, Hope, Houston, Aswell, Kinchloe, Jones, Swank, and McSweeney. The Cmamman. The committee will be in order. Mr. Ketcham, are you ready to proceed ? Mr. Kercaam. Mr, Chairman and members of the committee, the committee will be in recess to-morrow, and owing to the fact that Professor Stewart must be back on the job by Monday, I have changed the order I announced at the conclusion of the hearing yesterday, and the first witness to-day, instead of Mr. Newson, of Indiana, will be Professor Charles L. Stewart, of the Department of Economics. University of Illinois. STATEMENT OF DR. CHARLES L. STEWART, URBANA. ILL. Mr. Stewart. Mr. Chairman, I should say that I have been a student of economics since I took my first course at Illinois Wesleyan University about 1910; that I have been on the faculty of the Uni-86160—28—SFR E. PT 5—5 360 - AGRICULTURAL RELIEF versity of Illinois and University of Arkansas, and of che graduate school of the Department of Agriculture part of the time while here for a period of three years; that I am an owner of farm land in Illinois, where I spent my youth, and in Arkansas. where 1 spent two years and four months. I am not representing the economists, as was said yesterday. I am an economist and am giving my personal opinion on on these matters. I am representing nobody but myself. The export debenture plan, which I outlined in the hearings on the Adkins bill two years ago, is the plan which I think has a fundamental principle behind it which can be helpful to American agriculture in its present juncture. It isa principle which has been applied not in exactly the same form in which I have tried to sketch it, but in almost the same form, in four other countries. If you desire it for the record at a later time I can insert copies of the laws from Germany, Czechoslovakia, Sweden, and France, dealing with an application of the principle to which I am referring. Mr, Jones. I would like to have you insert those. Mr. Stewart. I have not completed the translation as yet in the case of the French material. (The laws of the European countries referred to and submitted by Mr. Stewart will be found immediately following his testimony.) Mr. Stewart. I want to say that I came because your committee chairman wired me to come. The name of Gilbert N. Haugen is known in Illinois, and I think it is true that a telegram bearing his name received by a member of a faculty of an institution of learning in any State would be received respectfully and an attempt would be made to meet such a request. Let us examine the plan as it seems to me that it could be expected to work in the case of wheat. We produce 800,000,000 bushels of wheat; we export roughly 200,000,000 bushels. If an export debenture were issued upon wheat at the rate of 21 cents a bushel, as is outlined in the Ketcham bill which is before you, then $42.000.000 worth of export debentures would be issued upon wheat. These debentures could be used by those who receive them to procure debentures entry into the United States of dutiable goods of any kind; limiting them so that the total issue on wheat and other things does not exceed half the amount of duties levied upon dutiable goods coming into the United States would be sufficient to keep these certificates substantially at par. As a consequence, those exporters—and the bill itself says that these instruments shall be issued to any person—who receive these debentures will have received instruments worth full face value if those same exporters use them to import, and substantially full value, except for the brokerage involved. if thev transfer them to some one else for application. It 1s said that legally it makes no difference whether these certificates are made negotiable. Tt does not modify the principle in the The result which should be expected is that those who , e or : purchase or pet rc mh fog most he mh i 8 eg tk vy would otherwise receive, the value of the . a have Forhe language here, part of which I discovered three months A=0. Ss Tound 1m a report laid before a House committee 30 vears AGRICULTURAL RELIEF 361 ago. Mr. George F. Stone, who was secretary of the Board of Trade of Chicago. was asked bv David Lubin: Mr. Stone, I desire to ask you a few questions in your official capacity as secretary of the Board of Trade of the City of Chicago. What effect would a Government bounty on the exports of wheat have with respect of the general price of what throughout the United States? Answer. I would in my opinion increase the price per bushel. Question. It is said that the speculators would get the 5 cents bounty, or at east the greater part of the bounty. Answer. If a bounty of 5 cents a bushel should be given by the Government on all wheat exported from this country, in my opinion the farmer or pioducer would receive the full benefit of that bounty and not the speculator or exporter. It would simply enable the buyer to pay that much more thau he otherwise could pay or would be justified in paying. Competition would force him to pav all he could to the farmer to obiain his wheat. It would be for the interest of the exporter to obtain the wheat; that would be his object. Competition would force him to secure it by every possible means without loss to himself. His great object is to maintain his business, to enlarge his business. Competition would impel him as it now impels him to give every cent that he can possibly afford to secure the product which he seeks io export, The fierceness and intensity and volume of competition, by the very force of circumstances, by the very necessities of the case would drive the 3 cents bounty proposed by the Governmen® into the pockets of the farmer or producer. There it would land and from there it could never be wrested by speculators or by anybody else. Question. It is also admitted by some that the 5 cents would come in some way to the producer for the quantity that would be exported, but that there would be no advance on the greater quantity remaining for home use. Answer. It is a mistake, in my opinion, to say that the 5 cents per bushel vounty which it is proposed to give would be confined in its beneficial results ‘0 the quantity or volume of grain exported. It would affect the price of the entire crop. for the reason that grain is a surplus crop in this country. and consequently the price per bushel of this grain is fixed and controlled by the export price of this grain. and this export price, of course, I will here aay parenthetically. is made in competi.ion with all the other surplus wheat-producing countries in the world. No domestic buyer will pay one single fraction of a cent more for a single bushel of wheat than the buyer for export will pay. The latter makes the price for the entire crop. If no more were raised than was required for home consump. ion the price would depend upon the domestic demand ; but the export demand is a continuous demand, inasmuch as the demand for food can never be interrupted for any length of time, and this continuous demand for wheat, so far as a surplus wheat-producing country is concerned, fixes the price of the en.ire crop of this cereal of that country. No class of domestic buyers, of course, can be made to pay any more than the price offered by the export demand, the domestic and the export demand being rer nresent in the market. [ do not say that ihe statement quoted is final authority. but it is 1 clear statement. Mr. Mrxces. May I ask vou a question right there? Mr. Stewart. Yes, sir. Mr. Menges. If the competition would be so intense as you seem to indicate, why is it that the competition in buying wheat now ‘etween these exporters does not make a difference in price? Mr. Stewart. It does not make a difference in price ? Mr. Mexces. Does not make any difference in the price. Mr. Stewart. As compared with what, Mr. Menges? Mr. Mexces. Well, I mean you have never heard that one exporter fers <0 much for wheat and another one so much, have you? Mr. Stewart. In answer to that question, may I call vour attenlion to a report by the Federal Trade Commission on grain exporters? There an examination was made of two alleged price igreements. One was the so-called Gulf price agreement. the other 362 AGRICULTURAL RELIEF was the Pacific price agreement, in the case of wheat during the war period or immediately after the armistice. The result of the investigation, which occupies a good many pages, 1S to show that despite the very desperate efforts that were made by those who had entered into the agreements in a preliminary way the agreements broke down. That was true in both the Gulf price and in the Pacific price case. S0 far as I have been able to learn, there has been no charge of the existence of a successful price agreement In the case of wheat. Mr. MENGES. You say No successful price agreement was reached, therefore the price of all those fellows is the same, is it not? Mr. Stewart. Not absolutely the same, but it is a question of the buying margin. The buying margin as determined for export has been most graphically presented, I think, in studies which have been given publicity by the St. Lawrence-Great Lakes people, who have shown, I believe, for Beardstown, IIL, a normal cost differential of about 32 cents under the Liverpool price. Now, to be sure, that is subject to some personal equation as between exporters and to some fluctuation from one part of a year to another. It is a governing fact, however, that one exporter must be able to meet the competition of other exporters. In the case of wheat I believe it is said that there are approximately 40 of the exporters engaged in the business in this country. In the case of cotton, I believe, it is alleged that in the Memphis market alone there are 170. I am not sure of that. Mr. Mences. 1 am asking about that, because 1 have had a little experience in that connection. Mr. Stewart. Is it your experience? Mr. Menges. My experience has been that what one pays they all pay. And so your proposition would not be any different to my way of thinking. Mr. Stewart. In other words, the presence of an export premium or even the presence of an export tax, which of course is the opposite, would make no substantial difference so far as the possibility for a price agreement or the impossibility of a price agreement is concerned. Mr. Forr. Doctor Stewart, is it not a fact that the actual competition between the exporters is not upon the cash wheat but on the exchange? They do their buying generally on the exchange in futures, and, of course, will not pay more than the exchange price: is not that the fact? ‘Mr. Stewart. Yes; they contribute their share in the competitive bidding which determines prices in our markets. Turning now to the case of cotton, I have it directly from an exporter in Memphis that his buying margin and the buying margins he has to face constantly on the part of the others in the Memphis market is 3 cents a pound under Liverpool; and that he stood no chance month In and month out of cutting that margin, and that if he did so he would have to go out of business; that that figure prevails so far as that market is concerned. The point I want to reach is that the higher price which would be made possible by the presence of an export premium would prev with respect to those portions of the product which AGRICULTURAL RELIEF 363 are actually exported, but would prevail with regard to the other anits as well, because it would be essential that the competition of the exporters be met. oo By that I am not willing to say that leadership in price movements is always on the Liverpool side. I think that the researches of the Chamber of Commerce of the United States of America have definitely shown, as many of us have long known from other studies, that the leadership is sometimes in American markets and sometimes on the Liverpool side. But, taking the run of the year and taking the run of the several years, I think that Mr. Kincheloe’s question of yesterday can be answered by saying that certainly during threefourths of the time, or, let us say, with a relation of 75 or 80 per cent, the Liverpool market in the case of wheat and in the case of cotton 1s essentially the market from which we have to derive our prices m the United States by a deduction corresponding very clearly to the buying margin of the exporters. Mr. KincuELOE. And in view of the fact that one exporter could not pay much more for wheat than the other. could he? Mr. Stewart. Not much. Mr. KincHELOE. They all have to sell at the same market at the same price ? Mr. Stewart. Exactly. Now, then, if that is the case an export premium in the sum, let us say, of $42.000,000 at the rate of 21 cents a bushel in the case of wheat, should result in raising the price ipproximately 21 cents a bushel, not only on the 200,000,000 bushels that go abroad, but on the balance of the wheat as well. approximating. therefore, $168,000.000. It is because of this fact that these exportable surpluses can be ised as fulerums so that with the leverage on an export premium vou can raise prices to all producers in the United States. It is because of that fact that I have been interested to see to it that some attention was given to the experience of the other countries and to che possibilities in this country. I had hoped that the case for agriculture would not be lost through lack of available knowledge as to the way the thing has been done by some other countries when they faced something like similar emergencies. Mr. AsweLL. What other countries besides Germany ? Mr. Stewart. England has applied the idea of export bounty. Mr. AswerLL. They do not have that now? Mr. Stewart. It was in 1673, in February. that a measure was passed by the Cavalier Parliament under Charles II. It was in effect for five years, and was then discontinued. but was taken up when the Whigs came into control under William and Mary in 1689. They re-enacted exactly the same measure, declaring in the preamble that experience has shown that when there was an exportable surplus of the three commodities in question—wheat, barley and rve— that the export bounty was a benefit not only to the land interests but to the whole trade of the realm. That remained on the statute books until 1815. The thing, of course, that happened in England during that time was ‘hat through the growth of population and the coming in of indus-Iries, as a result of the industrial revolution, the exportable surpluses ceased to be part of the picture. As a matter of fact. about 364 AGRICULTURAL RELIEF the time of our French and Indian War, 1765, the exportable surpluses in the case of wheat and other bread grains had come to a place where it could not be foreseen from one year to another, whether there would be any or not. They see-sawed, you might say, for a period of about 25 years. From about 1790 up until the time it was taken off the books, England was definitely upon an import basis. so far as bread grains were concerned, so that import duties came to be regarded as an effective way to bring about protection. Mr. AsweLL. I am not interested in the history of the world. I asked you what other countries had it now. Mr. STEwarr. At the present time you will find in addition to the four countries which I named earlier as having a form of the export debenture type a number of countries, including Australia and Venezuela. I have a memorandum of that, which I would be glad to place before you. (See Appendix.) Mr. Kercaam. You will pardon me, Doctor Stewart. But I think Doctor Aswell was not in the room when you made that statement. Myr. AsweLL. I was here when he named them, but I wondered if there were any other outstanding countries except Germany. Mr. Stewart. I would recommend to your attention the Bureau of Agricultural Economics bibliography, Economics No. 20. entitled “ Bounties on Agricultural Products.” It summarizes the bounty experience, not only in all countries of the world but also to the American Colonies prior to our Constitution. Mr. Fokr. Is that anything more than a bibliography? Does it give the history, or is it simply a bibliography ? Mr. Stewart. It is a bibliography, with excerpts that are helpful. Let us come now to the legal principle underlying the particular kind of export premium which I think might be helpful in this juncture of our agriculture. It is that the sending out of the United States of exportable surpluses may justify this country in allowing Juiiable goods to come back to replace them without collection of uty. Let me state that principle in personal terms. He who sends out of the United States certain farm products of which we have exportable surpluses may be given the right to replace them with dutiable goods brought in without collection of duty. That is the legal principle which seems to me to be definitely embedded in the Einfuhrschein of Germany. This arrangement was called to my attention by Mr. E. C. Squire, who had returned from Germany in 1924, 1 believe, after having seen it operate in that country. Mr. PurNerr. That does not mean, Doctor Stewart, that the exporter and importer must be one and the same person? Mr. Stewart. No; I think that is not required in the case of any of the four countries which have applied the tariff-waived replacement principle to this problem. Mr. Forr. The debenture, or whatever corresponds to it, may be made negotiable and may be transferred to others? Mr. Stewart. It would merely mean that the second man might take from the first man a credit and continue the operation which the fest man began. The fact that the debenture would be negotiable under those circumstances does not modify this legal principle to which I am calline attention. AGRICULTURAL RELIEF 365 Mr. Kincueroe. Of course, they are negotiable. What do you think, Doctor, would be the real market value of those? . Mr. Stewart. The latest word which I have from Sweden was a letter dated December 15, 1927, indicating that the grain-import certificates had been par most of the time. The writer was T. O. Klath, our commercial attaché at Stockholm. My recollection is that he said they had been above par part of the time. Mr. KincHELOE. Why is that? Mr. Stewart. That is surprising and it is a peculiar feature in Swedish practice which would not apply here. Mr. KincaELOE. What I mean is at par—a hundred cents—I mean vou have a debenture; you are an exporter and I am a big importer. Why should I pay you as much as a hundred cents for that debenture; because, if I am going to do that. I might as well just go on and pay 100 cents into the customshouse. Mr. Stewarr. An importer will buy a draft; will buy American exchange if abroad. If he can get his debentures from approximately the same source, and if there is no more risk involved during the time the debentures are in his possession until he can dispose of them in lieu of duty. then he will take debentures readily. Under those circumstances it would require a discount of no more than a couple of dollars a thousand. Mr. KincuELOE. I am going to pay a hundred cents for it. There is no inducement to take it. Mr. Stewart. I am not wishing to contend that he would. I am reporting the fact stated in the Swedish letter. It was a surprise to me. Mr. KixcueroE. When you said “ par ” a while ago. in speaking of the sale of these debentures in America, you meant par less the diszount for handling them ? Mr. Stewart. I should have said approximately par. That word “approximately ” I would be glad to analyze with you. Mr. KiNncHELOE. You did not mean a hundred cents on the dollar when you said “ par”? Mr. AswerL. He said at a premium. Mr. Jones. He said at a premium because of the peculiar provisions of that law. Mr. Stewart. There is a redemption feature in Sweden which is not provided in the United States which makes the certificates some-'imes stand above par. Mr. AsweLL. You said “above premium ” part of the time. did vou not? Mr. Stewart. Yes; but that feature would not be apropos to the discussion here, Mr. KincuEeLoE. I was wanting to get your opinion whether there youd not be a glut on the market and probably be a great deal less than par. Mr. Stewart. You have to make a distinction between what the exporter would get for his debenture and what the importer would pay for it. Mr. KincHELOE. Absolutely. Mr. Stewart. If a middleman has to intervene there will be some brokerage. There are some vorts 1n the United States with respect 366 AGRICULTURAL RELIEF to which the shipments are mainly outbound, other ports with respect to which the shipments are mainly inbound; those ports may be a hundred miles or five hundred miles apart. There will have to be a market mechanism there. There will have to be people interested to get the debentures across from our surplus ports to our deficit ports, and they will need some compensation for their efforts. The individual who does not wish to sell his debenture to an importer to use, but who can use it himself, of course is not confronted with that necessity. Mr. KinonerLoE. They would be very scarce. Mr. Stewart. A very small item. Mr. Kincrrroe. He is not going over to England to buy manufactured products to get the benefit of the debenture. Mr. Stewart. It would not be impossible, I think, in the case of some organization—perhaps a cooperative organization that was importing dutiable goods—to turn around and use the debentures which they might have received through the exportation of cotton or wheat in the payment of dutiable rates on some dutiable article coming in and handled by the supply department of such an organization. I do not say that is likely to be a widely prevalent practice. Mr. Kincueror. 1 want to get your judgment on this: Of course, the purpose of this bill is to take care of our surplus. Under the Ketcham bill there would be no way whereby any of the surplus commodities of this country could be stored here for our own consumption, would there? Mr. Stewart. It may be, gentlemen, that the habits of mind of the specialist or not going to be especially helpful. I am simply trying to point out that here is one thing which can be. done. The thing which I believe you have in mind, Mr. Kincheloe, is the matter of handling what might be called weather-determined surpluses. Mr. KincHELOE. Carry-overs. Mr. Stewart. Resulting in carry-overs. Mr. KincaeLoE. For the purpose of lean crops; possibly. This bill would not handle that situation? Mr. Stewart. That is another story, as Kipling would say. Mr. Kercuam. Doctor Stewart, before you leave the export debenture price would you be kind enough to give the committee the benefit of your judgment as to the most extreme variation that you would expect the debenture to have in the exchange conditions which you described a moment ago. ~ Mr. Stewart. That question requires almost a graphic illustration, if I could give it. I have made such an analysis. This analysis is one which is on a small scale, and I am not dependable upon your seeing it. There is a seasonal ebb and flow in the movement of dutiable goods into the United States. I have that plotted out here for a period of six years. I will be glad to pass this around the table or any of you to examine [passing the same to the members of the committee]. Mr. Kincurroe. What commodities are you taking? Mr. Stewart. This is on all dutiable goods. Mr. KincreLoE. Oh, dutiable goods? 5 Ar Sram Yes. With respect to the cost of debentures, someody handed me a scale of rates a little higher in some respects than AGRICULTURAL RELIEF 367 the scale which is included in the Ketcham bill, and taking the statistics of actual exportation from month to month during—— Mr. Kercaam. I do not think that is the point I had in mind. Mr. STEwART. I think I will reach it in a minute. During the last six years. It becomes evident that there would be a seasonal fluctua-‘ion in the way the export debentures are issued. Now, if it ever so happened that you should put in such high rates or make the debenture applicable to so many commodities that you would issue more debentures during one month than there are dutiable goods coming in immediately thereafter, then you would set up what would be called a monthly overissue. Now, a monthly overissue might require that the exporters would have to wait a month, or that the importers who purchased the export debentures then would have to wait a month, or maybe two months,, before they could use them. Debentures do not bear interest. It would be necessary, therefore, to discount the instrument because of the fact that it bears no interest. However, at the rates of debenture indicated I think it would be perfectly clear to anyone analyzing it that there would have been no discount during the last six years in which there would have been even a monthly overissue. Mr. Jones. Those figures were made from the schedules in the Adkins bill, were they not? Mr. Stewart. No. Mr. JoNEs. Are they not the figures that Mr. Adkins inserted in the record as coming from you about a month or six weeks ago, or did you see that? Mr. Stewart. What happened was that S. S. Knight, of Petaluma, Calif., made up some estimates at certain rates, and just for the sport of it I used those rates. Mr. Jones. The reason I broke in here was the fact that those rates and the schedules he put in the record were on a much higher basis than the ones here. Mr. STEWART. Yes. Mr. Jones. And I wondered if you made your graph from the old rates. Mr. KiNcHELOE. You say that will not show in six years where there was a monthly overissue of debentures in excess of the imports? Mr. Stewart. I think if you would take one month, which I can not recall off hand, in which there was the nearest equality between the amount of dutiable goods coming in duty paid compared with the amount of debentures being received by exporters that there would be twice, or at least half again, as much demand for the debentures as there would be supply of them. Mr. KincueLoe. That is based on all dutiable goods coming in ander the Fordney-McCumber bill, is it not? Mr. STewaRT. Yes; at those rates, which are higher than the rates in the Ketcham bill. whereas our tariff has been producing an average of over $45,000,000 a month during the last several years, reaching $50,000,000 a month, or a little better than $600,000,000 last year, debentures issued would not have exceeded $15,000,000 a month. It would seem that while there is a difference in seasonal character you need not anticipate monthly overissue if there is a conservative use of this agency. It is like many other principles. if abused it can 368 AGRICULTURAL RELIEF Jose its force and its proper place. But if it is conservatively used it is available. i Mr. Aswrrn. Since the debentures take half of the tariff, how could it be used ? Mr. Stewart. It could go to the entire amount of the tariff, for that matter, as I see it. Mr. AswerL. Under your bill you make it 50 per cent. Mr. Stewart. Do not hold me responsible for the bill, you understand. These are suggestions. Mr. Aswerr. Under this bill how could it be abused ¢ Mr. Stewart. I beg pardon, Mr. Aswerr. I say, under this bill how could it be abused? Mr. Stewart. I think there is no possibility of abuse under the 50 per cent restriction. Certainly there is no intention to abuse the resources that are available under the arrangement. Some of you have inquired as to why the debenture plan seems to have taken the long way around. Why not simply pay by appropriation of cash out of the United States Treasury in the sum of these bounties? In the first place, that practice would have two or three objectionable features. It would mean that instead of having a fairly conservative stopping point automatically fixed by the productiveness of the tariff revenues, you would have a practically wide-open field, and instead of having 1t stop at $600,000,000, so long as established duties produce $600,000,000, there would be nothing in particular to prevent it running on to a billion or two billion dollars. On the other hand, there is a more important reason than that. It you make it a matter of cash or appropriation bounty, you run into a higher probability of retaliation on the part of other countries. The export debenture is an application of the principle of remitted duties. It is a matter of establishing conditions under which goods may be brought in in such a way that there is a remission of taxes. There is nothing startling involved if you remit taxes that are being levied upon products coming into the United States, in order to allow more ease of egress of products going out of the United States. That corresponds in its essential character to what might be accomplished if the country should choose to reduce duties. A reduction of duty would tend to make easier the round-trip relationship which all economic science teaches is involved in foreign trade. Foreign trade rests upon exchange of goods for goods. Here is an arrangement whereby agricultural exports can be given a higher value in exchange for dutiable goods with the tariff in effect and without impairment of established duties. It is to be conceded that it is within the right of any country to modify the ease with which its goods can be exchanged for the goods of another country, so far as it is done by reference to import duties. On the other hand, most of the countries on the globe have antidumping laws. Under those antidumping laws retaliation can be undertaken in the case of a cash or appropriation bounty being paid by the Government of any other country. The United States, Great Britain. and one other country, the name of which does not come right now, are the only three countries. according to a report laid -« AGRICULTURAL RELIEF 369 before the International Economic Conference in Geneva in May last, which have not made agreements that they will not impose export bounties. But if you use the export-debenture method you come at it in a different way; it becomes a more domestic proposition: more a matter of adjusting our own tariff system. Under those circumstances the probability of foreign complication is markedly reduced. I am saying that not merely on the basis of my own judgment. 1 submitted the matter to Prof. Allyn A. Young, who attended the [nternational Economic Conference in Genera. and had from him a statement to the effect that in his opinion this method is less likely to lead to_ international complications than dumping would do. Professor Young, as you know, is connected with Harvard University. Mr. Kercuay. At that point, suppose the debenture exceeded our lariff rate. Then the principle you have just announced would not apply: but so long as you kept your debentures beneath the tariff rate that principle could apply? Mr. Stewart. To make a debenture rate exceed the tariff rate on any product with a possible exception of cotton—which T would wish to discuss later—to make a debenture rate exceed the tariff rate 1s to invite trouble. Mr. Jones. That would simply reduce the value of the debenture. You could not give it a greater value without making it redeemable by the Treasury ? Mr. Stewart. It would invite trouble, Mr. Jones, in two ways. In the first place, let us assume that the Government would say to a man, * We will give you 50 cents a bushel on your wheat as it goes out of the United States.” I believe 50 cents was the figure which your chairman used yesterday—50 cents a bushel on your wheat going out. He could take it out a few miles, bring it back in, pay 12 cents a bushel to get it back into the United States, immediately whirl it about and repeat the process. Each time he would come off 3 cents to the better, except costs of transportation and inconvenience. In the second place if you try any export promotion scheme for 50 cents advance on a product where you have only 42 cents tariff on it, you are going to draw into the United States wheat from Canada and from other countries, and will be giving the foreign units the benefit of an operation which is carried on at the expense of the United States. In other words, you can not operate any of these export promotion schemes, whether it be one plan or another, for a rise higher than that which is implied by the tariff, without inviting from Mexico or Canada or some other country wheat or other products handled in untagged units to participate in the same price benefits, Mr. Kixcueroe. You would also have to take out of the Treasury nough to pay the difference ? Mr. Stewart. It would be an imposition upon Americans. Mr. AsweLL. Mr. Taber said the plan would be to put a metal tag on 1t when it comes in and keep it tagged all the time. So that plan you have outlined would not work. Mr. Stewart. I made an exception in the case of cotton. ~ Mr. Aswerr. On anything—if you put a tag on it, you can not ring it in and take it out again. 370 AGRICULTURAL RELIEF Mr. Stewart. We have to recognize the fact that cotton is put into a container comprising bagging and bands, which as a rule stay with that particular bale of cotton until it reaches the mill, where the bands are cut, the bagging removed and the cotton consumed. Mr. AswerL. As a matter of fact, Doctor Stewart, I do not think there is any likelihood of passing a bill giving a debenture greater than the tariff on commodities generally regarded as covered by the tariff. o Mr. Stewart. Very true. What I am saying 1s perhaps academic, but the fact is that cotton is one of the very few commodities which are put into identifiable units which retain their identity from the time that they are first put together until they reach the mills where the bands are cut. It is the only commodity that has been brought into the picture in farm relief discussions of which that is true. The significance of this can be made clear with respect to the experience of an exporter in Memphis. This exporter had taken to certain European markets, I believe he said, 10,000 bales of cotton. Price conditions shifted so that he wanted to bring that same cotton back into the United States. He was faced with the necessity of paying two-fifths of a cent a pound as fumigation fee, unless he could show that this was cotton of United States growth. He took the matter up with the Federal Horticultural Board, which administers the fumigation regulations in the case of cotton, and was able to make clear by markings on the cotton bales, after it had made its missionary trip to Europe, that it was cotton of United States growth. You will hardly find another agricultural commodity ander consideration here of which that same thing is true. Mr. AsweLL. Since there is no tariff on cotton the debenture certificate on that product would not affect the tariff in any way. Why not make it about 5 cents a pound instead of 2 cents a pound? Mr. Stewart. The tariff, you mean? Mr. Aswerr. I would make the debenture on cotton 5 cents a pound instead of 2 cents a pound. Mr. Stewart. That has been suggested. Mr. AswerL. Well, why not? Mr. Stewart. If I may interject—— Mr. Aswerr. Why not do it? Mr. Stewart. If I may interject a statement, when Senator McKinley faced this matter two years ago—-Mr. AswernL. Who? Mr. Stewart. The late Senator from Illinois. When Senator McKinley faced this matter two years ago, he preferred 5 cents to 2 cents on cotton. - The whole matter of rates is another story. What is the ratemaking principle— . Mr. AsweLL. Would you be in favor of 5 cents on cotton? It would make your bill stronger. [Laughter.] Myr. Stewart. That was what Senator McKinley wanted. Mr. AsweLL. Would you be in favor of 5 cents on cotton? Mr. Stewart. If I were asked to set up a rate-making system, I would have to give it considerable specialized study. I would be glad, in case the committee should like to have a memorandum on that, to try to work it out. but IT would not want to say offhand here AGRICULTURAL RELIEF without consideration of more factors than have yet come to my attenton. Mr. CLARE. Are these rates going to be determined in the long run as experience dictates? Mr. Stewart. There is some desirability of keeping in line the debentures on various products. In the case of Illinois, with our 20,000,000 acres of land in crops, a debenture that would be too high on wheat, as compared with corn, would not be a desirable factor. An attempt should be made to stabilize rather than to disturb the economic relations between different belts and within the different belts in the United States. That is a pretty big story in itself. Mr. Fort. On cotton—you may be coming to this later, and if so you need not answer it now—the effect of this plan would be to make the cotton cost the American spinner 2 cents a pound more than it cost the European spinner, less differential of freights and insurance. Should not the tariff on cotton goods be correspondingly increased ? Mr. Stewart. I should imagine that the Tariff Commission, making a study of cotton textiles, would take that factor into account. Mr. Fort. It would have to. would it not, for the protection of American spinners? Mr. STEWART. I could not see how they could help doing it. Mr. Jones. They probab™s alreadv have enough tariff to cover that. Mr. Fort. But manufactured cotton goods come into this country .n spite of the fact. Mr. Jones. But there is not anything like the amount that would pe coming in but for the tariff. However, I agree it might be necessary. That could be adjusted if found necessary. Mr. KincrELOE. Doctor, let me ask you right there: I have tried to get these other gentlemen to go into it. I am asking the question for my own information. Take cotton here, with no tariff on it. Suppose you put a debenture upon it at 5 cents a pound, by which, of course, you hope to obtain for the cotton grower 5 cents a pound above the world’s price. I do not know how much cotton ls grown in other countries; I do not know anything about the markets there. But the thing I would like to know and would like to have you tell us, because we will be asked on the floor of the House, and I do not know—how you are going to keep the importation of cotton out of this country in the absence of a tariff, say. with a debenture of 5 cents a pound on it? Mr. Stewart. If you are going to try to have an export premium under any kind of a plan, either debenture or any other kind of a plan, designed to raise the American price of cotton 5 cents ahove the European price, you ought to have a tariff on cotton. Mr. KincueroE. I was just thinking perhaps it would not do. Suppose there is no tariff on it. I am talking about a fact. because now there is no tariff on it. Mr. Stewart. I think that you could administer it for 2 cents advance, or $10 a bale advance, by requiring proof of origin in the case of any cotton of the typical American description coming nto our ports, in such a way that you could prevent imposition apon the United States Treasury. But if you make it 3 or 4 or 5 cents, you invite “ bootlegging ** of cotton. 371 372 AGRICULTURAL RELIEF Mr. Kincueror. What do you mean by “proof of origin? Mr. Stewarr. I mean to say that if some cotton is brought back into the United States from Cuba, let us say, after having taken the debenture on its way out, that cotton is easily identified. Of the 300,000 bales coming into the United States, most of it is of peculiar physical description, either because of the length of staple or because of the peculiar characteristics of Peruvian, Chinese, Japanese, or some other cotton. The foreign cotton is nearly all identifiable when it comes into the United States. It is different from our ordinary cotton. Mr. Jones. Mr. Kincheloe referred to cotton going elsewhere and coming in. Mr. Stewart. Take North Mexican cotton from the portion of the Imperial Valley, which is in Lower California. From that area cotton is brought directly into the United States and handled through our channels. Mr. Kincueroe. I am talking about if you make the debenture high enough above the world’s price that growers of cotton in other nations of the world can afford to ship it over here and pay the freight on it and bring it in here and sell it. how are vou going to keep it out without a tariff? Mr. Stewart. You can not do that. But you can do this, you can prevent that cotton which has taken a debenture when it went out—— Mr. KincHELOE. There is no doubt of that. Mr. Stewart (continuing). From coming back in without sacrificing the debenture. Mr. KincHELOE. That is a matter of administration. I was talking about principles. Mr. Jones. I will say in this connection, Doctor Stewart, in reference to cotton: Most of the cotton that comes in here from abroad is long-staple variety and does not measurably compete with the average cotton grown in this country, and there is so much greater demand in foreign countries for cotton’ than there is production of cotton in those countries that unless you very greatly increase the domestic price there would not be any tendency to bring cotton in here, at least for the present; and, in addition thereto, this country raises such a very great percentage of all cotton in the world that it practically controls the world market anyway. Mr. KincrELOE. Do you think, Mr. Jones, that 2 cents a pound would be a material help to the cotton farmer? Mr. Jones. I do. It would mean $150,000,000 on the average crop in the South of 15,000,000 bales. We have grown as high as 18,000,000 bales; and that is a big help, especially when cotton gets own around the low price where the farmer is really not getting oat of his cotton except expenses, say, and then if he can g 3 mcrease, ] Be got ated i e, or $10 a bale increase, that may be all that r. KinceELOE. Do you not think, further, in view of the f ’ e fact hat, the dchpitie of 5 cents a pound would likely be so high that it Pations t 2 Teens 1ve, to say the least, to growers of cotton of other ations to ship 1t in here, that we better not have it too hich? AGRICULTURAL RELIEF 373 Mr. Jones. That is very possible, at least for the present. It would be unfortunate if it should break down the system so far as cotton is concerned; that is, if we put the debenture too high. Mr. Stewart. Without a tariff? Mr. Jones. I say, without a tariff; and the system might require a tariff in order for it to work to the best advantage. Mr. AsweLL. Let us not consider that discussion final. Mr. KincBELOE. Why ¢ Mr. AsweLL. Because the Department of Agriculture estimates the average cost is about 18 cents. Now, when cotton is selling at 11 cents, as it was a year ago, 2 cents more is still 5 cents below the cost of production. You say it helps a little. But that is not what [ want; I want to do something worth while. Mr. KincHELOE. You do not want to close the debentures on 5 cents? Mr. Jones. I just want to say in that connection, when cotton is 11 cents, I do not know in all the history of the country when the farmer in the South needed $10 a bale more than he did then; and [ want to say this also in that connection if I may have the attention of the committee, that in so far as that is concerned the $10 a bale that would come in might enable them to have a pooling system that would enable them to hold the cotton and get a price that was much greater than 11 cents. If through this means of securing a fund the cotton crop when it was 11 cents last year, or the surplus of that crop, could have been carried over until this year we would have gotten 20 cents. Mr. AsweLL.- You would not oppose 5 cents, would you? Mr. Jones. I would not oppose anything the committee was willing to give. Mr. AsweLn. You would not oppose 5 cents, would you? Mr. Jonzs. I would not oppose anything the Government might want to give. But I know it does not do a fellow any good to ask for more than he has any chance in the world of getting under the circumstances. Mr. AsweLr. Unless you ask for plenty in some things you do not get anything. Mr. Jones. That may be your political philosophy; it is not mine. [ try to ask what is right. The Cumarrman. Have you any estimate about cost under this bill ? Myr. Stewart. The estimates which have been made and presented in that chart, which, I believe, has traveled part of the wav around the committee table. Mr. KiNcrELOE. Do you mean this one? Mr. STEWART. Yes. The Crairman. It has been suggested that we advance the desenture to 5 cents. There would not be enough tariff to go around, would there? I understood you to say the average amounts to $45,000,000 a month. Mr. Stewart. That is the fact, I believe. The Crarrman. That would be $540,000,000. Mr. Stewart. No; more than that. Last year it was $605,000,000, The Crarman. Last year we exported 11,550,000 bales, and that, at $5, would be $557,750,000, and the income is only $540.000.000. so we would be short $37.950.000. 374 AGRICULTURAL RELIEF Mr. Fort. At $5 a bale it would be $55,000,000. Mr. Jones. I do not think Doctor Aswell would refuse even $5 a bale. Mr. Stewart. The proposal, I believe—-Mr. Jones. I do not think anybody would refuse $10 if they could not get $25. The CramrMAN. We would be short $12,950,000. Mr. AswerLr. Short of what? The Crmarrman. It would exceed the receipts that much. Where would the wheat growers come in after that operation ¢ Mr. Stewart. Mr. Chairman, may I make a short statement? I understand what you are saying. Lo At $25 a bale for 11,000,000 bales—— Mr. Jongs. The average exportation has been around 8,000,000 bales for the last five years; it has been as low as 4.000.000 bales. but the average has been 8,000,000. The Carman. Figuring on last year, I have a report showing 11,759,000 bales. Mr. Stewart. Figuring on the basis of 11,000,000 bales, at $25 would be $275,000,000, or about 45 ver cent of our revenue from import duties. Mr. Kincueror. Figure wheat and see where you are going to et to. s Mr. Fort. The bill calls for 2 cents a pound, or $10 a bale. Mr. Stewart. Which would be not to exceed $110,000.000 if you had 11,000,000 bales exported. Mr. Kincaeroe. How much a bale is that? Mr. Stewart. $10 a bale. I have another chart which can be passed about, which shows at certain rates indicated what the monthly variation would be, and gives an approximate idea as to how cotton compares with the other products in the extent to which it would draw upon the resources of this system. (The chart referred was thereupon passed among the committee.) Mr. KincaerLoe. Will you put in the record, if you have made it out, just how much of each of these commodities mentioned in this bill have been exportable, say, the last year? Mr. Stewart. The amount in absolute figures? Mr. KixcmreLo. Yes; how many bales of cotton, how many pounds of, how many bushels of wheat. and those other commodities mentioned in the bill. Mr. Stewart. That could be easily supplied. I would like to call attention to an article in the Tariff Review of January, 1928, entitled “Agricultural surpluses in the United States.” This article summarizes many of the ficures to which vou refer in a very helpful way. I should like to point out that the list included in the Ketcham bill, is a list which is somewhat larger in total number of commodities included, than that which you will find in some of the other countries. I understand that ih England three commodities only were included; in the case of France, four agricultural commod]-ties. There were some commodities of a nonagricultural order. including iron and steel products. I believe. AGRICULTURAL RELIEF 375 Mr. Hope. How long has their tariff been in operation? Mr. Stewart. The edicts which put the import certificate system into effect were issued in 1850, according to a statement by Dr. Josef Grunzel, who is the author of economic protectionism, from which I have excerpts with me, which I would be glad to place in the record, if they would be of service to any members of the committee. Mr. Crarke. I think that would be instructive, for the reason that it would give us some little idea of what is being done abroad. (The excerpts from Dr. Josef Grunzel referred to and submitted by Professor Stewart are included in the appendix.) Mr. Fort. Professor Stewart, may I ask you a question on these other plans? Have those plans been adopted in countries that were producing a surplus of commodities to which the export debenture applied—normal surplus—or were they applied for the purpose of taking care of the surplus that might result from the stimulation of home production for home use? Mr. Stewart. The answer to your question is yes and no. In the irst place, they have been applied in countries which are upon a net deficit basis, taking the countries as a whole. Nevertheless, in these countries there are different provinces. In the case of Germany, for example, the provinces of the northeast of Germany produce exportable surpluses of rye, wheat, barley. spelt, oxts, legumes, rape seed, etc., which have been made subject to the application of this method. Now, then, their natural domestic market has been in their industrial southwest, if you please. They had their choice between using rail transportation to get their products to their own remote southwestern industrial markets, or sending their products out over the Baltic Sea, North Sea, Rhine River route, because they desired the privilege of getting those northeastern province surpluses into the southwest provinces without paying duties. A provision was made whereby the Bundesrat was given the power to permit the use of Einfuhrscheine not only in the case of the same products coming back, but also in the case of cocoa, petroleum, and a considerable list of other commodities upon which the tariff had been levied primarily for a revenue purpose, that is to say, products which were not produced in Germany. That existed for a portion of the time, and it was that experience which I have used as a basis for the somewhat more generalized application which I have suegested for this country. Mr. Fort. That was a peculiar condition due to the fact that Germany is not fixed as we are with the free trade between the States. They did not have free trade between their Provinces. Mr. Stewart. I think it was more of a transportation—— Mr. Fort. You also referred to France. which never did produce food enough for its own needs? Mr. Stewart. Taking the country as a whole, no. Mr. Fort. Therefore, in the effort to stimulate production in France, they put on this export plan so that, in the event their farmors did produce surplus, they would be protected: is not that the act ? R6160—28—SER E, PT 5—6 376 AGRICULTURAL RELIEF Mr. Stewart. I think not exactly. The situation in France is that in the southern Provinces there is a tendency to use imported grain in their flour mills; in the northern Provinces, which for several centuries have been on an exportable basis, in previous centuries exporting even into England. In the northern Provinces it 1s more natural to send the product out as flour or wheat, even over into Belgium or into Germany. ‘A scheme was worked out whereby the sending out of wheat from the northern Provinces became the occasion for the bringing in of duty-free wheat for milling in the southern mills. But it was not the same wheat that came back in. Mr. Fort. No; but again you have the situation that that is due to local conditions in their country, and not international problems. Mr. Stewart. It is a one-country reciprocity situation, if you lease. b Mr. Fort. Now, do you know of any place where this sort of proposal has been adopted by a nation as applicable to any commodity of which that nation habitually raises a surplus above its own requirements ?¢ Mr. Stewart. No. The reason why I have been interested in this other experience is that it has shown the mechanical workability of the plan, and it revealed a legal principle which could be worked under the Constitution of the United States. Our Constitution gives to Congress the power to lay and collect duties. That power has been interpreted to include the power also to lower the duties or to remit duties, as has been done in the case of sugar and molasses since 1876, now 51 years; and, inasmuch as that power to lay and collect duties obviously carries with it the power not to do so under certain specified conditions, it seems to me that this foreign experience had a direct application under our organic law. Mr. Fort. I am not questioning the experience value: I am asking as a point of historical information. Mr. Stewart. I am very glad you have done that. Mr. Fort, along that same historical line, has your economical investigation of this general question disclosed any country which habitually produces a surplus over its own requirements of any commodity which has adopted a price-stimulation plan, except such price-stimulation plans as have been used in coffee, rubber, and sugar. which try to produce a decline in production ? Mr. Stewart. Yes; that was the purpose of the English bounties, from all I am able to learn from the researches of N. S. B. Gras, of the University of Minnesota, and Harvard University, who has given most attention to the English bounty system, I believe. That was apparently a deliberate purpose in England. Mr. Fort. What century ? Mr. Stewart. In the latter part of the seventeenth century and on through the eighteenth century. Mr. Fort. Was there any other nation which adopted it? Mr. Stewart. That, I believe, will be covered in a memorandum which is to be filed. It will have to be based largely upon the ounty bibliography of the United States Department of Agriculture, to which I referred earlier. But there is such experience. Yr. Fort. Has it been successful or has it had to be abandoned? r. STEwarT. It has been sufficiently successful to be continued. AGRICULTURAL RELIEF Mr. Forr. It has? I would like the illustrations of it, because I have not come across that in my reading. Mr. Stewart. It has been sufficiently successful to be continued. That does not say it is perfectly successful. Mr. Fort. Can you tell me what thev are, offhand, so I can look hem up ¢ Mr. Stewart. I have with me and could place in the record a report based upon seven countries, including five countries in which there has been some use of or attempt to use the bounty method. Australia, I think, affords the best recent illustration of what you have in mind. Mr. Fort. Is it the Australian butter bounty to which you refer? Mr. Stewart. They have a number of bounties, governing dried fruits, apricots, and a lot of other things of that kind. Mr. Fort. On all of those? Mr. Stewart. On a number of them. Mr. KiNncHELOE. Do they have that on wheat # Mr. Stewart. The Australians had a wheat pool during the war, and immediately following. and it is continuing to operate. In Australia, I might say, they have had a tendency to use two plans. At.the same time, I think I know of no case in which they have used both plans on the same commodity in Australia, but, on the one hand, you have the tendency to work along the line of corporation or pool and, on the other hand, to work more directly along the line of a customs bounty. As far as I am able to see, there is no inconsistency between the two procedures. As to whether they are both equally suggestive for American experience depends largely upon the way our Constitution is worded. Mr. Kercaam. Professor Stewart, the time is getting short, and I am willing now, unless there are more questions along this line, to turn to the other phase, namely, the penalty feature of it. Of course, we come against this argument that any price stimulation, of course, is immediately going to make the situation already bad, entirely worse. Will you please discuss for a little time this remaining feature. Mr. Aswerr. I would like to ask him just one question about rotton. Does this apply to raw cotton only? This debenture plan? And I will give you my reasons for asking that question. There is a bill pending before this committee to require all cotton moved in interstate and foreign commerce to be packed in cotton bagging. That will cover about 3,000,000 bales of lower grades of cotton. If that were to become efféctive, would the debenture plan apply to that bagging shipped out, too? Mr. Stewart. I understand that the present trend is in the direclion of dealing in cotton on net weights? Mr. Aswerr. That is including the bagging? no Stewart. No: not including the bags; it would not include ‘he tare. Mr. Aswerr. So that would lose 3,000,000 bales from your plan right off the bat. Mr. Jones. According to the estimates of the department, it would mean 300,000 bales of the lower-weight bagging they are able to make now. 377 378 AGRICULTURAL RELIEF Mr. AsweLL. Say 8,000,000 bales. Would you include the weight of the bales in the debenture, if only three bales? Mr. Stewart. That is a new problem. I would be glad to study it. I have not any answer offhand to give you on that. Mr. Aswern. All right. | Mr. Stewart. With respect to the matter Mr. Ketcham has mentioned, that of preventing over-stimulation of production of debenturable quantities, I may say that here again is a place where 1t would be difficult to be dogmatic. I am going to give you my personal platform on this. I think that there are some commodities with respect to which any fears that you have with respect to 10 cents or 20 cents having any effect on increasing acreage are rather beside the point. Take the case of corn, for example. The acreage 1n corn during the 5-year period from 1921 to 1926, stood at 100,000,000 or 101,000,000, a year-to-year variation at its widest mark of only 1.4 per cent. Mr. KincreLoe. What is that production; corn? Mr. Stewart. That is the acreage given by the Department of Agriculture on corn; that is not production. The production varied more widely. The thing I am trying to emphasize is that there are some products in our American export agriculture, the acreage of which is pretty firmly fixed—so firmly fixed that a 10 or 20-cent bounty would not be likely to disturb it. That is not so true of wheat. Mr, Kixcueror. Still, corn, don’t you think, had a whole lot to do with that cost of wheat? Mr. Stewart. In the case of corn you have practical stability of acreage. Mr, Kixcugroe. I come from a corn country, and there are hundreds of acres of fertile land in that country capable of growing corn in which there has never been a plow stuck for that purpose. Mr. Stewart. Very true. But what I am trying to say is that the variations in price which have been experienced in respect of corn in the past few years have resulted in variations in acreage much smaller than the ordinary eastern imagination pictures. : Mr. Hore. What have those variations been in price during that period ¢ Mr. Stewart. Those figures could be placed in the record from the Department of Agriculture year book. — Hore. I wondered, practically, whether they were great or all. Mr. Stewart. They are there for vou to look at [handing the book to Mr. Hope]. Mr. Hope. There have been considerable fluctuations? hy Soni There have been in price but not in acres. ~ Mr. Hope. Which ought to affect the acreage if it was possible to increase acreage. hou: BINCHELOE. But you have to carry in mind that the price of og le has a whole lot to do with the fluctuation of the price of corn, too. i BRT Very true. In the case of wheat we had between i) 9 a jump in acreage from 59,000,000 to 76,000,000 in one year, not easily traceable to difference in price, because the price diference was not marked: but the acreace difference did divulege—— AGRICULTURAL RELIEF 379 Mr. KincaeLoe. Was that the reason the Government during the war told them to plant wheat and more wheat? Mr. Stewart. But there was a larger acreage in 1919 than in 1918 by 16,000,000, which I believe is about 28 per cent. I say that merely to point out that we ought to become rather skeptical about some of the claims as to the danger of acreage expansion. It is not so true of some commodities as it is of other commodities. But, passing that point and granting the worst fears of those who seem to be seeing ghosts in the matter—granting that those worst fears are true, it seems to me it is a logical thing to include in a measure of this kind a definite and drastic basis for withdrawing the debenture in case there is a marked increase in acreage; and I think about three methods could be properly proposed to govern that. I have one with me this morning. Mr. McSweeNEY. In my home town there is a brush factory, and they tried to speed up production by increasing the rates for piecework in that factory, and they found that those men, whenever they had increased their wages, as soon as they had earned the regular amount they used to earn per week, they would knock off that many days and not produce any more. Is that true in growing crops, that if the price went up there would be a tendency to cut down? Mr. Stewart. I think it is true that, when the price goes down in agricultural commodities, there is not always a tendency to cut off production. In other words, there are stabilizing factors all through our economic life. But, assuming that the worst fears of those who fear the improbable should be the basis for the preventive measures, it has seemed to me that you should in the first place consider two or three ways of getting at the problem. One is the basis of exportation. If we should find that exportation of any debenturable commodity has increased 10 per cent, then there should be an automatic cut in the rate of debenture. The rate should be cut drastically enough that it would cease to enable any one commodity to run away with the benefits that are available under this system. That 's one basis—the exportation basis—the basis of actual export. On the other hand, suppose that you should consider the acreage basis. Of course, you could not apply that to livestock. You would have to use, in lieu of acreage, in the case of livestock, some sort of a production criterion. But if you wanted to use acreage, you would require a different scale by which you would cut down. and I have suggested here a scale. For a computed increase in production of acreage of less than 5 per cent, no reduction in rates of debenture; for an increase of between 5 and 15 per cent, a reduction of onefourth in the rate of debenture; for a computed increase of 15 per cent to 25 per cent, reduction to one-half; in the case of an increase of from 25 to 50 per cent, reduction by three-fourths; and in case the production was in excess of 50 per cent, the complete withdrawal of the debenture, or at least 99 per cent of it. That is a suggestion. In connection with this point I would emphasize that such a change in acreage should be computed on a sufficiently broad basis that the farmer could see what he was in for if he persisted in increasing acreage. Suppose that you should say that, if during the past two years the farmers had increased their acreage of any one of these debenturable commodities by 20 per cent. then there would be this 380° AGRICULTURAL RELIEF indicated reduction in the rate of debenture, that is, a 20 per cent 1ncrease in those two vears compared with the preceding five-year basis. One year passes. The board reports that there was an increase of 20 per cent. The warning goes out to the farmers of the country, « You overincreased last year, and if you do that again this year, or if you don’t make an adjustment in your acreage this year to a much lower basis, the average for the two years will be such that you have no debenture year after next. That is a suggestion. It is not perfect by any means. But, again, there is a suggestion which has come to me indirectly this morning. This method might resemble the basis used in a tariff law about a hundred years ago, whereby the amount was reduced annually by a certain proportion of the tariff. It was to take 10 years, 1 bélieve, to cut the tariff down to about half, or something like that, to its original figures. Mr. PurneLL. Is it not true, as a general proposition, that lower price levels are followed by corresponding increased acreage, and that higher price levels carry with them a lower acreage? That has been suggested by a number of witnesses who have appeared before the committee. Mr. Jones. Just the reverse. Mr. Pur~err. In my opinion it is the reverse, but the question has been that the lower price levels carry with them the increased acreage and representing an effort to get in more money regardless of net profit involved. Mr, Stewart. There is a great deal of force in that contention as stated. Mr. Kincueroe. I think that is true. Mr. Stewart. It depends upon whether we are concerned with marginal land or with other land. Mr. Kincaeror. I am talking about the land in America. Has that been your experience as an economist that the lower the price the greater the amount of the commodities raised ? Mr. Stewart. Take the case of wheat. Our wheat acreage has been cut down to a little more than 50,000,000 acres as compared with the 76,000,000 acres which we had in 1919. Mr. Jones. But, Doctor, there was a special appeal to the patriotism of farmers during that time to produce wheat needed by the whole world. I know in 1917 and 1918 there was; and, of course, the farmers had gotten their machinery and they had gotten their facilities and were all arranged for larger production. Mr. Stewart. There was a hang over there. Mr. JoNEs. Do you not think, generally speaking, high prices stimalate production and lower prices retard production? fr Smmane, I should say that was the tendency. The only thing his matter of agricultural acreage is that you can increase 1t more easily than you can decrease it, speaking in totals. So far as indironal crops are Wig it is possible to get out of line with other ENC mers will try to get out of sinking ships. But so far as keep ois Lage 1s ohuenerd, hard times may cause the farmers to whieh hor an working rather than to neglect it. Take the case in gh taxes are runnine and the farmer has some land which AGRICULTURAL RELIEF 381 he can clear and put into cultivation. I happen to be in that position myself. The effect of those lower prices in the case of my land in the Mississippi Delta of Arkansas is to cause me to want to cut the trees down and get that land into cultivation so as to help carry its own charges. So where you have high taxes running upon land that is a factor in the case. Mr. KincHELOE. If you had a higher price to help you pay those :axes, you might, want to cut the taxes and plant more, too. Mr. Stewart. I might not be in such a hurry if I were getting more rent from my land already cleared. Mr. Fort. What is your notion as to the effect of this debenture plan upon production? We will take wheat, getting the 5-year average of something like 800,000,000 bushels. That is certainly an ample margin of safety over our domestic requirements, is it not? Mr. Stewart. It is about 24 per cent. Mr. Fort. Do you think we need it all as a margin of safety? Mr. Stewart. It is about 24 per cent. Mr. Fort. Do you think we need it all as a margin of safety? Mr. Stewart. Perhaps not. Our population is increasing at the rate of 115 per cent a year. I think we ought not to be in any deathly run to get ourselves to a see-saw condition where we can not tell from year to year whether we are to depend on Canadian wheat or United States wheat. I think, on the whole, that the consumers of the United States have to be thankful for the fact that we have a persistent and large exportable surplus. Mr. Fort. I am not questioning that. but I am asking you, does it need to be any larger? Mr. Stewart. I do not think it needs to be any larger, but I do aot think it needs to be apologized for. Mr. Fort. If it does not need to be any larger, do you feel that this plan would or would not tend to increase it? Mr. Stewart. I think that it would tend to cause some increase, but [ do not expect it to be as much of an increase as some do. I am inclined to think that there will be less disturbance in that respect than might be expected. Mr. Forr. Now, you have said nothing, Doctor, about whether this bill would work equally—I assume it would under its language—on all grades of commodities. What is your view about the wisdom of that? Mr. Stewart. My view on that would be this, that our tariff duties as now specified are lagging behind the opportunities afforded by the expert services which we are developing through the Federal grain supervision. Even at the time of the passage of the tariff act of 1922 it should have been possible to distinguish between No. 1 Dark Northern and other premium tvpes of wheat as compared with lower grades of wheat. That could have been done. But in the tariff as it was drawn provision was made for a flat rate per bushel, thought to be high enough to keep out that particular type of export wheat upon which we are on the import basis, and with respect to which I might add that in my opinion the tariff has normally been considerably effective. But that is not the bulk of the wheat of the United States. The bulk of the wheat, which is upon al export basis, in my opinion would not require 42 cents a bushel In the wav of an import duty. 382 AGRICULTURAL RELIEF I look forward to the time when there will be a graduation of import duties in the case of wheat, just as I feel that there should be a graduation of import duties, if you had duties in the case of cotton. Mr. Fort. Based upon grade? oo Mr. Stewart. Based upon grade, differentiating that which is upon an import basis from that which is upon an export basis. Mr. Jones. Differentiating as in the price of cotton. a different price for the different price. oo Mr. Fort. Would it not be sounder economically at this time—a better national policy—to make your debenture an inducement to the man to raise the better grades, the things that we do want rather than the things that we do not want in this country ¢ Mr. Stewart. I thing that is true. The experience under the English bounty brought out one interesting point, and that is that the effect of the bounty was to get the poorer grades out of the country. [Laughter.] Mr. Fort. We have certain grades of wheat, which are not used in this country except to a relatively small percentage, for instance, macaroni wheat, chiefly raised for export. The presence of these grades of wheat makes up our present statistical surplus to a large extent ? Mr. Stewart. To a large but not total extent. Often soft wheats are on an export basis. Mr. Fort. From year to year, however, we still want the soft wheat here in large amounts. But we do not want a large amount of macaroni wheat, do we? Mr. Stewart. No. Mr. Fort. Would it not be a better piece of legislation, from the picture you have drawn here, if, following what you said a while ago was the policy of a great many countries in establishing export bounties, you place bounties on the things we want a larger production of and no bounties on the things we do not want any production of? Mr. Stewart. I would say that there is in that principle something to be considered; I do not think that is the sole consideration that should enter into the graduation of export premiums on grades. Mr. Fort. I am not saying it is, but should it not be a feature of legislation if we are going to adopt this legislation at all? Mr. Stewart. I think in some cases it could be a determining factor as to how you would graduate your bounties. Mr. Hope. Is it not true, Doctor Stewart, in a great many cases where we have odd grades, like wheat and cotton grown in different localities, and one quality is only adapted to that locality: is not that what makes the difference in a great many cases? Mr. Stewart. That is true. When we had the study made as to whether the wheat duty should be raised, we made it in Montana, North Dakota, South Dakota, and Minnesota. where your northern spring wheat is being raised. Now, gentlemen, if a study had been made in Oklahoma it might have revealed a difference in costs which might not have indicated 42 cents a bushel. It might have been more; presumably it would have been less. There is perhaps a tendency to pick the areas where costs of production and marketing per bushel are highest. Mr. Forr. We are getting a little away from the thought. I wanted your opinion as an economist. Do you think it is good judgment AGRICULTURAL RELIEF 383 to go into the bounty business at all on a commodity for which there is no actual domestic demand, or so little demand that it does not absorb even the present production ? Mr. Stewart. I should say that if farmers, or any other producers in the country, start into the production of a given line solely for foreign markets that there would be less reason why they should be granted an export premium. But I do not think you should come to ‘his point in your thinking where you would say, “ Here, we have cotton, of which 56 per cent 1s exported. Here we have wheat, of which 24 per cent is exported. Here we have corn, of which 11, per cent is exported. Our bounty should be very light upon cotton, heavier upon wheat, and heaviest of all upon corn.” I do not think your philosophy should necessarily lead to that result. Mr. Fort. But your whole plan is based on the analogy of the tariff. Now, with most tariff rates for the protection of the domestic market those tariff rates reflect no benefit on the exporter; he gets no gain. It is only on what he sells in the domestic market that we protect him. We would not put a tariff on articles for which there was no domestic market. It would be purposeless if we did. Why should we put a bounty? Mr. Stewart. No, sir. It is my thought that considerable weight should be given to this principle which you have mentioned. In my opinion, it is not the sole principle that should enter into the picture. I have the impression that the export branches of American agriculture are suffer.ng at the hands of certain Federal policies which have been inaugurated not for any particular purpose of making them suffer but rather for the specific purpose of helping some other branches of our economic life. We have immigration restriction, which is not set up for the purpose of putting agriculture at a disadvantage, and yet which has something to do with keep.ng the costs up in the case of farmers who have to use machinery made by labor kept high in wage scale. Yet there has been no definite intention to put agriculture at a disadvantage. The same thing is true of a number of other Federal policies. There has been no intention to put agriculture at a disadvantage. And yet the fact is that as a result of immigration restrictions and tariff and noncancellation of foreign debts even, and some other policies, all of which have a rational basis from some points of view, our sxport branches of agriculture are at a disadvantage. Under those circumstances it seems to me that you might justify me in using the word “debenture.” I use the word “debenture” because it means something due—:t is from a Latin word meaning something owed. Mr. Fort. I am only using the word “ bounty ” as generic. I think the word “ debenture ” is all right in this case. I still want to get at the basic principles, Doctor Stewart. I agree largely with the statement you have just made, that as a result of the operation of things that were not so intended agriculture has in many cases been at a d:sadvantage, without question. But, conceding that as a fact, Is it still a part of the duty of the Government as a fundamental economic principle to foster an industry which is operating at a loss in the production of a commodity for which the American people have no demand 2 AGRICULTURAL RELIEF Mr. Stewart. I should say that certainly in extreme cases the prin. ciple would have to be granted absolutely. Other principles may prevent its being followed as the sole criterion. The principle to which you refer seems to me a basis for guidance in the graduation of rates. Mr. Fort. In part? CL Mr. Stewart. In part. I would not overuse that principle. Mr. Fort. Any legislation, then, with which we attempt to deal with the resultant effect of these discriminations should be drawn, bearing in mind that fundamentally we are raising some commodities for which we have no real need and that those are not entitled to the same consideration from the Government—I am not saying they are entitled to no consideration, but they are not entitled to the same consideration from the Government—in the handling of this problem that those things are entitled to for which the American people provide a real market? Mr. Stewart. I think I can agree. Mr. KercaAM. I have six questions I want to ask, and they can all be answered yes or no. I know it is hard for an economist to answer questions yes or no. It is pretty hard to give a categorical answer. But these are the vital things we men have to answer 1n the ordinary discussion of this bill. Will you please answer these questions? In the first place, is this any radical or new departure from our traditional system ? Mr. StewaRT. I think that it is amply founded upon precedent. Mr. KercHAM. Second, is it constitutional, in your judgment ? Mr. Stewart. It is. Mr. Kercaam. Third, is it economically sound ? Mr. Stewart. It can be administered so that it will be consistent with the welfare of producers and consumers. Mr. Kercuam. That is what you mean by “economically sound”? Mr. Stewart. That is what I mean. Mr. KercaHAM. In the fourth place. in vour judgment. is it practicable ¢ Mr. Stewart. It is workable. Mr. Kercaam. That is what I want. Mr. Stewart. And it should be consistent with the resources of the Federal Government. Mr. Kercram. That is what I want exactly. Now, will you say whether or not in your judgment this leads to dumping ¢ Mr. Stewart. In my judgment, it is not of that species of practice which would be classified by other countries as “ dumping.” Mr. Kercaam. Now, last; in your judgment, are the penalty provisions against overproduction carried in this bill as direct and specifically applicable as they are in any other proposition that has been presented to us? Mr. Stewart. That is a harder question to answer. I should say that you can make it so, if it is not that way. Mr. Keroram. One further question: In contrast with any other plans, do you regard this as the simplest and the least free from machinery ? : Mr. Stewart. Perhaps because I have'studied it most. it is to me the simplest. AGRICULTURAL RELIEF APPENDIX 385 Cory OF LAws oF NATIONS HAVING THE EQUIVALENT OF THE EXPORT DEBENTURE PLAN—GERMANY READOPTS THE EINFUHRSCHEIN DECREE ISSUED AT BERLIN, SEPTEMBER 12, 1925 (REICHSGESETZBLATT, PART I, NO. 44, PAGE 331) By consent of the Reichsrat it is hereby decreed with respect to paragraph 3, part 2, number 2, of the tariff revision law of August 17. 19235 (Reichsgesetzblatt., page 303) : ArtICcLE 1. The rulings of paragraph 11, No. 1, Part 1, and No. 8 of the tariff ‘aw of December 25, 1902 (Reichsgesetzblatt, p. 303), become effective: No. 1. part 1: With respect to the exportation of rye, wheat, spelt, barley, nats, and legumes, within the free-trade area of the Reich certain centificates (Einfuhrscheine) will be issued on the request of the possessor of the commodity if the exported quantity amounts to at least 500 kilograms (1,104 pounds). Within a certain period to be determined by the adm.nistration upon agreement with the Reichsrat but not to exceed nine months the possessor is authorized to import without payment of duties a quantity of any one of the aforesaid commodities corresponding to the value of the certificates (Einfuhrscheine). The determination of the value (of the Einfuhrscheine) is based on the minimum general or treaty tariff on the kind of grain in question. Clearance for export with claim to receive certificates (Einfuhrscheine) must take place only at the customs offices which must be designated bv the treasury officials of the States. No. 3. On the exportation of commodities produced within the free-trade area of the Reich certificates (Einfuhrscheine) will be issued to owners of mills and malt on a corresponding quantity of unprocessed legumes or grain fNo. 1). The ratio of yield to be applied will be decreed by the administration. The determination of the value of the certificates (Einfuhrscheine) for barley malt is fixed according to the minimum duty for barley that is designated for purposes other than animal feed. The certificates in this case, therefore, can not be used for paying duties on barley which is dest ned for animal feed, nor can they be used for paying duties on legumes. ArT. 2. This law goes into effect October 1, 1925. BERLIN. September 8. 1025. OECREE OF BEPTEMBER J. 1925, CONCERNING THE PERIOD WITHIN WHICH THE EINFUHRSCHEINE MUST BE APPLIED With the agreement of the Reichsrat in pursuance of paragraph 11. No. 1, Part 1, of the tar!ff law of December 25, 1902 (Reichsgesetzblatt, p. 303). the following is hereby decreed concerning the form of the law of certificates (Einfuhrscheine), September 3, 1925 (Reichsgesetzblatt 1, p. 331): PARAGRAPH 1. Nine months is decreed to be the period within which certifiates (Einfubrscheine) issued upon the exportation of rye, wheat, barley, oats, and legumes. as well as the products of millers and malters. may be applied for paying duties. PAR. 2. This decree becomes effective October 1. 1925. BERLIN, September 7. 1925. LAW OF JULY 14. 1926, CONCERNING THE DETERMINATION OF VALUE OF EINFIU'HR-SCHEINE FOR AN INTERIM PFEFRIOD The Reichstag has passed the following law which, with the agreement of the Reichsrat, will be proclaimed. PARAGRAPH 1. In the case of certificates (Einfuhrscheine) issued in pursuance of the rulings of paragraph 11, No. 11, and No. 3 of the tariff law of December 235. 1902 (Reichsgesetzblatt, page 303), in the form required in the decree on certificates (Einfuhrscheine) dated September 3, 1925 (Reichsgesetzolatt I, p. 831), with respect to the exportation of rye, wheat, splet, barley, oats, And dry legumes, the determination of value must be based after July 1, 1926, on the duties specified in paragraph 6 of the tariff revision law of August 17, 1925 (Reichsgesetzblatt I. p. 261). 386° AGRICULTURAL RELIEF Par. 2. When it has been proved by the production of certificates of the customs authorities that goods of the kind described in paragraph 1 have been introduced into the free-trade area of the Reich by payment of the import duty in accordance with the rates prevailing on August 1, 1926, the duties. prevailing in the case of the exported product will be used as a basis for the determination of the value of the import certificates (Einfuhrscheine) up to the full amount of the customs value of the quantities stated in the certificate of the customs authorities. Pak. 3. The Reich's minister of finance will decree more specific rulings, especially concerning the form of certificates (Rinfuhrscheine) as proposed in paragraph 2. Par. 4. This law became effective on August 1, 1926; by consent of a committee of the Reichstag the administration can determine the time of its repeal. Berlin, July 14. 1926. CZECHOSLOVAKIA CZECHOSLOVAKIAN TARIFF AND IMPORT CERTIFICATE SYSTEM From Sammlung der Gesetze und Verordnungen des Cechoslovakischen Staates, No. 53. Published July 9, 1926. : Law of June 22, 1926, amending the Czechoslovakian tariff law and making provision for the regulation of trade relations with foreign countries. The National Assembly of the Czechoslovakian Republic has passed the following law : ArTICLE 1. The Czechoslovakian customs tariff is amended as follows: Tariff No. 2 2 2¢ Ys 2y 20 Commodities Wheat, maslin, spelt. _ ye... 3arlen Dats... Maize. .__. Buckwheat Millet. __ Malt (ieneral customs rate in rowns ner 100 kiloorams i Tariff No. 31 3% 33 Commodities Beans, peas, lentils_...___ Vetch, lupine o_o. Flour and milled products of grain and legumes (rolled, ground, | husked grain; grits and groats) _-Rice unhusked and husked: broken" rice General customs rate in crowns per 100 kiloerams 36 24 120 26 Notre —Milled products made from rice are assessed under No. 33 ArT. 2. The Government is empowered to regulate by special decree the system of import certificates for grain (with the exception of barley and malt), legumes and rice in accordance with the following principles: } 1. On the exportation to foreign countries of 1ye, oats, wheat, maslin. spelt, and legumes, if the quantity exported amounts to at least 50 quintals of one and the same species of commodity, the exporter will be given, on request, an import certificate entitling its possessor, within a period to be decided by law and not exceeding 9 months, to import duty free a quantity of ome of the above-named commodities corresponding to the tariff value of the import certificate. This applies also to maize and rice. 2. Millers exporting flour and milled products, covered by No. 33, which have been produced on their own premises, if the quantity exported amounts to at least 50 quintals of one and the same product, may be granted, on request, import certificates for the duty free importation of a proportionate quantity of the commodities allowed to be imported by paragraph 1, as well as of millet. The raw product value of flour and milled products is fixed by law. 3. The customs value of the import certificate is determined by the quantity of commodities exported or the amount of their value as raw products, and by the lowest tariff rate prevailing for the particular species of grain or lecumes in auestion. AGRICULPURAL RELIEF 387 4. The clearance of commodities in import certificate trade can only be effected by properly accredited customs officers. 5. This measure will be effective as from August 1, 1926. ART. 3. This law will come into force on the fifth day after its publication. At the same time the provisions of article 3 and of article 7 of the law of February 13, 1906 (Reichsgesetzblatt, No. 20) as well as of article 53 of the aw of 1907 with regard to the customs tariff will be abolished. The execution of this law is entrusted to the Minister of Finance acting in concert with the Minister of Industry and Trade and the Minister of Agriculture. SWEDISH LAW CONCERNING GRAIN IMPORT CERTIFICATES [Law No. 382. Royal proclamation concerning export certificate for rye and wheat] His majesty, in accordance with riksdag's resolution, decrees as follows: PARAGRAPH 1. Anyone who exports at one time and in a single shipment by sei or railway, a total of at least 500 kilograms of unground rye or unground wheat of a marketable value which he has at his disposal within the kingdom, is entitled to an export certificate issued by the customs authority concerned indicating the amount of customs duty which would have been paid on a corresponding quantity of imported grain. Exports to Swedish free ports do not entitle a person to an export certificate. Par. 2. On the surrender of export certificates within six months of date of issue, holders are entitled either to import duty free such amounts of rye or wheat as can be imported for the amount of duty to which the holder is enttiled as specified on the certificate, or the holder is entitled to obtain from the customs department the stated amount with a deduction of 2 per cent, provided amounts sufficient to cover such payments have been collected in import duties during the six months specified. Par. 3. Further instructions concerning the issuing of export certificates, also concerning the general application of the law, will be given by the King. This decree takes effect August 1. 1926. and will be in force up to and including July 31, 1928. Law No. 383. Royal proclamation concerning instructions in connection with the decree concerning export certificates for rye and wheat] His Royal Majesty has, in accordance with paragraph 3 of the decree of this day (No. 382), concerning export certificates for rve and wheat ordains as follows : PARAGRAPH 1. Exporters who wish to procure export certificates specified in the lecree concerning export certificates for rye and wheat make a request for same in a petition for declaration of exports which is issued by customs authorities or at railway stations. PAR. 2. (1) The director general of customs and such customs officers as are placed directly under the supervision of the district collectors of customs are authorized to issue export certificates. (2) In case the declaration of exports is made at a customs office not directly under the supervision of the director general of customs, or the district collectors of customs, the question of issuing export certificates shall be left to ‘he customs director concerned or to the head customhouse. 3. In case the declaration of exports occurs at a railway station, the issuing of the export certificate falls to the customs office in that locality in which the export takes place. Par. 3. Export certificates are issued by filling out the blank forms submitted 'n accordance with this proclamation. Par. 4. Export certificates are issued with the following qualifications: (1) That the commodity exported be found to be of a marketable quality, as stated in paragraph 6: (2) that the net weight of the commodity be ascertained in the manner directed in paragraph 7; (3) and also that investigations which the customs authority concerned considers trustworthy be made concerning it, and ‘hat the article of export be carried out in the manner stated in paragraph 1 of ‘he above proclamation. PAR. 5. Goods impaired by immaterial defects (slightly damp condition, poor rrowth. ete.) shall be considered as of a marketable value. Existing foreign 388" AGRICULTURAL RELIEF material (weeds, sand, stones, and other impurities) are allowed provided that they do not amount to more than 2 per cent of the net weight of the goods. Par. 6. The question as to the marketable quality of the commodity to be: exported shall be settled by the customs authority or railway station where the commodity is delivered for export. In case of dispute in regard to the marketable value of the commodity, the customs authority or the railway station shall appoint two competent and disinterested persons to examine the commodities and to report as to their marketable value. The goods shall not be considered marketable unless the decision of the examiners is unanimous. The cost in connection with this examination falls on the exporter. Par. 7. The net weight of the goods is ascertained by actual weighing, or according to the judgment of the customs authority or ra.lway station concerned from test weighing. In weighing, a machine for weighing railway cars must be used. As to the question of grain exported in bulk in a vessel the (suttle) net weight as verified by reliable man may be accepted. Pag. 8. In case the customs authority to whom goods is assigned for export does not issue export certificates, and in case the declaration of exports takes place at a railway station, the inspection in regard to the marketable quality of the goods and the statement as to the net weight shall be given over to that customs authority which is authorized to issue export certificates. Pag. 9. Export certificates must be in agreement with the exporters request, as stated in the petition for declaration of the exports, and be made out either in the form of a single certificate, including total quantity of grain reported and exported in a single shipment; or the computed amount of duty for the given quantity of exported grain may be divided among several certificates, which must not in any case. however. be made out for less dutv than 200 kroner. PIANK FORM FOR EXPORT CERTIFICATE (N. N.) has on (August 3, 1926) reported for export, and on (August 5, 1926) exported in a single shipment by sea/by railroad ——— kilograms unground rye and ——— kilograms unground wheat of marketable quality, for which amount (amounts), should an equal quantity be imported, the total import duty would be — kroner —— ore. The holder of this certificate is, according to the proclamation of July 26, 1926, concerning rye and wheat (Statute Book of Sweden, No. 382) entitled to within s'x months from the first date stated above, consequently at the latest (February 2, 1927), either to import duty free such amounts of unground rye or wheat as can be imported for the amount of duty to which the holder is entitled, as specified on the certificate, or to obtain from the customs department the stated amount with 2 per cent deduction, provided that amounts sufficient to cover such payments have been collected in import duties during the six months specified IMPORT-PERMIT TYPES OF EXPORT PREMIUMS [Excerpts from Josef Grunzel : Economic Proteetionism, pp. 204-207. 216-2201 In modern commercial policy there are two methods of relieving goods of import duties on reexportation. The first is that of the * drawback,” in which the duty is regularly paid on importation and refunded on reexportation. The other is that of manufacture in bond, where the duty is conditionally credited on importation, and later written off on reexportation of the goods. Either proof of identity of the imported and exported article may be required, or a rate of equivalence established on the basis of an assumed utilization factor. If the proof of identity is waived in this manner, customs drawbacks and manufacture in bond may experience an extraordinary development through the use of so-called importation permits or certificates. These reverse the technical order of procedure. The exportation of the goods is taken as the starting point, the exporter receiving permission to import at will, and duty free, the same quantity of the same commodity or a corresponding quantity of the raw material or part manufactures worked up in the exported product. If these certificates are made freelv negotiable. thev mav become the basis of an AGRICULTURAL RELIEF 389 extensive speculative trade. The relations of the various methods of procedure may be represented by the following scheme: Basis idea—relief of exports from duty payment : Return of duty paid on reexportation: Drawbacks—— With proof of identity. According to a principle of equivalence. Writing off of duty credited on reexportation: Manufacture in bond— With proof of identity. According to a principle of equivalence. By granting subsequent free importation on the basis of proof of exportation: Importation certificates-— Nonnegotiable (use restricted to importer by name and to same customhouse). Negotiable Manufacture in bond and drawbacks may in themselves lead to export bounties when strict proof of identity is not required. Thus the ratio of utilization may be fixed in such a way that the producer receives as a drawback on the exportation of his manufactured product than he has in reality paid in duties on the foreign raw material. The provisions for proof of importation may be drawn so liberally that under certain conditions the drawback may also be secured on domestic material which has paid no duty. It is further possible that finer qualities of raw material may be imported for domestic consumption, while for exportation poorer qualities produced at home are worked up. For example, the United States of America refunds on exportation the duties, less 1 per cent, paid on any foreign raw material contained in the exported goods, but requires only a sworn aflidavit of the exporter as proof of the fact in question. By the royal decree of February 27, 1896, Italy grants restitution of the duty on exportation of cotton yarns and fabrics: but as the duty is but 3 lire per 100 kilograms while the amount of the drawback is 4 lire per 100 kilograms in the case of yarns, and four and a balf in the case of fabrics, and in addition the tax provisions are very liberally administered, an export bounty is the result. A similar situation obtains in Russia, where, on the exportation of certain cotton and woolen manufactures, a drawback at fixed rates is paid for the duty on machinery and raw material usd in their manufacture, the payment taking the form of an issue of receipts which are rccepted in payment of duties on raw cotton and wool. An export bounty appears most frequently in case of negotiable certificates of importation, and may in fact make its appearance in two different ways. [n the first place, that part of domestic production which comes from the home district most favorably situated commercially, and geographically with respect to a foreign market region can be more effectively exported because of the fact that on exportation the producer can sell his export certificate for the approximate amount of the import duty in another part of the country where an import demand for the goods exist; but this import demand will again be increased because the producing region best situated for exportation can now compete on the foreign market under conditions more favorable than it previouxly could in the more remote domestic markets. In this case the industry will at once he assured of a domestic price profiting by the full amount of the tariff protection, Le. (neglecting freight charges), a price equal to that in the world-market plus the duty, while the exporting district will receive the same price, viz, the price in the world market on the sale of the goods, and an amount approximately rqual to the duty from the disposal of the importation certificate. An export premium may also result from the quality of the imported raw material put into the exported final product, since similarity in quality, is still harder to verify than equality in amount. This import-certifictue system first reached an extensive development in France in the course of the ninetcenth century in the case of cereals and iron; it was later taken over by Germany for grain, and in recent years has found ardent advocates in Austria-Hungary. The ‘titres d’acquits a caution” in France: The importation certificates System first came into general use in France in connection with grain. The ousiness of manufacture in bond, which had been carried on since 1828, was facilitated in the edicts of January 14 and June 1. 1850. by the elimination of the requirement of proof of identity and of the limitation requiring exporfation to take place through the same customs office. The ratio of product [0 material was fixed. according to grade. at 90, 80, and 70 kilograms of flour ver 100 kilograms of wheat. The period of manufacture was fixed for the 390° AGRICULTURAL RELIEF time being at 20 days, but was extended to three months by the edict of August 25, 1861. The southern provinces dependent upon the importation of grain now secured their imports duty free through sale of the certificates in the flour-exporting north. When the harvests were band and the importations large the millers secured the lion’s share of the bounty, while under the reverse conditions, when the amount of importation was small, the grain traders in the south raised the price on the certificates. The landlords on the south soon began to complain that they were not sufficiently protected against the growing oversea competition resulting from the lowered duties on imports, while some foreign countries also, especially the Belgian Government, protested against this form of export pounties. - As a result the edict of October 18, 1873, restored the provision that the importation of grain should take place through the same customs office by which the corresponding exportation of flour had gone. The new regulation did not impede the phenomenal development of the Marseilles milling industry, which immediately took advantage of the provision of manufacture in bond (admission temporaire), imported foreign grain, and exported the flour manufactured from it to the Near Eastern countries, Egypt and Turkey. In the year 1909 the wheat importation of Marseilles amounted to 4,400,000 quintals, of which 3,400,000 quintals were reexported in the form of flour, grits, pastry, crackers, and starch. In recent years the trade in import certificates has again been admitted. At present the millers in the north export flour made from domestic grain and sell the import certificates in Marseilles, where flour made from foreign grain can be advantageously sold at home. The titres d’acquits a caution have played an important role in the iron industry also since the requirement of proof of identity was dropped in the edict of September 8, 1851. The southern and western iron and steel works carry on a flourishing export trade in goods manufactured from domestic iron, while the northern works import the higher-grade English pig iron. This procedure led to complaint on the part of Germany, and edicts of January 9, 1870, and January 24, 1888, introduced restrictions prescribing the transportation of the imported iron to the plant which desired to claim the drawback and which was to affect the manufacture (obligation du convoyage a 1'usine) ; the new reculation brought to an end the commerce in iron certificates. IMPORT CERTIFICATES IN THE GERMAN GRAIN TRADE The above-described effects of the traffic in import certificates have been especially conspicuous in Germany also. Different districts within the country are interested in the commerce in grain in very different ways. The northeastern Prussian provinces produce a surplus which, by the aid of cheap freights by water, they can market more advantageously in England than in the more remote consumption centers of Germany, while Russia and Austria-Hungary afford a more convenient source of supply for the industrial sections of middle and southern Germany. In the years 1887 and 1888, therefore, the landlords began agitating a demand for the issue of import certificates; in view of the fact that the question related to an extension of elaborative industry, they demanded abolition of the requirement for proof of identity. In the law of April 14, 1894, the desired change was introduced, and it has been retained in the latest tariff law of December 25, 1902. By the terms of the law, on the exportation of wheat, rye, spelt, oats, buckwheat, legumes, hops, rape, and beet-seed, and when the amount exported is at least 500 kilograms, certificates are issued which entitle the holder to import duty-free a corresponding quantity of the same commodity within an interval to be fixed by the Bundesrat, but in no case to exceed six months. As a further extension of this traffic, the proprietors of grinding roller mills, to whom the privileges of manufacture in bond had already been granted in the tariff law of July 16, 1879, and also the proprietors of oil mills, likewise received permission to use import certificates. They were given the certificates on exportation of manufactured goods produced by themselves within the customs domain, issued on the basis of the amount of raw material embodied in the products, and subject to the provision that this amount must be not less than 500 kilograms. The yieldratio fixed in the exportation requirements is in the case of rye flour 75 per cent, of barley malt 75 per cent. and of wheat malt 78 per cent. AGRICULTURAL RELIEF 391 The Bundesrat was further authorized to permit the acceptance of these mport certificates in payment for duties on goods otter than grains and regumes, and the permission was in fact granted in the case of a series of artiles subject to purely revenue duties, including coffee, cocoa, tea, spices, tropical fruits, olives, rice, herring, petroleum, ete. The first limitation was mposed by a ruling of the Bundesrat on November 9, 1911, reducing the term of validity of the certificates from six to three months, and restricting their acceptability in place of cash in duty payments to grains, legumes, rape, and rape seed. These import certificates were extensively employed in grain exporcation, but in the case of flour the older provisions for manufacture in bond were found preferable. The immediate effect was that the prices of grain in those parts of the country which depend on exportation for their market and which formerly had to contend with depressed prices, rose to a point higher than the general world-market price by approximately the amount of the import duty. As a result, an equalization in grain prices within the German customs domain has come about, as in the exporting districts also the domeste price could now rise to the height of the world-market price plus the amount of he duty. (NoTE.—Since the publication of this volume by Doctor Grunsel in 1916 the German Government readopted import certificates, restoring certain provisions of the tariff act of November 25, 1902, so far as to make these instrumentilities effective in the case of rye, wheat, spelt, barley, oats, and pulse. See the Reichagesetzblatt, Part I, No. 44, September 12, 1925, for the text of a lecree of September 3. 1925, based upon the tariff revision act of August 17. 19925.) Mr. Kercuam. Thank vou. Now, Mr. Chairman, we are faced with this situation: Mr. Newsom, who is here ready to give testimony, is a very busy man, having a 400-acre farm to care for, and other responsibilities, and he has a brief statement which he would like to submit, and I would like very much if he might just be introduced and then have permission to submit his statement. if that is aoreeable to the committee. STATEMENT OF JESSE NEWSOM. OF INDIANA Mr. Newsom. Mr. Chairman and gentlemen, it will be impossible for me to wait over until Tuesday. I have a few lines to present to the committee that I desire very much to present, along the line of Mr. Ketcham’s first question. I think it will answer very well some of the other questions, particularly the background of precedent of the entire debenture idea, that is founded largely upon Alexander Hamilton’s Report on Manufactures. If it is agreeable, I would like to present it in written form in a day or two. I do not have it ready at this time. The CHAIRMAN. Without objection, it is so ordered. , The committee will now adjourn until Tuesday morning at 10 o’clock. (Thereupon, at 11.55 o’clock a. m., the committee adjourned to meet Tuesday, February 14, 1928, at 10 o’clock a. m.) R6160—28—BERE, PT5— 7 392 AGRICULTURAL RELIEF House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Washington, D. C., Tuesday, February 14, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m.. Hon. Gilbert N. Haugen (chairman) presiding. Present: Representatives Haugen, Williams, Ketcham, Hall, Fort, Menges, Andresen, Adkins, Clarke, Hope, Aswell, Kincheloe, Jones, and Rubey. . The CHARMAN. The committee will kindly come to order. Mr. Kercraam. Mr. Chaiarman and gentlemen of the committee, it will be recalled that at the conclusion of the hearings the other day permission was given to Mr. Jesse Newsom, the master of the Indiana State Grange, to include in the report of the proceedings of the committee a brief statement which he wished to submit by reason of the fact that he could not stay over for the hearings to-day; and I have this statement here, just a very brief one, and unless some one desires to object, we will simply submit it. (The statement referred to is as follows:) STATEMENT OF JESSE NEWSOM, MASTER OF THE INDIANA STATE GRANGE As master of the Indiana State Grange, I wish to say that sentiment among the farmers of my State is crystallizing in favor of the export debenture plan of farm relief. The export debenture plan appeals to our people because of its simplicity and workability, its certainty to benefit farm prices, and the high authority upon which the fundamentals of the plan rest. The authority in question was Alexander Hamilton, our first Secretary of the Treasury, who by common consent is acclaimed as the ablest of the long line of d stinguished men who have held that imnortant position in the Cabinet of the President. The prcblem confronting the Nation in its beginning was how to raise the revenue to finance the Government, and how best to develop the resources of the country to the advancement, happiness, and general welfare of our people. In the formative period of our country our population was overwhelmingly agricultural. There was slight possibility of raising money by many of the methods which we now employ. The tariff system was the main source of revenue in our early history, and its chief exponent was none other than the great conservative, Alexander Hamilton. In his famous report on manufactures, made to Congress in 1791, upon the request of that body, Hamilton gave recognition to the fact high import duties for the encouragement and protection of the industries of the country would reduce the income from the customs branch of the Government. Notwithstanding this tendency, however, the Secretary of the Treasury advocated the encouragement of our industries, even though the policy pursued interrupted the flow of millions of dollars into the treasury from the customs branch of the Government. Not only did Hamilton, 135 years ago, suggest our protective policy as a means of fostering our industries, but he indicated the measures to be adopted to ‘“ conciliate ” or recompense agriculture. so that the benefits of our tariff policy might be evenly distributed. The Supreme Court had held that the power to tax and untax remains with Congress. In other words, Congress has the power to levy high protective duties, and moderate import duties, or it has the power to place commodities on the free list and {o authorize drawbacks and rebates. the legal principle which underlies the export debenture plan. Ts avs Hatin 95 per cent of the revenue came from the tariff. Consequently -he i 2 per ia of the national revenues come from that source. onsequently he 1mportance of the tariff as a source of revenue is rapidly diminishing, d the oth i . 3 g. and the other function, that of a regulator and promoter of busihe prosperity, is rapidly increasing. nega interesting io wig that Hamilton said that in a perfect com-. : 11d be the prevalent custom: that it was not his AGRICULTURAL RELIEF 303 duty, however, to write an essay, but to consider what it was wise to do under »onditions then existing. oo [t is also interesting to read the masterful discussion of the relative importance of agriculture and industry, contained in the first 70 pages of his report, wherein is found the following: “It ought readily to be conceded that the cultivators of ihe earth, as the primary and most certain source of national supply, as the immediate and chief source of the subsistence of man, as the principal source of those materials which constitute the nutriments of other kinds of labor, as including a state most favorable to the freedom and independence of the human mind—one perhaps most conducive to the multiplication of the human species, has inirinsically a strong claim to preeminence over other kinds of industry, but it is aot entitled to exclusive predilection.” His whole philosophy was that the development and encouragement of both agriculture and industry whenever and wherever needed was fundamen. al and a prime function of government. With these thoughts in mind, he proceeded to declare a Federal policy for industrial encouragement. The functioning agencies to be emploved were the :ariff and the bounty. On protective duties he has this to say: “ Duties of this nature evidently amount to a virtual bounty on the domestic fabrics; since, by enhancing the charges on foreign articles, they enable the national manfactuurers to undersell all their foreign competitors.” In considering a monopoly of the domestic market to its own manufacturers he declared it to be in every proper instance dictated by the principle of distributive justice, certainly by the duty of endeavoring to secure to our own citizens a reciprocity of advantages. On pecuniary bountics he says: “This has been found one of the most efficacious means of encouraging manufacturers and is in some views the best. Bounties are sometimes not only the best but the only proper expedient for uniting the enccuragement of the new object of agriculture with that of a new object of manufacture. The true way to conciliate these two interests is to lay a duty on foreign manufactures of the material the growth of which is desired to be encouraged. and to apply the product of that duty, by way of beunty, either upon the production of the material itself or upon its manufaciure at home or both. There is a degree of prejudice against bounties from an appearance of giving away the public money without an immediate consideration, and from a supposition that they serve to enrich particular classes at the expense of the community. But neither of these sources of dislike will bear a serious examination.” We have quoted clsewhere that any outlay of public funds is justifiable when in the interest of general welfare. “As to the second objection, it lies equally against other modes of encouragement, which are admitted to be eligible. As often as a duty upon a foreign article makes an addition to its price, it causes an extra expense to the community for the benefit of the domestic manufacturer. A bounty does no more. But it is in the interest of the society in each case to submit to the temporary expense—which is more than compensated by an increase of industry and wealth, and by an augmentation of resources and independence.” “It is of necessity, 1¢ft to the discretion of the national legislature to pronounce upon the objects which concern the general welfare, and for which, under that description, an appropriation of money is requisite and proper. And there seems to be no room for doubt that whatever concerns ihe general interests of learning. of agriculture. of manufacture. and of commerce are within the sphere of the national councils. so far as regards an application of money.” After a discussion of drawbacks and remission of duty Hamilton has the following to say: “ The possibility of a diminution of the revenue may also present itself as an objection to the agreements which have been submitted. But there is no truth that may be more firmly relied upon than that the interests of the revenue are promoted by whatever promotes an increase of national industry and wealth. In proportion to the degree of these is the capacity of every country to contribute to the Public Treasury; and where the capacity to pay is increased or even is not decreased, the only consequence of measures which diminish any particular resource is a change of the object. If, by encouraging the manufacturer of an article at home the revenue which has been wont to Accrue from its importation should be lessened, and indemnification ean easily be found, either out of the manufacture itself or from some other object which may be deemed more convenient.” 394 AGRICULTURAL RELIEF «fn what can it (money) be so useful as in promoting and improving the efforts of industry?” . . . . [ have briefly tried to sketch the fundamentals in the policy of industrial encouragement as outlined by Hamilton. I would call your attention to the close similavity of the principles of the debenture plan in the Ketcham bill with those outlined by Hamilton, which have practically become the economic law of the land. I respectfully submit that fundamentally there is no new principle involved. The Ketcham bill most readily harmonizes with the Hamiltonian theory of drawbacks and tariff remissions as means of assistance. If the one is just, the other is equally so. There is no difference in the last analysis so far as the Treasury is concerned between this feature of our tariff policy and the debenture idea of the Ketcham bill. If by a loose definition of the word some would call the one a subsidy, the other is most certainly a subsidy also. If it is a subsidy to deflect a part of the customs revenue from the Treasury to our—as Hamilton says——* intrinsically preeminent occupation,” even though it is for the general welfare, it is most certainly a subsidy under the same definition to deflect money from the Treasury through the tariff by drawback, tariff remissions, and tariff rebates. The nature of the occupations of agriculture and manufacturing are essentially different, but their votaries are the same; they have the same ideals, hopes, and aspirations. The strict language of the law enacted for one group perhaps does not fit accurately the situation to be corrected in the other, but the principles of the law should be made equally applicable and effective, and to conform to the mechanical differences of the occupations concerned. Individual happiness depends upon the general prosperity, and justice and equality in legislative enactment is all that we ask. The rest remains with us. In concluding, gentlemen of the committee, may 'T commend to you the reading of the full text of Hamilton’s report on manufacture. It is, of course, to be found in the Congressional Library, in an individual volume, and also in other works of Hamilton. My references have been taken from the Life of Hamilton, volume 1, from an article entitled © Manufactures and Protection,” and from The Works of Alexander Hamilton, fourth volume, Federal edition, by Henry Cabot Lodge, pages 70 to 202. I also refer you respectfully to the address of Hon. Marvin Jones, a member of the House Committee on Agriculture, which appears in the Congressional Record for January 6, 1928. A careful study of this report will do much to show the merit and justice of the Ketcham bill and the wisdom of adopting the export debenture plan as a necessary complement of our protective tariff system, JESSE NEWSOM, Master Indiana State Grange. Mr. Kercuam. Then, in addition, the committee will recall that in the announcement of those who are to offer testimony I included the name of Hon. Carl Vrooman, of Illinois, who is a very substantial farmer of that State—I think he operates something like 4,000 acres, and was at one time, under a previous administration, Assistant Secretary of Agriculture and a very outstanding authority. He was forced to go home on account of pressing business engagements and sickness, and he left with the committee a very brief statement, which would probably be very much shorter than the statement he would have given had he had the privilege of appearing before the committee. I ask permission that it be inserted at this point. The Cmamman. Without objection it is so ordered. (The statement of Hon. Carl Vrooman referred to is as follows:) A STATEMENT IN SUPPORT OF THE ExPORT DEBENTURE PLAN, BY CARL S. VROOMAN, FORMER ASSISTANT SECRETARY OF AGRICULTURE I desire to go on Tecord before this committee in support of the export debenture plan as the central feature in an effective farm relief plan. My draft of a complete and adequate farm relief bill includes several important features in addition to the export debenture idea, but I realize that the latter feature 1s the one which will work when lesser methods fail and is therefore the feature that will occasion most disenesion AGRICULTURAL RELIEF 395 When President Coolidge vetoed the McNary-Haugen bill last February it became evident that if “equality for agriculture” is to be secured during the present administration, a bill must be drafted which either he will not veto or which can be passed over his veto. The President's veto message, as well as his attitude since the issuance of that message, makes unmistakably clear that no bill providing for an * equalization fee” ean receive his approval. Moreover, the fact that 74 Democratic Congressmen and 20 Democratic Senators either voted or paired against the MeNary-Haugen bill, largely because of their opposition to the ‘equalization fee,” makes equally clear that no bill providing for an “equalization fee” can receive enough Democratic votes to puss it over the President's veto. Therefore, it would seem to be so apparent that he who runs may read. that no bill providing for an “ equalization fee” ean be enacted into law during the aext session of Congress, and that the advocates of “ farm relief ” will have to do one of two things—either give up all hope of gaining economic justice for the farmer during the coming session of Congress or else draft a new compromise bill, which will have enough “teeth” to make it satisfactory to the Uentral West, and which at the same time can command the support of either the Coolidge Republicans or of the southern Democrats, I am convinced that a bipartisan compromise bill based on the export debenture plan can be drafted that will achieve all that the MeNavy-Haugen bill was designed to accomplish, while containing important safeguarding features which it lacked. Having worked on this problem since 1921, when I had the honor of having introduced in Congress the first farm relief bill, the so-called ‘export credit bill.” which passed the Senate by a unanimous vote and the House by a two-thirds majority, only to be assassinated “in conference ” by two eastern Congressmen, I am loath to see nonessential differences of opinion as to method lefeat again, for the fourth time, this most urgently needed legislation. I want to make clear that had I been in Congress last Year I would have voted for the McNary-Haugen bill—which, whatever else it might or might not have done, would have given us a Federal farm board, the functions of which could have been enlarged or altered later. as the functions of the Interstate (‘ommerce Commission repeatedly have been extended, by legislative action. While 1 realize that some farmers would prefer to wait for relief legislation ‘wo or three years, if necessary—until a new President and Congress could take action—rather than change in any way their position on the MeNary-Haugen bill, others of us are more interested in getting prompt and practical results, than we are in the means by which those results are achieved. In brief, the bill in its final form should vontain, in my opinion, four main features, all to be administered by a board, the members to he selected in a way that will insure a sympathetic understanding bv them of the farmer's needs and point of view. The first job of the board. and one which would require its continuous at-‘ention, would be to keep itself and the farmers of the country thoroughly advised as to crop prospects, probable price trends. snd supply and demand both at home and abroad. This practical crop and price information service is capable of far greater levelopment than anything at present available. If we had been fully informed in the fall of 1926 of the fact that the world crop of cotton was no larger than that of the preceding vear. even though our own crop seemed «o tremendous. we would have escaped the tragie slump in the price of cotton that ruined so many southern farmers. While this sort of market information would have been a big help, suppose ‘hat, in addition, means had been provided to lend cooperative growers, ginners, and dealers up to S85 per cent of the fair conservative value of the cotton held, and at the lowest feasible rate of interest. It ix plain that under these conditions few holders would have sold their cotton at the then ruinouslv low prices. and the market would have sagged but little. if at all. One section of the proposed bill should provide for the loaning in this way nf upward of $300,000,000, in an effort to prevent undue depression in market price levels. This sum of course would be augmented by funds available from orivate-banking institutions, and the Federal intermediate-credit banks. Storage from times of surplus to times of scarcity is just as necessary a function to-day as it was in the days of Joseph. Despite our best calculations. 396 - AGRICULTURAL RELIEY unusually good weather conditions are certain to produce troublesome surpluses of some crops in some years. . When such a condition occurs, evidently the sensible thing to do is to store this surplus until another year. The proposed bill should provide that the board shall take steps to provide necessary storage facilities whenever in the opinion of the board, no other agency or agencies can be relied upon to warehouse, or store a sufficient percentage of such crops, at low enough costs and for a sufficient length of time, to secure for the farmer reasonable prices for their crops. Liberal credit also may be extended to foreigners wha want to buy our agricultural products, and who have sound commercial security to offer for such credit. This principle received the overwhelming indorsement of Congress when the original export credit bill of 1921 was before that body. Every year since the World War, Americans have been making huge loans abroad, in one form or another. All too often, however, this money has been expended by the borrowers to buy wheat, corn, and meats, not from the United States but from the Argentine or Australia. If some of these loans could be made for the sole purpose of financing the exportation of American surplus crops, it would mean hundreds of millions of dollars in the farmers’ pockets, in the form of higher prices. Most of us remember the extraordinary increase in the price of grains which resulted from the gift of $20,000,000 worth of foodstuifs to the starving Russians in 1922. From the day our Government began to buy these supplies the price of corn, for example, began to rise, and the day it stopped buying the price of corn stopped rising. Despite the fact that only a small part of the $20,000,006 was spent for corn, it was found that this stimulus to the market means an increase of $150,000,000 in the value of the 1.500.000.0600 bushels of corn left in the country at that time, However, in spite of the three partial remedies above suggested, as well as a crop-acreage limitation plan to be described later, there will always remain the possibility, following a series of favorable years, of pyramiding surpluses of certain crops above domestic requirements, and thus reducing prices below the “American level.” It is this class of crops which fails to benefit by the kind of protective tariff now in opeartion. The prsent Ktcham bill provides that in an agricultural crisis of this kind the board shall establish a system of “export debenture” payments on the exported part of each crop, up to the amount of the tariff on that crop, and 2 cents a pound on cotton. The export-debenture plan would do far more for farmers than would the *“ equalization-fee ” plan and is far simpler to operate. The former is a frank recognition of the principle that the consumers of the United States must help make up to the farmer the loss he suffers through the tariff system. and other governmental price-raising arrangements in industry. . The administration of this feature of the law would be very simple, as has been pointed out to this committee by Doctor Stewart. There is a certain poetic justice in making this compensating payment to the farmer out of funds received from duties collected to “ protect” our manufacturers. The one action is no more paternalistic than the other. In a way the Government would be merely saying to the farmer: “ Since you must sell your products at world price levels, because our tariff does not protect your wheat, cotton, corn, and meats, we shall permit you to bring in free of duty an equivalent amount of other goods at world price levels.” With the above-outlined provisions in operation, farming again would have a fair break with industry and some plan would have to be devised to prevent undue acreage expansion. The Ketcham bill provides for declining debenture values to discourage overproduction. This would be exactly as effective as the increased equalization fee payments provided in the MecNary-Haugen bill. By Lam inclined to think that considerably more could be done toward acreage wl Jam Dian Jor doing this would be by increasing the acreage of legumes board after car : plowed under as fertilizer. The bill could provide that the overs, probible on y investigating the quantity of the various crop carrydemands at home D cTeagen and crop prospects, together with probable crop of the countrv ought t abroad, shall decide what percentage of the arable land > ht to be planted in lecumes to be plowed under. AGRICULTURAL RELIEF 307 It would endeavor to secure such acreage adjustments through unpaid Siate, county, and township committees. The chief functions of the local committee would be, first, to make clear to local farmers the splendid results in the way of higher prices for their crops and increased fertility that would come about from the carrying out of such a policy; and second, as the lical draft boards did during the war, to grant immunity in cases where owing to unusual conditions undue hardship would result from a rigid enforcement of the plan upon all alike. Something of the spirit of the Liberty loan drives could be injected into ‘he movement, so as to arouse lceal sentiment against would-be slackers. The official backing of the American Bankers Association, the United States Chamber of Commerce, and the various farm organiz:ticns. local banks, merchants, elerator managers, and farim-organization officials could be relied upon to exert influence in favor of compliance with directions of the Federal board. The various steps outlined here make a well-rounded program. Credit for orderly marketing, storage fucilities for temporary surpluses, stimulation of foreign markets, export debentures to raise crop prices to the “American level,” and an acreage-control plan as a brake on undue expinsion of production. I submit that the plan here presented is one on which farmers of all sections "an unite, one to which President Coolidge could and should give his approval. Fortunately, however, if the farmers and their natural allies and friends should unite on such a bill, no presidential veto could prevent its being enacted nto law. The Cmarrman. The Chair also has a statement by Mr. A. P. Sprauge, of York, Nebr., on the subject of the cooperative wheat marketing associations of var.ous mid-western States, and unless there is objection that statement will be inserted. [After a pause.] Without objection, it is so ordered. (The statement of Mr. A. P. Sprague referred to is as follows :) This statement is made by A. P. Sprague, of York, Nebr., who bears separate written credentials from each of the cooperative wheat marketing associations of Texas, Oklahoma, Kansas, Colorado, Nebraska, South Dakota, and Minnesota, all filed with the House Committee on Agriculture, asking for appropriations for loans for the extension of membership and for the purchase of grainhandling facilities, and signed under corporate seal by the president and secretary of the respective associations. Upon reaching Washington we learned that a great many other cooperatives were interested in the same matter. Accordingly a conference was called of representatives of the various farm grouns and they unanimously indorsed these features, In addition we have received letters and resolutions of indorsement from axtensive growers, local farmers’ union groups, ete. Mr. Mayer, of Devils Lake, S. Dak., and Mr. Mat Grennan, of Illinois, have appeared before the House committee on the same subject. Provisicn for loans for the purchase of facilities was in the original bill, Loans for * federating, consolidating, merging, and extending the membership of ” going concerns with security to back such loans is discussed herewith. Senator McNary wired the Nebraska Wheat Growers Association in response to a request for his support of this amendment: “I can see no objection to your suggestion proposing an amendment to Mc¢Nary-Haugen bill and will eall the matter to the attention of the committee when it comes up for consideration, Charles L. McNary. U. S. 8S.” While this amendment has not been presented to Seeretary of Agriculture Jardine and hence he has expressed no opinion on it, he has said in public atterances that it is not only desirable but consistent with our governmental policy to give proper aid for the encouragement of cooperatives. In an article n the Oklahoma Farmer and Steckman of November 1. 1927, he said: It is altogether consistent with our economic policy that the development of ‘hese desirable organizations should receive public encouragement.” Again he said, in the same article: “The activities of this board, in addition to enhancing the growth of sound ganization in every practical way, would be,” ete. And in the Report of the Secretary of Agriculture, 1927, addressed to the President November 8, pages 18 and 19. we find - 308 - AGRICULTURAL RELIEF “We should center attention on the problem of organizing the producers of major farm commodities.” And again: “It these cooperative organizations would help agriculture and be generally veneticial to the country, their development should be encouraged.” Concluding the same paragraph with— “It is entirely consistent with established American policy to foster a beneficial agricultural movement in its early stages.” The concluding declaration of policy on pages 2 of both H. R. 7940 and 8S. 1176, reads: . “And to further the organization of producers of such commodities into cocperative assoc’ations.” Surely none but a practical and substantial aid is contemplated. Yet section 5 makes no provision for appropriations for loans to “further organization.” In its experience and development the Federal Farm Board will be most concerned in, and desirous for, an ab lity to render financial aid for organization in such cases as it deems worthy and necessary. Legislative price regulation is not all the farmer is interested in, as suggested by some advocates of the debenture plan, because legislation is erratic and changeable. The farmer wants bargaining power, class independence on a par with industry so as to make his advantages permanent: which can only come by extensive organization. In any act proposed it should be remembered throughout that the fundamental objective in the long run of agricultural rel ef is to build and maintain strong, self-sustaining, and effective cooperatives with bargaining power. Such organization ‘s a tremendous undertaking. Farm papers, the public press, official agricultural reports, for years have pointed and stressed bargaining power for the farmer. Is it possible legislative action will underrate the expense and d ficulties of organization? Any farm relief bill should provide “building machinery” at the farmer end of the cperation by provision for loans when the board deems it necessary. The term * cooperative marketing” is synonymous with “organized markating” and pctures the two primary functions of such an organization. The “marketing” element has many established methdos and channels already with us and available, even though unsatisfactory; but organization” of approximately a million wheat farmers has not yet been demonstrated. Such organization will not just come about. nor result automatically from the nperation of the act. Organ’zation work varies in the number, character, and intensity of its difficulties in different commodities, llocalities, and times. As to localities, mark the rapid organization of wheat in Canada, and the comparative fa'lure to organize wheat in some of the States. As to times, some of the tobacco groups easily signed up 65 per cent of ther territory a few years ago, but now desire this assistance. As to commodit'es, fruit, vegetables, and dairy products are more easily organized because their production is more localized, ete. So we can not predict the results of organ’zation effort in one locality by hat happened in another. We must know the local atmosphere and conions. There is precedent for Government loans for organization. Government money was loaned for organization purposes in Canada for the Canadian Wheat Pool Campaign. (See Bulletin 63, Bureau of Agricultural Economics, p. 62.) The United States Government sold stock and bought stock and bu’lded the Federal reserve system for banking, an activity wh'ch was no more in behalf of all the people than the production of their food. Government gave as a gift. 129.000.000 acres of land, to encourage railroad construction. The central and northwest wheat States have labored five years with this organization problem without getting enough volume to become a potent factor in the market. Some of the difficulties encountered should be borne in mind in order to get a perspective of the requirements for relief and the reason why the I ory mind is kent so deceived and muddled that he will not organize A localized effort like a farmers’ elevator at one point draws little fire from opposition to farmer organization. But the attempt to organize a whole commodity. covering several States, draws fire, with volumes of malicious propa-Sma Competing interests have repeatedly misrepresented the prices paid by The or waodiom, Stories are circulated that officers are dishonest Aistoaraging Fail . cial organ in Chicago recently carried a series of articles |eonrs ‘ rs from joining the Wheat Growers Association and pub- AGRICULTURAL RELIEF 399 (ished in box form a display article telling members of several slick and deceptive ways to evade their contracts and why they should. Such procedure is almost continuous and is destructive of organization. It fools people. It explains why the farmer will not organize himself, as is often proposed. A second ditliculty is the expense required to get personal contact with every grower. The solicitor’'s job is one of education, explaining the plan, its operation elsewhere, and the contract the farmer is called upon to sign. Manifestly the signing of a written contract calls for its thorough understanding, the meeting of the minds of the parties and general conformity to the law of rontracts. This work is necessarily slow and expensive. Third. Nebraska has approximately 60,000 wheat farmers; Kansas probably cwice as many ; there are 15 States of wheat raising consequence. The organizacon of but a single State has small influence. The organiaztion in all States of any commodity to the highest possible degree is necessary in order to get the cooperation of all in the adjustment of production and to affect the market, otherwise the unorganized States constantly counteract the efforts of the organized. In adjusting production, the maximum of the benefit of organization will not be available to any great extent until all major commodities are highly organized. Fourth. If the farmer would pay a cash membership fee, the problem would be solved; but sometimes he will not and sometimes can not. Congressman Purnell spoke before the House committee of the farmer's broken morale. We are satisfied with statisti, but Congressman Norton, of Nebraska, has handed me an up-to-date report from an astract company in two counties of his district, showing a total increase in 1927 over 1926 in farm, town, and chattel morfgages of—in Jefferson County, $1,087,774; in Thayer County, $608,078. The vast majority of farmers insist on giving a note for membership fee, and the organizing body has to advance to its solicitor the cost of getting it. Again, the farmer has been a “ joiner,” Everything he joined promised relief and failed to bring it. He has grown skeptical and solicitors and membership fees. The Republican Party made a campaign on the slogan “ Confidence.” The farmer lacks confidence now. Even congressional opinion is divided as to the better course. Is it surprising the farmer is in doubt, his mind befuddled by misleading propaganda and knowledge of the frailties of judgment? A real participation of Government by the loan of funds for organization work will zo far in restoring confidence to the farmer's mind. And why should government not do this? It took, through the War Finance Corporation, $50.000.000 of wheat profits from the farmer during the war. Our farmers believe large volume of necessary to successful cooperative marketing. In my own county, four out of eight farmers’ elevators failed; the four that are left are the four with large volume. Farmers told our solicitors they approved of cooperative marketing, but did not want to join until we had 35 to 50 per cent of the Nebraska acreage. That presented a serious question so long as we had to accept notes for membership fees and pay solicitors in cash. Still we were anxious to test this challenge and see if we could discover a way to write members easily and rapidly. We launched a campaign, contracts not to be enforceable until we received 50 per cent of the wheat acreage of the State. Solicitors were sent in three counties, widely separated and differing in nationality and conditions. They signed up rapidly 80 to 90 per cent of the farmers canvassed ; and secured, without covering the entire county, 50 per cent of the wheat acreage in three counties. We demonstrated that wheat can be organized far beyond the 50 per cent limit if there were funds to carry on the work throughout the States. Such a loan by the Government is no more hazardous or likely to abuse than loans for the purchase of facilities. The same people, the same securities are back of both. The Federal Farm Board should carefully scrutinize and supervise both, should call for the aid of the advisory council, should know the men and keep track of their operations. Canadian cooperators repaid every dollar they borrowed for organization. The cooperatives doing business can give security of such loans: 1, by the pledge of the membership note: 2, by the agreement of the signer in his contract that payment may be taken out of the proceeds of the sale of his product; 3, by the pledge of the association to pay the debt from its reserves and the 2 per cent gross resale proceeds; 4, by the security of the product itself. There is a compelling reason why all major commodities must be strongly organized at the earliest possible date. namely, the relation they bear one to an- 400 - AGRICULTURAL RELIEF other in adjusting production to demand. The impossibility of absolute control of production emphasizes the wisdom of exercising the maximum of control. Thousands of acres of cotton and tobacco land will raise corn and wheat. In December the Department of Agriculture reported: «In livestock and livestock products we are to-day on an import basis. The value of our net imports of animals and animal products for the past three years was 6.2 per cent of the total farm value of domestic production.” Beef consumes corn. It was stated a few days ago in the Senate that shutting out Cuban blackstrap molasses would increase corn consumption in the United States 50,000,000 bushels for the manufacture of alcohol. Two deductions are clear. Thorough organization of commodity cooperatives will aftord a powerful instrumentality to remedy such conditions and adjust production to demand; second, any commodity is interested in the organization of all others on defensive grounds. Some say we can not affect production. There are many ways to affect and adjust it. We have thousands of acres in wheat in the West which should be raising sugar beets. Homesteading is progressing, and that could be stopped. If an operating period were declared on wheat under the Mc¢Nary-Haugen bill, or a debenture plan, and the producer given a substantial benefit of the tariff without at the same time giving like benefits to other major commodities, there would be danger of an excessive increase in wheat acreage. Since the proposed act contemplates operating through cooperatives, the Federal Farm Board might be placed in an embarrassing position if unable to speed up organization of other commodities. In an article published in the Farm Journal in August, 1927, the Secretary of Agriculture said: . “ Commodity cooperative associations have a definite funetion to perform, not only in merchandising farm products, but also in adjusting production to demand. I believe that ample authority for this is provided in. section 5 of the act creating the division of cooperative marketing.” And again in the same article: Large-scale organization for orderly marketing and for adjusting production to demand is essential to that economic stability of agriculture which we all hope to attain.” The Federal Farm Board is bound to meet conditions. which will place it squarely up against this organization question, or else turn the whole operation over to private interests and forget all about the farmer's bargaining power and his cooperative. Whatever the legislative plan, if it is financially beneficial encugh to be an incentive to increased production, the equation of production will find its mightiest ally in thorough organization of the farmers. Government can not limit my legitimate uses of my property; it can not say I shall cultivate only so many acres of this or that; but the farmers’ own organization may contract with its members for reasonable regulation or adjustment of production in consideration of services rendered. The rapidly increasing acreage in Canada is another angle of overproduction. Canadian and Australian grain are both well organized and stand ready and waiting to cooperate with us in stabilizing foreign markets. It would appear that a strong cooperative is the onlv United States agency with which they can function. Loans for organization are needed in any permanent agricultural-relief program. The subject has a preferred claim to consideration. The structure should be builded first and then given its uses. It is a supermajor operation which should be treated where most needed and bv the agency responsible for agriculture's present ills. The farmer does not ask a gift, but a loan. It is not likely that more than $2,000,000 would be borrowed in the organization of all the commodities. Such a loan is so modest in this atmosphere of vast appropriations that Government can not afford to take the chance of handicapping the Federal Dam Tory OF hs omission. Furthermore, refusal would appear unsympat e fundamental objective of agricultural relief. namely. bargaining power. ee stated hy fe farmer can not organize himself ; how loans will be such aid EW ae Ys e amendment ; and the urgency and justification for s e standpoint of the farmer and the operation of the law. We know of no substantial obiection. AGRICULTURAL RELIEF 401 To the Congress of the United States: We take this method of advising you that the Texas Wheat Growers’ Association is enthusiastically supporting the movement to get Government loans for organization work and securing facilities to handle grain. Mr. A. P. Sprague, who is representing the wheat pools to secure such legislalion, will be glad to fully explain the whole matter to you and we trust you will give him your help. { SEAL) AMARILLO, TEX., December 27, 192%. [.. GOuGH, President. GRACE WEBSTER. Secretary. ENID, OKLA., December 27. 1927. To the Congress of the United States: We take this method of advising you that the Oklahoma Wheat Growers’ Association is enthusiastically supporting the movement to get Government loans for organization work and securing facilities to handle grain. Mr. A. P. Sprague, who is representing the wheat pools to secure such legislasion, will be glad to fully explain the whole matter to you and we trust you will give him your help. (SEAL) W. L. GRAVES, President. Joan MoULEY, Secretary. WICHITA, KANS., December 29, 1927. To the Cungress of the United States: We take this method of advising you that the Kansas Cooperative Wheat Marketing Association is enthusiastically supporting the movement to get government loans for organization work and securing facilities to handle grain. Mr. A. P. Sprague, who is representing the wheat pools to secure such legisla-‘ion, will be glad to fully explain the whole matter to you. and we trust you wll give him your help. ( SEAL.) JOHN VESECKY. Presidcnt. ERNEST R. DowxNI1E, Sceretary. ABERDEEN, 8. DAK... January 5. 1928. To the Congress of the United States: We take this method of advising you that our association favors legislation providing loans to bona fide cooperative farm organizations for organization work and for securing facilities for handling and storine grain and other agricultural commodities. Mr. A. P. Sprague of the Nebraska wheat pool, who is working in the interests of such legislation will explain the matter to you in detail and any support that you can give him that will lead to the enactment of such legislation will be greatly appreciated. Very truly vours. C. W. Cros. President. MINNEAPOLIS, MINN., January 3, 1928. To the Congress of the United States: We take this method of advising you that the Minnesota Wheat Growers’ Association is enthusiastically supporting the movement to get government loans for organization work and securing facilities to handle grain. Mr. A. P. Sprague who is representing the wheat pools to secure such legislation. will be glad to fully explain the whole matter to vol and we trust vou will give him vour help. (SEAL) WM. B. BosworTH, President. G. N. CoxXELL., Seerctary. AGRICULTURAL RELIEF DENVER, Coro. January 9, 1928. To the Congress of the United States: We take this method of advising you that the Colorado Wheat Growers’ Association is enthusiastically supporting the movement to get Government loans for organization work and securing facilities to handle grain, Mr. A. P. Sprague, who is representing the wheat pools to secure such legislation, will be glad to fully explain the whole matter to you. and we trust you will give him your help. [SEAL.] Joe PLUMMER, President. Harry (. STrPHENS. Secretary. Mr. Kercuam. Now, Mr. Chairman, we have with us this morning Mr. Louis Taber, master of the National Grange, who wants to continue the testimony that he gave on the opening of the hearing, and also wishes to take a little time to answer any questions members of the committee desire to ask him. Mr. Wirrtams. How many more witnesses have you? Mr. Kercuam. These to-day will round out the program. STATEMENT OF LOUIS J. TABER—Concluded Mr. Taper. Mr. Chairman and gentlemen of the committee, we feel that continued testimony is not necessary. We feel very strongly that a careful perusal of the testimony will indicate the justice of the ground upon which we stand and the purpose of our organization. I mentioned in the opening statement the method by which the grange develops its program of action, and I want at this time to read into the record the resolution of the National Grange, upon which our whole program has been founded. You remember I stated in the beginning that the grange can not take snap judgment, and that its officers can not in any manner dictate its policy. We can not have a set of resolutions handed down to the membership. It must be discussed in the subordinates, in the Pomona. in the State. and then in the National Grange. One year ago at Portland, Me., the grange went on record in favor of accepting the debenture idea of farm relief. That was discussed in the Pomona, in the subordinates and States Granges of the Nation. This year it met at Cleveland, Ohio, and had on that occasion between 9,000 and 10,000 farmers at the convention. The master’s report called attention to the export debenture idea. The executive committee called attention to it; resolutions were introduced on the floor. The national master appointed a special committee, of which Jesse Newsom, of Indiana; Mr. A. S. Goss, of Washington; Mr. Eugene Eckert, of Illinois; Mr. Harry A. Caton, of Ohio; and Mr. D. H. Agans, of New Jersey, were members. This committee held hearings every evening for a week, and finally reported this as the consensus of opinion of our organization [reading] : REPORT OF SPECIAL COMMITTEE ON FARM RELIEF The National Grange believes that the disparity in ‘the purchasing power of agricultural products can most readily and effectively be corrected by apblying princinles such as the following AGRICULTURAL RELIEF 403 1. The producers of farm products, who are unable to secure the benefits of protective tariff because they export a portion of their goods, should ve permitted to secure equivalent benefits by means of export equalization debentures, which, in effect, are export premiums resulting from waiver of tariff. 2. Import tariff duties and export debenture premiums are inseparable parts of a sound and complete program of national economic development. 3. In order to make import duties and export debentures equitably effective for easing such situations as the present agricultural depression, the executive agencies. which would carry out the will of the Congress, should be as far removed as possible from political bias and political pressure. This principle of equitable adjustment, now so urgently required by agriculture, might at some later date and under circumstances similar to those now existing in agriculture, be applied in behalf of other industries. Export debentures are import drawbacks, insiruments of tariff remission for equalizing the effects of the tariff and of other established Federal policies now contributing to agricultural depression. Export debentures would enable those portions of our staple products which must seek markets abroad to zttain and hold that to which they are equitably entitled, namely, a higher value in exchange for dutiable goods from foreign lands. This enhanced value would apply to the total production of the debenturable staples. A sound debenture policy to lift penalties from the export branches of our agriculture requires that debentures should be utilized upon individual products only during periods in which exportable surpluses are depressing the domestic market. Over-stimulation of the production for foreign sale of any debenturable commodity should be guarded against by provisions for automatic and rapid reduction of its debenture rate for the ensuing period. Manufacturers using farm products, and livestock and dairy producers and other agricultural producers, whose costs may be increased because of their use of debenturable raw materials should be compensated for these increased rusts by adjusted rates of duty and debenture. Farm relief throuzh export debentures depends nei her upon appropriations nor special taxes. By debenture method farm relief can be attained with administrative simplicity, directness and ecenomy of operation. Export debentures will not interfere with established marketing machinery and will plice no disadvantage upon those who use cooperative methods in buying or selling products. Without impairing established duties and without special advantage or disadvantage to any importing agency. export debentures would make our tariff system effective on those products which have exportable surpluses: Therefore be it Resolved, That the National Grange reaffirms its former declaration =upporting the export debenture plan as the most effective and workable farm relief plan, applied independently or in coordination with other sound remedies, and on this basis stands ready to cooperate with anv group or organization in bringing about immediate relief. JESSE NEwsoM. A. 8S. Goss. E. A. ECKERT. HARRY A. CaTtox. D. H. AGANSs. On the resolutions introduced by Brother Caton on tariff adjustment, Federal Farm Board, stabilization cooperatives and production control, the *ommit‘ee report them covered in their general report. The report was discussed by Brothers Davis, Roxburgh, Ageans, Deal, Harrison, Phillips. 8. S. Knight of California, and Professor Charles L. Stewart ot the University of Illinois, and was adopted. That is read into the record only that the foundation upon which we stand may be made clear. Mr. ANDRESEN. Mr. Taber, will you permit a question ? Mr. TABER. Certainly. Mr. AxpresEN. You represent the largest farm organization in the [United States, as I understand it ? Mr. Taper. That is correct. 404 AGRICULTURAL RELIEF Mr. Axpresen. I am sure you recognize the fact that the other gentlemen who are here sponsoring the McNary-Haugen bill also represent a large group of farmers in this country, many organizations, and what I would like to have you answer is: Have you ever been invited to sit in the councils of these other groups to consider with them farm legislation? Mr. Taser. I will answer that the National Grange issued an invitation to the bona fide dues-paying farm organizations of the Nation last February. We agreed on every item of legislation except two, and those were farm relief and the Muscle Shoals program. Mr. Crank. Just a moment right there. These other farm organizations accepted invitations to meet with you: did I understand that correctly ? Mr. Taper. Making it clear: The Grange, the American Farm Bureau Federation, and the Farmers’ Union are the three Nationwide dues-paying farm organizations. There are others that cover a lesser territory. The Committee of Twenty-two organized for a special purpose, the cotton associations organized for a special commodity; the milk associations for a special milk shed, and others of like character. These agencies were not called into conference, for the simple reason that it was thought wise to restrict the conference, if progress was to be made, entirely to organizations national in scope; and as it was stated, we had no difficulty in compromising all our differences save two. Maybe that should not be made public, but I want it to go into the record in answer to the question. in strict accordance with the fact. Mr. KincurrLoe. What two are those? Mr. Taper. Farm relief and Muscle Shoals. Mr. KixcueLoE. Do you know of any two more important questions more vital to the farmers than these? You say you did not agreed on farm relief and Muscle Shoals. so you gentlemen did not agree on very much ? Mr. Taper. We agreed on 33 different problems. Mr. KincueLoe. Oh, that may be. But I am talking about important problems. You did not agree on farm relief and Muscle Shoals. Do you know of any two bigger things in this country, so far as the prosperity of the farmer is concerned, to be solved? Mr. Taser. I think there is nothing so important as farm relief. But there are others more important than Muscle Shoals. Mr. AnpreseN. How many conferences did vou have with them on the subject of farm relief? Mr. Taper. We had a conference during two days on farm relief at that time. In November of this year we held another conference, and, again, with the same result. The Grange has never been invited to attend any of the Corn Belt or Mid-West organizations. We have never been invited to attend the meetings of the Committee of Twenty-two. But that has nothing to do with the situation. Let me pause in answering your question—and I think I can say this without any fear of contradiction : The Grange has a membership more widely distributed geographically than any other farm organization in America. We have a strong membership in New England of the dairy farmers and truck farmers. We have over 130,000 members in New York State. They held their convention last week and between 2.000 and 3.000 were present. AGRICULTURAL RELIEF 405 We have on the Pacific coast, in Mr. Goss’s State of Washington, approximately 20,000 members, and they are growing rapidly. We have a membership from Oklahoma to the Lakes; we have a membership from Maine to California; and that membership embraces every type of American agriculture. It makes it a bit more difficult for our organization to approach a question and reach a conclusion than it would be for an organization in the Corn Belt than it would be for an organization in New England or an organization on the Pacific coast. Mr. AsweLr. Mr. Taber, why is it you do not have any membership mn the South? * Mr. Taser. We are organizing now in Virginia and Kentucky. Mr. AswerLr. I mean in the real South? Mr. TaBer. Where is the real South? Mr. AswerLL. Louisiana. [Laughter.] Mr. Tagger. I will come into your community and organize a grange next summer. Mr. AsweLr. I will meet you there. Mr. Taper. It is an agreement. Mr. AswerLn. All right. Mr. Taser. I will give you the obligation and the password. Mr. ANpreseN. Mr. Taber, there is no difference in the point of view as it affects the grange member or the other farmer: their problem is the same. Mr. TaBer. Absolutely the same; in the same territory. But let me make this point clear: That is why I read the resolution. The farmer in New England that feeds grain to dairy cows and to chickens is in a different relationship than the farmer that sells his grain; he has a different viewpoint of the problems of the equalization fee and on problems of the debenture. Mr. Apkins. One is interested in cheap corn and the other is inter->sted in high-priced corn? Mr. Taser. That is not altogether true. But the man interested in cheap corn and the man interested in high corn is in this relationship: The man who is going to feed the corn wants to be certain that there is comprehended in the legislation that he indorses a program whereby as the cost of his production increases he shall be compensated either by tariff adjustments or debenture adjustments; and our program is the only program that protects that particular individual. Mr. Apkixs. Do you yield right there? Mr. TaBer. I yield; yes. Mr. Apkixs. I think one of the most ardent high-tariff men I know of in Congress is a New England dairy farmer, who has talked with me about this matter frequently, and he has not only stated but reiterated the statement that when we developed our cheap productive land in the Middle West that we put the New England farmer out of the business of raising corn, and they had to go to dairying and the raising of chickens. “Now,” he said, “We have to buy your feed now, and you do not need to think that I would stand, after you have put us out of business on the grain production, for increasing the price of grain your produce ot J which we have got to buy to feed.” He explicitly stated that. Now, in other words, that is one of our great difficulties: One part 2f the country is the customer for the products crown in another 406 - AGRICULTURAL RELIEF part of the country; that is why it makes this such a hard problem to solve. We are all selfish, and we want to get the best of it. We ought to be frank about that. Mr. Taper. May I go a step further. Mr. Adkins? Mr. ApkiNs. Yes. Mr. Taper. I think you will find a large number of the New England, New York, Ohio, Wisconsin, and western dairymen that may be purchasers of feed are coming to realize the justice of a program that protects'the grain grower. Mr. Apkrns. That is what we are making an effort to accomplish. Mr. Taper. I find that we are selling carloads of Jersey cattle in our community to Nebraska, to Louisiana, to North Carolina, and other States; that people who are growing cotton and growing wheat are going into the dairy business. Now, it is nice for us to be able to sell our young stock, but we do not want too many men milking cows. Mr. Apxins. Right at that point: Our people do not like to milk cows; we would rather grow corn and grain and feed it to hogs and cattle. But they are preparing to have dairy cows just as soon as they can find the money with which to buy them and a little left over to pay the grocery bill. Mr. KincueLoE. 1 want to ask you something along the line of the questions asked by Mr. Anderson. I have been thinking along this line ever since this hearing started. You say the three big national organizations are the Grange, the American Farm Bureau Federation, and the Farmers’ Union, and that you have tried to get together and you can not. Yet the biggest thing that confronts the American agriculture is farm relief. I was just wondering when the poor farmer is going to get any relief when you leaders disagree on the fundamentals. Mr. Taser. I want to tell you, sir, I have laid awake many a night thinking on that same problem. Mr. Kincueroe. The individual farmer will not be helped very much on how much sleep you and I may lose. But I was wondering when the individual farmer is going to get any real benefit. Mr. Taser. He is going to get real benefits just as soon as the leaders of farm organizations forget politics, forget selfishness. Mr. KincurrLog. I think you are right about that, too. Mr. Tagger. I am sure I am obligated and ready to go as far as any man in the whole group. Mr. KincHELOE. You are the leader of one of those organizations? Mr. J BER. I am. r. KincuerLoe. Do you forget your politics? Mr. Taper. I have tried to. se Mr. KiNncueLoE. You think then the sinners are the other fellows? Mr. TABER. I do not say that. I am readv to accept mv share of the responsibility. Mr. KixcueLoE. Have you done it? I am trying to get you to amplify on that a little bit, and I heartily agree with you that the farmer will get some relief as soon as you leaders quit politics and petty jealousies. That is the substance of what you say. Mr. Crarke. And thinks in terms of the farmer instead of their organization. AGRICULTURAL RELIEF 107 Mr. KincHiLoE. And thinks in terms of the farmer instead of his organization. That is what I was trying to get, and I would like to get you to amplify that. Mr. Taser. I do not propose to criticize either the judgment or the patriotism of any organization or individual. oo Mr. KixcHeLoOE. Is there any politics in your organization? Mr. Taser. No. Mr. KincueLok. Is there any selfishness in your organization? Mr. Taper. We are human. Mr. KixcHELOE. You say there is no politics in it? Mr. Taser. I say that. Mr. Apkixs. No economic politics Did you ever know of an organization that elects officers—excuse me. Mr. KixcaeLok. I think you understand. I do not mean politics in the way of who shall be the manager or president of your Grange and who shall hold the offices in your organization. I am not talking about that. I am talking about your organization as a whole, whether you put any politics in any of your activities, economically or otherwise, and 1 am not asking that in the way of criticism. What I am asking and what I am trying to think of is the time when the individual farmer is going to get what he is entitled to and what he is thinking about the proposition. Mr. Taser. We try to arrive at our conclusions, as I said in the beginning, without any consideration of who is going to be President or who 1s going to come back to Congress, Mr. Kixcurroe. I am not talking about that. Mr. TaBer. But in terms of the greatest cood to the greatest number of our membership. Mr. KixcHELOE. Is it a fact that there is a bad feeling existing between the big farm organizations of this country, and especially nmong 1ts leaders? Mr. TaBer. There is no ho’ Mr. KixcueLoe. Oh, wel! feeling among yourselves; 1s Mr. Taser. Yes. Mr. KiNcHELOE. I' mean .nere is not any hostility or jealousy or any bad feeling .>ctweei. your organization and any other farm organization in the United states? Mr. Taser. Well— Mr. KixcHELOE. Well, you can answer that. Mr. TaBer. I think not. Mr. ITiNcreroE. Well, I will tell you what I have been reliably ‘nformed. I understand that between your organization and the Farm Bureau there is such pealousy and animosity existing in the State of Illinois that you practically hamstrung the president of the Illinois University to such an extent—I am not saying who is to blame—that he hesitated for awhile on the question whether Doctor Stewart was going to come down here and testify and speak his own sentiments on the farm proposition for fear that that university would be boycotted by some organization. Have you heard anything about that ? Mr. Taner. I do not live in Illinois. I have heard some rumors. R6160—28-—SER E, PT 5——R 408 AGRICULTURAL RELIEF Mr. KincHELOE. You have been in Washington a good while here lately ? Mr. Taser. Only a few days. Mr. Kincueros. You can tell whether you have heard that or not. Mr. Terr. 1 have heard that there was jealousy in Illinois. Mr. Kincueror. And you heard there was some question whether Doctor Stewart was going to be permitted to come down because somebody was intimidating the president of the Illinois University. Mr. Taser. I had a telegram from Doctor Stewart saying certain conditions were in the way of his coming. Mr. Kincaeros. I never asked you what Doctor Stewart told you. I am asking if you heard that as a fact. Mr. Taser. I have heard those rumors: yes. Mr KixcmeLor. I was just wondering how the individual farmers of the country were going to get relief when the leaders of the various organizations can not get together themselves, and not only can not get together, but that there was such acerbity existing between them, that even a great university in a State is intimidated because of that acerbity existing between your organization and some other organization in that State. Do you think that the union organizations of this country would have gotten very far on the question of immigration if they had been divided like you leaders of the farm organizations have been? Mr. Taser. I presume you are right. Mr. KincueLoE. Do you think that the protected interests in this country would have gotten very far when asking protection on their products in the Fordney-McCumber tariff bill if they had been divided like you leaders are? Mr. Taper. They usually work together. Mr. KincurLok. That is not answering my question. Do you think they would have gotten what they wanted if they had come up here and cut each other’s throats like you farm leaders have been doing all the years? I do not mean literally so; I mean differing on the remedy for the farmer. Do you think that if the protected interests of this country had come in that attitude they would have gotten legislation Mr. Taser. They most certainly would not. But you are overlooking this question, that Charley Barrett, for whom I have a profound regard, and Sam Thompson and myself find ourselves bound by resolution such as I have just read. Mr. Kixourtoe. I am not talking about just you three; I am talkin shout le der, In on, regan nd al ge ¢ g untry—that is broad enough. think that the railroad reat would have gotten the er fn they did under the Adamson law and every other piece of leg-Mr. Fam, %y had come here divided like you farm leaders have? 1. KincaeLor. Then, why d i 3 i hope of relief fr the condition of the think Gere Is going to be any r. Taser. The hope is much greater th i i 2 Sn ten to get together. I find it ety ahore. Tre. at the No. oO, he . - iv args Tet Bad tnymenly, organizations to seek to find a 0 Issue Ais Invkiation to other farm AGRICULTURAL RELIEF 109 Mr. Kincueroe. Well, you say you have had two meetings this last vear. and you have not got together on the great big problem of farm relief at all. I was wondering how long the American farmer would last while you are whereasing and resolving and trying to get together and come here and compromise on a concrete program to lo help him? Do you have any idea about that? Mr. Taper. I will not take verv long, if you will just pass the export debenture idea. ~ Mr. Kixcurroe. And the American Farm Bureau Federation people say it will not take that long if you will pass the McNary-Haugen bill. too. That is exactly what I am talking about. And then you come down here and because you all differ you say, “ We are zoing to do something on this or nothing "—you have not put it quite so strong this time, but other organizations have. It looks to ne like you ought to get together instead of saving, “ We are going to take this or nothing.” Mr. Taper. You will have to talk to somebody alse about that. I have not said that. I have said the grange is ready to meet any other program in a fair spirit of comproinise. Mr. Kixcueroe. But you do say these organizations have had two meetings this year trying to get together on propositions and you have had the wonderful success of getting together on everything else except farm relief. Mr. Crarxe. Can we not come nearer home than the University of Illinois? I heard myself during the early hearings right here at that end of the table by men representing farm organizations a threat made that he would * nail the political skin of a member of this committee ” if he did not get behind a certain proposition. Mr. Kincueroe. I want to say this, Mr. Taber—I am not asking this is an offensive way—but I think that the people and the country and the farmer at home who is making a living on the farm ought to know that their farm leaders are in Washington and they can not get together; and that they have had two meetings this year and they can not get together on farm relief. I think that the individual farmers of America ought to know that; and that is the reason I am asking this, not in an offensive way. Mr. Taser. Mr. Kincheloe, I do not think that you or the members of the committee can wash your hands of all responsibility because the leaders of the farm organizations have failed. Mr. KINCHELOE. Answering you as a member of the committee and speaking individually, I am not washing my hands of any responsibility. If you will tell me of any responsibility I have dodged I will be glad to have you do so. Mr. Taper. You are not a dodger, we will all admit that. Mr. KixcueLoe. Not on your life. I am not going to dodge when [ think the farmers’ interests are at stake. Mr. AswerL. Who has tried to dodge responsibility ? Mr. ANpreskN. Mr. Taber started to answer the question and I think he ought to have an opportunity to conclude. The Cuairyax. Would you prefer to answer the question? Mr. KixcarLok. I will permit you to answer that question. Mr. Taper. The voint I want to make is this: I am not here to criticize any other farm organization leader. I am not criticizing the Farm Bureau Federation: I am not criticizing the Farmers’ 110 AGRICULTURAL RELIEF Union. I am here representing the grange, and I am stating that the grange here and now Is willing to meet on any equitable proposition of compromise. But that does not mean signing on the dotted line. Mr. KincuELoE. You mean you are ready to meet them and agree on any farm program that you, the grange. agrees on? Mr. Taper. No, sir. Mr. KincurLoe. You have made to efforts this year. and did not agree. “Mr. Taper. I am not going to be put in the position of criticizing or of stating the position of anybody except myself. Mr. Kincurrog. Listen, I am not asking you to put yourself in the attitude of criticizing your people or in an offensive way. Mr. Taper. I realize that. Mr. KincurLor. But I do not think you should go out here and talk about this organization, saying that Congress ought to do this and that and the other thing. I think that the individual American farmer, so far as the press is concerned, ought to know that the farm leaders of the three biggest farm organizations in America, as you admit, are here with their representatives and they can not get together at all. That is what I want the individual American farmer to know. ‘That is the reason I asked you that. Excuse me, Mr. Andresen; I thought you were through a while ago. Mr. AnprEsEN. I want to compliment you and your conferees on (he attitude you have taken toward this committee. We recognize our responsibility in this committee, and we are willing to assume it; and we feel very keenly—at least I do-—the statements that you and your conferees have made, that you fear the committee has a responsibility and that you want to leave something to our judgment. We do not have to sign on the dotted line. There are about 30 or 40 farm organizations represented in a group of conferees down here, including the American Farm Bureau Federation, the American Council of Agriculture, the Corn Belt Committee, the Farmers Union, and 25 or 30 others. They have a oroup of conferees here who are considering the farm problem. What I would like to know, is, have these conferees ever invited vour organization to participate in the conference? Mz. TaBer. They have not. “Mr. AxpreseN. Do you not think that if you received an invitation, representing the organization that you do, to deliberate or participate in proceedings that you would get together just the same 7 Inanhors of this committee have to get together on this proposition ? Myr. Taser. We could if all would be fair. . Mr. AnpreseN. What is the main difficulty? What are the main 1ssues on this farm question that you can not agree on without having accepted an invitation to attend or receive one? Mr. Tager. The main difficulty is twofold : First, the fact that the grange membership is more national and the fact that many of our members ane > as indicated, purchasers of products, the price of ght to be enhanced. There has to be offered to that gnoup more attractive assurance that they are not penalizing themselves for the advantage of some other group. That is the first AGRICULTURAL RELIEF 411 difficulty ; and the second difficulty—and I am not going to hesitate a moment in stating it—the second difficulty is politics and outside influences. That is a serious thing to say, and I am saying it deliberately. To me it is the saddest thing we have faced in agriculture, that in this crisis there was not a willingness to surrender the principles not vital to get together on principles that are essential. But in view of all the facts, in view of two offers of our organization, we stand where we commenced in this hearing, suggesting a program that has in it the elements of compromise and certainty to benefit the farmer. There is another thing you must remember: There is no lure to the grange for $10,000 jobs; there is no lure to our organization for a program that sets up expensive machinery. It has no lure whatever. There is only one thing we are concerned about, and that is money in the farmers’ pocket, by the simplest method, that does not do violence to a 61-year program of an organization that opposes any superimposed dictatorial authority on top of agriculture. Mr. AxprEsEN. Mr. Taber, is your organization willing during the course of the next week to try to get together with these other S1ganitings to see if you can not unite on a bill before this committee ¢ Mr. Taser. We are ready now. We have been ready for a year. Mr. AxpreseN. Well, will you make an effort during the course of the next week to get together? Mr. Taser. I have made that invitation. If it will do this committee any good, I will reissue it. But the point I am trying to emphasize is this: If that invitation is to come in and sign on the dotted line. to accept the board, the equalization provision of the bill and all, there is no use to issue that invitation, expecting an upstanding organization 60 years old, with almost a million dues-paying members to efface their self-respect. I think it is asking too much. Mr. Menges. A little while ago, Mr. Taber—if I may ask a question—Mr. Adkins stated’ that a New England farmer and himself had been discussing these agricultural problems, and the New England farmer stated. if I repeat you correctly, that vou do not need to think I will vote for a bill that will increase the stuff I feed to my dairy cows. Am I right? Mr. Apkins. Yes. Mr. Mexces. I am an eastern man. and we recognize that if that western farmer can produce the grain he feeds into his dairy cows cheaper than we can, then he can feed his dairy cows cheaper than we can. I say that if he can produce lis feed cheaper than we and feed his dairy cows cheaper than we can, if we persist in keeping down the prices of his product by our votes in the East. it will not be long until he will be up against us as a dairyman and he will ship his dairy products cheaper into our market than we can produce them. [s our selfishness going to help us in this thing? I want to say to vou that my people are ready now to come in on a program eliminating that selfishness. Mr. Taper. I think that is true of a great many sections. Mr. Menges. I would like to say to you, Mr. Taber, that I am a cranger, and I am willing to abide by a program that will eliminate the damnable business that we have been at, and that you fellows have been at! That is pretty plain. is it not ? 412 AGRICULTURAL RELIEF Mr. Taper. That ought to be plain enough. Mr. MencEs. 1 think so. Mr. Taper. I think that it is. Mr. Apkrns. Do you yield for a question? Mr. Taper. I yield for a question. Mr. Apxixs. I do not think there is any member of this committee but who is trying to use his best efforts and thought in trying to solve the farm problem, and I feel I am no exception, because I have talked to all of them time and over again, and I know every man here is sincerely trying to work out the program. But he does not want to carry a strong organization politically on his back in every campaign, to be frank about it, in his district, because he knows the influence it has in the farm vote. It is just as well to be practical about that. But when we met here for the second session last Congress, of course, every member of the committee, especially, came down here with the farm relief thought on his mind. wondering if we could get something done the second session; and myself along with the rest came down here two weeks ahead of time. 1 took the matter up with one whom I consider a very prominent friend of the farmer in the United States Senate, as we all appreciated that we had to have a bill that could pass Congress first, and then one that probably had a chance of being signed by the resident, that if we could not pass a bill bv both Houses we had no chance. I took it up with Senator Capper—I do not think anybody questions his sincerity and influence in the United States Senate—and outlined the facts to him that we had tried to sell the equalization fee idea to the country twice, and failed, and that I was not married to anybody's else’s particular program, because they were experiments anyhow, and I thought we had about as well try one as the other, and then amend. I asked him what he thought of trying to put this idea through instead of the equalization fee bill. He said “ I am not married to anybody else’s program,” but he said, © The fellows over here are not for this program; they are for the other scheme.” I am sensible enough to know, and 1 think every other member is, that it is useless for us to pass a bill that the Senate is not for; that we have got to work together. Then we should naturally, as far as I was individually concerned, take up the matter in the committee here. We took up the other bill, and passed it, and the Senate passed it. The best information I have been able to gather 1s that the Senate is of the same mind vet. and want to trv this other experiment. Mr. AsweLL. What other experiment ? Mr. Apxixs. ‘Well, the Haugen bill. I am speaking of the two, the debenture bill and the equalization fee bill. out I understand this bill here, Mr. Taber, I think you and I talked > Ig he train coming over about it. I think everybody has agreed on the board. We could try a debenture, and if we failed we oon Cry, Something Cle. ; I take it Jou have about the same maother bill, have on nots r the debenture that you have on the wi Tanmm. Undyr cir Lill it provides a minimum of simplicity AGRICULTURAL RELIEF 113 Mr. Apkins. Well, I say, you have the board? Mr. TaBer. We have the nonsalaried ex officio officers. The issuance of the debentures is just a simple proposition. Mr. Apxkins. I understand about the debenture. Have you ever thought of this—and that is an objection I found raised when I was conferring with different people before, everybody was for the debenture as far as farm organizations is concerned. Here was the situation: The exporting, as you know, is all done on a very close margin, because of competition; that unless the farmers organized an export company themselves there is a chance for very little of this debenture to get back. Suppose you were an exporter and I was an importer. If I was an importer I would not bother with debentures, unless you made it an object; I would just pay the import tariff and ¢o on. So that the colusion that might be entered into and would be, no doubt, since competition is pretty severe, that a good part of these debentures would be divided between the exporter and the importer and very little of it seep back so that it would become necessary, in order for the farmer to get the full benefit of your debenture, to organize a farmers’ export corporation. Have you thought of that? Mr. Taner. We have thought of that, Mr. Adkins. I am not sure whether you are asking a question or making a speech. Mr. Apkixs. I only want to present my idea so that you may understand. If you can provide it in better form for the record, I will be glad for you to do that. Mr. Taser. We have given that matter serious consideration, and Mv. Jones in his bill has given a suggestion. Experience indicates that your fears would be groundless. Mr. Apkixs. I would like him to answer that. Mr. Taser. We have given very careful consideration as to whether there was need for an export corporation to see that the fee gets back to the farmer. And the experience in other countries and the exporting experience in this country indicates that there is not the necessity for such a corporation that the farmer would get substantially the full rate of the fee just the same as he would—— Mr. Apxixs. The reason I asked that question is that I asked Doctor Stewart if he had any figures from any economist on what it would probably cost on the exports during the last year. what it would cost the Government and what the benefit to the farmer would be; and he sent me the figures from a man by the name of S. S. Knight—and I presume good authority or Doctor Stewart would not have sent them to me; and he took six of our leading commodities for 10 months of 1927, and I incorporated the figures in my remarks before the House; and he showed that there would be an increase of value to the farmer of $136,000,000 on wheat, for instance. But I notice from his figures that there would be an increase of $168,-000,000, and that would be 21 cents a bushel. That is half of the tariff —21 cents a bushel on the entire 800,000,000 bushels of wheat that he estimates was in the country. He goes on and states that there would be a benefit to society of $312,000,000. That would be going on the theory that the farmer would get that entire 21 cents, and going on the theory that there would be, perhaps it is fair to state, around a hundred million bushels that would be used for seed and feed on the farm. which would be quite an item taken out, 414 AGRICULTURAL RELIEF and it is hardly to be presumed that the importer out of the goodness of his heart would bother with a little matter of bookkeeping in that way, that is, bother with these debentures, without charging some brokerage for the trouble he would be at. In other words, the figures used in presenting these matters are misleading so far as the farmer goes on all commodities. as to the benefit. Mr. Taser. I will touch that a little later in pointing out the relation of benefits. But it is just as fair to assume that the benefits would accrue in accordance with the equilization fee or any other set of figures. Mr. Apkixs. True, you have all this to contend with, and probably will have to amend later to meet the faults we find in the bill when we get to the practical operating of it. Mr. Taper. No legislation is perfect. The suggestion that we make simply is that if these fears materialize their correction is a matter of simple amendment. Mr. Apkrns. In all probabilities we will have to build up the machinery to protect ourselves against these various things as they come up. Mr. Aswerr. Mr. Taber, how would this do as a compromise— everybody seems to be anxious about it: Have the debenture plan limited to cotton at 5 cents a pound ? Mr. Taper. Why don’t you make it 10 cents a pound? Mr. AswerL. Well, now, let me ask my question. Let it be at 5 cents a pound on cotton, include tobacco and rice; and then let the chairman and his associates at the other end of the table arrange for an equalization fee on corn and things of that kind. How would that work? That would be a compromise. Mr. Taser. You will have to suggest that to the chairman, Mr. AsweLrL. Would not that be a good compromise? Mr. Taper. Not a very good compromise, I fear. Mr. AswerL. Why not? Then everybody would be happy. Mr. Haugen wants to pay a fee and everybody up there wants to pay a fee, and we do not. How about that? Mr. Taper. That would not be a very good compromise. A good compromise would be to try the debenture fee bill in its simplicity on the 1928 crop, and then if it did not work the next Congress would have time to get a full equalization fee program tested by the courts ready for the 1932 crop. That would be a compromise that would put money in the farmers pocket. solve the problem, and give us a chance to get ahead. Mr. Chairman, I would like to put in the record—I do not care to read it unless there is a request to read it—a point was raised in our hearing the other day that our penalty provision was not as drastic as could be desired. ‘And after going over the matter with Congressman Ketcham and others, we have suggested an amendment from pages 10 and 11 and 13, with a very much more drastic penalty provision and a much fairer penalty provision on all crops. : You remember that we commenced our reductions with the idea that there was no reduction unless we had a 20 per cent increase. It mas evident in the hearing on cotton that that would be a burden on the Treasury. A little consideration broucht us to the fact that we AGRICULTURAL RELIEF 415 should begin wih a 5 per cent penalty; and further that it should be based on a two-year basis. If the surplus is up in 1929 the board can give its warning for the production in 1930, and we feel that this amendment would give the bill the protection to which every one interested 1n sound legislation insists upon, namely, that there should be some penalty for over production. If there is no objection I would like to file this amendment, and to have it in the record, so that is will indicate that our whole purpose is ligislation; that while it benefits agriculture, at the same time it protects the public Treasnry against undue simulation or overproduction . (The amendments proposed by Mr. Taber are as follows:) SUGGESTED AMENDMENT FOR AUTOMATIC REDUCTION OF RATE OF DEBENTURE TO PREVENT OVERPRODUCTION Strike out line 4, page 11, to line 10, page 13, and insert in lieu thereof: “(d) In order to prevent undue stimulation in the production of any lebenturable agricultural commodity it is hereby provided that— “{1) The board shall compute the total production of debenturable livestock and products thereof and the acreage of other debenturable commodities for each of the seven preceding years, computing each commodity separately, and shall show by what percentage the average of such- production or acreage for ‘he last two preceding years exceeds or falls short of the average like production or acreage for the seventh to third preceding vears. inclusive, and shall report rhe same to the President; and that (2) Whenever the President finds from the report of the board, or from any other source, that the average annual production of debenturable livestock or products thereof, or the average annual acreage of any other debenturable agricultural commodity for the last two preceding years has exceeded the average annual production or acreage of such debenturable agricultural commodity for the seventh to third preceding years, inclusive, he shall by proclamation prescribe that the export debenture rate for the commodity or debenturable products thereof shall be reduced for the ensuing year by the percentage fixed in subdivision (a). Such reductions shall become effective on the date fixed in such proclamation, not less than sixty days from the date of the issuance thereof, and shall remain in effect throughout the crop year. At the end of such Crop year the export debenture rates for such debenturable agricultural commodity and the debenturable products of such commodity which were in effect immediately prior to the commencement of such crop year, shall become effective again unless the President under the provisions of this act prescribes a change in such rates. The term “crop year,” as used in this subdivision, means a *welve months’ period beginning at a time designated by the President. “(e) Reductions in debenture rates under subdivision (d) of this section <hall be made in accordance with the following percentages: “(1) For a computed increase in production or acreage of less than 5 per centum, there shall be no reduction in rate of export debenture. “(2) For a computed increase in production or acreage of 5 per centum but less than 15 per centum, there shall be a reduction of 23 per centum in the rate of export debenture. “(3) For a computed increase in production or acreage of 15 per centum but less than 25 per centum, there shall be a reduction of 50 per centum in the rate of export debenture. “(4) For a computed increase in producticn or acreage of 23 per centum but less than 50 per centum. there shall be a reduction of 73 per centum in the rate of export debenture. “(5) For a computed increase in production or acreage of 50 per centum or more, there shall be a reduction of 99 per centum in the rate of export lebenture. “(f) In computing reductions in export debenture rates fractions of a cent less than one-eighth shall not be used. “(g) Investigations to assist the President in determining, under subdivisions (a), (b), (e), and (d) of this section, the necessity for increases or reductions in export debenture rates shall be made by the board under regulations prescribed by it. No proclamation under anv such subdivision shall be issued by 416: AGRICULTURAL RELIEF the President until such an investigation has been made by the board and a report thereof submitted by the board to the President. In the conduct of any such investigation the board shall give reasonable public notice of its hearings and reasonable opportunity to parties interested to be present and to be heard. Mr. Kercaam. Have you finished your statement ? Mr. Taser. I have finished my statement as far as I care to go. Mr. Kercaam. There are just two or three things by way of summarizing your argument that I would lke to put to you in the form of questions. Im the first place, just to get the picture of the situation that agriculture is in, I presume you have made a study of the indexes that are furnished by the Department of Labor as indicating the trend of prices in agriculture and all other commodities, and several other groups? Mr. Taser. Yes. Mr. Kercaam. You are familiar, for instance, with the fact that the labor index is at present 228, that the transportation index is 157, and that the all-commodity index is 152, while the index of farm commodities at the farm 1s 138. Do you subscribe in that connection to the general opinion that that variation is attributable to a degree—quite a large degree—to legislative procedure—are there certain specific acts of Congress that, in other words, may have contributed to the making of the labor index what it is instead of what it would be had the laws previous to these particular enactments been enforced ? Mr. Taser. We fully subscribe to the notion that the commodity and labor price index, as given by the Department of Labor reflects a true picture of our difficulty, and reflects also that that difficulty has been contributed to in no small part by the actions of Congress itself. and by legislative enactment. Mr. Kercaam. Do you share in the opinion that there was any malice or any intention on the part of Congress or in the thought of anyone that the results as indicated in these indexes would follow as a result of that action? Do you think it was injuriously directed toward the farmer? Mr. Taser. We have never felt that Congress, business, or labor acted with a desire to injure agriculture. We have felt that their superior organization, their superior mobility, made it possible for them to secure benefits that did not accrue to other groups. Mr. Kercuam. Do you subscribe to the idea that as a result of these indexes which, of course, indicate higher purchasing power that in general that contributes to national prosperity; in other words, the fact is you have no desire to see these men particularly crippled in the advantages that they enjoy? Mr. Taser. Our policy has always been to build up agriculture and not to seek to interfere with wages or standards of other groups. _ Mr. Kercaam. Then, if I understand the purpose of your appear-Ing here in the advocacy of this bill it is that you believe that this bill will best take care of agriculture and place it, as reflected in the indexes, on a parallel with the other groups with which reference has been made Ir. Taser. Our whole purpose and our only purpose in appearin here and in advocating this legislation is the honest belief. founded on our best judgment and our experience, both in America and elsewhere, that this legislation more certainly, with less expense and less AGRICULTURAL RELIEF 417 delay, would do the very thing that you have indicated—Ilift agriculture on a plane with labor, with transportation, with finance, and with industry; and we think, further, that it does it in harmony w.th precedents and in accordance with the established policy of the Govarnment better than any other legislation proposed. Mr. KercaaMm. One further question, Mr. Taber, and I think I am through: Supposing that this bill were passed by the Congress and approved by the President and were put into effect, and that following that agriculture did take its place; and then add the supposition that our population changes will keep on with their draft towards the cities and naturally, possibly, the need for this special kind of legislation would gradually disappear—what is the effect of this particular bill on that kind of a situation? Mr. Taser. This bill 1s self-eliminating. Mr. Kercuaay. “Self-eliminating ¥ describes the situation, and still does not give agriculture a supreme advantage over others; but simply puts it into the picture, so that we can march down the road side by side, which is all any farmer asks. Mr. Taper. That is correct; it does exactly that thing. As we approach the import basis on any commodity, the export debenture automatically, without any expense, without any difficulty, eliminates itcelf, and the system that is then prevailing for the protection of other groups will protect agriculture. Mr. Kercuan. I said that was the last question I had, but here is one other: You have stated that you preferred the form of organization set up in the bill—without a board and without what is referred to as the revolving fund or the stabilizing features of the other bill. In the spirit you manifested, which I want to compliment, you have said that if it be the judgment of this committee that these added features, such as board and loan features, ought to be incorporated, you would be glad to go along and would give that sort of an arrangement your support, although vou preferred the provisions of this bill; is that correct? Mr. TaBer. That is a correct statement. Our attitude would be simply this: We favor the simple non-salaried, naked proposition because of the reasons we have indicated. But we realize, as we have said in the very beginning, the superior judginent of this committee—your long experience, your seven-years’ study of a problem— and 1f in your judgment you felt that a salaried board was necessary, 1f In your superior judgment you felt a revolving fund was necessary, or if veu in your superior judgment felt an export corporation was necessary, we naturally would acquiesce in your superior judgment, believing that your study and your experience brought you to this conclusion with the good of agriculture in your mind— naturally we would go most enthusiastically along with the program in spite of the fact it was not just what we asked for or just what we wanted, Mr. KercHay. You think that is a fair statement; you think that lescribes your sincere desire to compromise? Mr. Tarer. We think so. Mr. Kercuay. If I got your idea of compromise, it is that you are willing to go along the road, but you do not want to go so far as to compromise in the way of the two carpets, where the husband 418 AGRICULTURAL RELIEF brought two carpets home and told the wife they would discuss colors, one red and the other green. He preferred red, she the green. The green was preferred by the wife, and the husband said we ** compromise upon the green.” Is that the idea? Mr. Taper. That is not a compromise. When anybody says at any particular time that does not include all the dots on the i’s and all crosses on the t's is abject surrender and is not stating just what he believes. . I believe and you believe that a compromise means that two groups of people earnestly striving for the common good, realizing that they can not have exactly what they want, accept a common ground between the different positions that have been set up. And that is our notion of a compromise. We have two methods proposed: One is a large-salaried board, with ramifications of different official connection; the other is a nonsalaried board and an automatic provision. There might be a compromise somewhere between those two positions. The other is a position of using the machinery established by the Government for a century and a quarter, for the protection of American capital and American labor and American industry, by protecting the American market to the American producer, and its completing half is what we know as the export debenture idea. That is one side. And across over here [illustrating] is the theory of excise taxes for the equalization of costs administration; and between these two positions there may be some position, and I believe there is a position of compromise; and that position of compromise ought to be such that it comprehends the good of American agriculture, and not the good of any particular locality, section, group. organization or unit. Mr. Kercuam. Right there, at that point, Mr. Taber: The theory of the protective tariff is to equalize the cost of production here and abroad, so that we shall not force our laboring men to come into competition with the lower price and possibly lower scale of labor of other communities. My understanding of your advocacy of this particular proposition is, that you want to apply the same situation with reference to our American farmers, with regard to the products they sell abroad. You do not want to bring them into world competition in the growth of the things that they have to export in agricultural commodities; is that correct ? Mr. Taser. You are exactly correct. We should provide in the bill the same adjustments of the difference in cost of production at home and abroad, for the raising or lowering of debenture rate. that we provide in the flexible provision of the tariff. Mr. Kerceam. I think that is all, Mr. Chairman. The Cuaamrrmax. 1 would like to ask you a few questions. 1 would first like to ask you if you would favor amendments that would strengthen the bill ? Mr. TaBer. You are correct. The Crairmax. Of course, we might differ as to what might a it. That would be a matter of judgment. Would you fre 2 Jipangion of policy, to preserve advantageous domestic ets tor agricultural commodities; would you be willing to incorporate that in your declaration of policy ? AGRICULTURAL RELIEF 119 Mr. Taser. State it again, please; I do not understand you. The CHARMAN. To preserve advantageous domestic markets for agricultural commodities. Are vou for that? Mr. Taser. Yes. The CrairmMax. You are for that. Are you also in favor of the policy to minimize speculation and waste In marketing such commodities? Mr. Taper. Again, that is language that expresses—— The Cuairmax. Are you for or against +? Would you be in tavor of incorporating that ‘n the bill? I think that is one of the most important provisions of the measure, and I would like to have vour idea on it. Mr. Taper. In the declaration of policy, that would not be objectionable. The Cumarmax. Now, then, would you be in favor of providing for that the power of the board, shall be exercised in such manner, and the marketing agreements entered into by the board during any marketing period, that shall be upon such terms as will in the judgment of the board carry out the policy declared. Shall the board carry out the policy declared ? Mr. Taser. That declaration would require some amendment to the bill. It requires marketing provisions that we do not set up in our bill. It is sound as policy, if your legislation contemplates it. Our legislation contemplates the elimination of inequality and not the building of machinery. The Cmarrvmax. It is simply this, shall the board carry out the policy as declared in the declaration of policy—use your own wording—the question is, shall the board carry out the policy declared. Are vou for that? Mr. Taser. There is no objection to having a statement in the declaration of policy that the board shall carrv out the policy declared. The Cuatrmax. Are you in favor of the board carrying out the declaration of policy? Mr. TaBer. Yes. I'he Crarman. The board is there for some purpose, and I assume for the purpose to carry out the policy declared by Congress— shall the board carry out the policy as declared in the declaration of policy! Mr. Taper. Certainly, the board should be compelled to carry out the declaration. "iy CrarMaN. You are not in favor of incorporating that in the 111 Mr. Taser. No: I would not be in favor of incorporating that parfeular statement in the bill without rewriting the bill. The Craikmax. What is the use of having a policy unless it be carried out. Why declare in favor of a certain volicy unless it shall be carried out? ~ Mr. Tarer. You will note, if you will read our declaration of polley, that it sets out the purposes of our bill. A declaration of policy must set out the things that the machinery of the bill provides for. The Cuatryan. The debenture bill declaration of policy is simply to pav debentures? 420° AGRICULTURAL RELIEF Mr. Taper. No; I ask you to reread it. The CuarmMaN. Now, are vou for the board carrying out the declared policy. Mr. Taper. That requires machinery that we do not set up. The CraarMaN. The purpose of my bill is to eliminate speculation and waste. Do you want speculation and waste to go on? Mr. Taper. We do not. The Crmarrman. Then, why not so declare? : Mr. Taper. To do many things would require many types of machinery. The Criarrman. It does not require additional machinery, just a declaration of policy and direction to carry out the policy. One bill is simply te, pay the debenture: that is to do only one thing ¢ Mr. TABER. Yes. The CrarrMaN. The board would do that, if you specify that it chould be done. You have the board. Is the payment of the subsidy all that you are in favor of? Are you for speculation and waste or are you against it? Shall we declare against it? Mr. Taper. We are, of course, against unnecessary speculation. unnecessary costs of distribution, and waste. The CrarrmaN. Would you be in favor of or against it? Mr. Taner. I would not be in favor of declaring against it in a bill that was not seeking to remedy it. You and I read different bills. The CrarrMaN. I am reading your bill, but I am asking you if vou are willing to have it incorporated in your hill. Are vou against thic waste and speculation? Mr. Taper. Of course, we are against waste. The CrairMAN. Then. why not set it up in the declaration of policy ? Mr. Taper. Because it is not wise to state something in declaration 3 policy that you do not pronose to correct or remedy in your egislation. ~The CuarmaN. But in my bill it proposes to remedy the situation. It is our intention to do away with speculation and waste. and shall the board be bound by the declaration of policy? Mr. Taser. Yes, but you are seeking to discuss—— The Cuarmax. I am discussing farm relief. Are you for it? Mr. Tarver. We are for farm relief that will relieve. But we are for doing it one step at a time. The Crmarman. 1 believe you to be one of the most intelligent witnesses that has appeared before this committee. I think “you understand the proposition, and we need not go into details about the speculation. We have in the past endeavored to overcome that, but 1t has not worked out as we expected. The law is one thing and the administration of it is another, and I think if we now write a pill we should make it plain just what we expect from this board, cp EN aly) Lie be the policy of Congress to do certain things Jeclared. state that the board shall carrv out the policy Mr. Taper. If you intend—— he r J ive 18 the chairman trying to bring out that to carry out os (amps, J ust to make it clear that the board shall carry out AGRICULTURAL RELIEF 121 Mr. Joxes. Including the machinery for carrying out the policy—— Mr. Taper. I want to say, sir, if it will give the slightest bit of strength to change the chairman’s declaration of policy for ours, and it means the same thing, we have no pride of authorship. The CmarrmaN. Are you for those very things? If you are for them, I would like to know. And why you left them out. I presume there is some reason for that ? Mr. Taser. The reason is we could not include all that is good in our policy. The CHARMAN, It is the all-important part, and there is where we have our trouble over that one thing. It will interfere with the operations of some gentlemen in certain cities in certain parts of the country; and I think if the provisions referred to were eliminated from my bill we would have no trouble about the equalization fee. But those two little sentences have made us all the trouble; and, to be perfectly frank, the question is: Shall the farmers control the marketing of agricultural commodities? Shall they market them in the way that will give them the benefits of laws already established? You propose to give them a subsidy. The farmers say, “ No; we will pay our own bills and make money by doing so.” Are you for the elimination of speculation and waste ? Mr. Taser. We are for the elimination of speculation and waste whenever the machinery can be provided to do it. The Cuairman. Oh, well. we have the machinery. We set it up. Mr. Taser. I doubt, Mr. Chairman, that your machinery will do it. The Cuamryrax. The machinery is there. It is just a question, are you for or against speculation and waste? If you are not for it I assume you are against it. You understand the language in the bill—the language in your own bill. Mr. Taper. I understand the bill, and we submit again we will be delighted to have the chairman rewrite the declaration of the policy of Congress if he can state it move clearly than we have in our bill. The Crmarrmax. It is just a question of what the policy shall be. We can write it after we determine what the policy shall be. Mr. Taper. Our program, as we have indicated over and over again, is without the equalization fee. The Crarman. Is it your policy that the speculation and the waste shall go on or shall it be eliminated ? Mr. Taser. Our policy in this bill is not to cure all the ills of agriculiure, but to cure the ill of price inequality bv the export debenture rather than by an excise tax. The CmamrMaN. Are we agreed now to the alleced economic depression in agriculture? Mr. Taser. We are. The Crarmax. Now, then, are you for full farm relief or just part relief; to give them a little money by taking the money out of the Treasury before it is put in the Treasury in payment of the proposed subsidy? Mr. TaBer. We are for the most certain relief known. The Cuairman. Let us analyze the two bills. We will assume the wheat sold to be 800,000,000 bushels. Under your plan for the 200,000,000 exported the farmers should receive $42.000.000. at the expense of the Government 422 AGRICULTURAL RELIEF If they also get the benefit of the 21 cents on the 600,000,000 bushels, which I assume they would, they would receive a total of $168,000,000, would they not? That would be the advantage to the wheat growers, $168,000,000. Now, take it under the plan to equalize the price; if you advance the price 50 cents a bushel and sell 600,000,000 bushels at 50 cents advance in price the profit would amount to $300,000.000; if you sell 700,000,000 1t would amount to $350,000,000. Under the debenture plan they would get 21 cents on the 800,000, 000 bushels or $168,000,000 at a cost to the Government of $42,000,000. The net profit to the farmer under the equalization fee would be $300,000,000, without any cost to the Government, instead of $168. 000,000 under the debenture plan. Now, are you of the opinion that the $168,000,000 is all they are entitled to or should they have $300,000,000% Mr. Taser. Whenever the chairman is through with his question—— The CrmarrmaN. I am through. Mr. Taser. I am going to answer it, because you have asked that question two or three times. Fortunately, you asked the question of Mr. Goss and of Professor Stewart, and we figured the result very carefully, as I knew you would ask me the question. I am going to answer it with the statement we prepared: The chairman presents the following proposition: Under the equalization fee the farmer’s price could be raised to 50 cents above that of the world markets, and the fee necessary to accomplish this would be 121% cents, leaving the farmer a net gain of 371}, cents. It was not my purpose to discuss the equalization fee, but since he has not understood the application of the debenture 1 will compare the results of the operation in order that it may be clear to all. In the first place, with a tariff of 42 cents it would be impossible to raise the price to 50 cents above that of the world markets without bringing in all the wheat from Canada. No plan for raising any price above world markets will work without a tariff, unless some other sort of tax or inhibitory provisions set up a wall at the border, such as can be set up in a limited degree on cotton. So we will have to revise the chairman’s figures and assume that the export corporation would bid wheat up to 42 cents above the world market—the very limit. They would export 200,000,000 bushels at a loss of 42 cents, requiring an equalization fee of 1014 cents. This fee would be right if every bushel of wheat raised paid the fee and there was no cost of collection. Our misgivings in regard to the operation of the fee are due to the impossibility of collecting without evasion and excessive cost. The fee actually needed would be far greater than 10%4 cents, but for the sake of the illustration let us assume that there was no evasion and no gost of collection. Under the fee the Ameripeople would pay cents per bushel on 600,000,000 bushels or $252,000,000. If the evasions and cost of collections necessitated a 15-cent fee which is admittedly extremely very low, the farmer would receive but 27 cents per bushel, or $216,000,000. Under the export debenture plan if the board found the difference in cost of production to be 42 cents. the public would pay 42 cents per AGRICULTURAL RELIEF 193 vushel on 600,000,000 bushels or $252.000.000—]listen, please—and that portion of the taxpayers who reaped the most benefits from ihe tariff would pay $84,000,000 making a total received by the farmers of $336,000,000 as compared with $252,000,000 under the impossible conditions of a self-enforcing equalization fee without evasions, or a net gain to the farmer of $84,000.000 by the debenture lan. P Or if it argued that the farmer should get only the 3114 cents per bushel, the maximum possible theoretical benefits under the equalization fee, let us assume that the board set the export debenture rate at this figure, 3114 cents. Under the equalization fee, in order to assure the farmer 3114 cents, the public would pay 42 cents more than the world price for the wheat, or $252,000,000 on the 600,000,000 bushels consumed domestically. nce more let me remind you that the evasions and cost of collection would net the farmer much less than 3114 cents. Under the debenture plan the public would pay 3114 cents more on the 600,000,000 bushels, or $189,000,000, and those who received the most benefits under the tariff would pay 3114 cents on the 200,000,000 bushels exported or $63,000,000, making the total received by the farmers $252,000,000. The amount of the advanced selling prices must be made up somewhere under either system. Under the equalization fee every bushel which evaded payment whether because of being used for seed or for feed or through unlawful practices, would mean that the rest of the wheat had to pay that much more fee, plus the cost of collection. Under the debenture system there could be no evasions and there is no cost of collection, for there is no fee to collect. Every penny paid by reason of the price advance would go direct to the farmer. Then, I want you to pause: This answers a question from my distinguished young friend of a moment ago as to why our organization did not accept a different plan. It is all summed up practically ‘n this last statement. While I am comparing the two systems I would like to make one more comparison which may bring the true situation to you. Picture a map of the United States with thousands upon thousands of stars scattered all over it, running possibly into the millions. Every star represents some transaction made necessary by the collection of the equalization fee, or the avoidance of double payment. That is the picture of an internal-revenue system levying on production. Now, picture a map of the United States with less than 200 stars scattered around the border. Each star represents a port of entry, ul equipped to handle the export debenture on each export. I'he difference in cost of operation of the two systems comes out of the pockets of the farmers, and we prefer the simpler system, and the one that gives the American farmer $84,000.000 more on wheat alone. than the equalization fee plan. Thank you for asking that question to-day. The Criamrarax. Irecall that a member of this committee stated that by advancing the price on a hog weighing 200 pounds, from $7.05 a hundred to $11.34 as total advance in price, $8.58 the equalization fee, would be about $22 on a $14.10 hog. I think we are agreed that with SO160—28—SERE. PT 5———Q 124 AGRICULTURAL RELIEF a tariff of 42 cents, and freight 8 cents on wheat from Canada to Minneapolis the price might be raised 50 cents as up to the level of the tariff wall. fe have a tariff and freight of 50 cents a bushel. Now, it does not require a sharp pencil to figure out the equalization fee if you have 800,000,000 bushels to market. We are familiar with the prices at Winnipeg. We buy wheat from Canada. Canada is receiving now a premium on wheat because of the 50-cent pool of about 10 cents. But to be conservative, we will say the board would advance the price only 50 cents. The purpose of the bill is to give the domestic producers the benefit of the tariff, and that is the very thing provided “1 the bill. So we advance the price 50 cents a bushel. 1 think all agree that if they get 50 cents a bushel extra price on 600,000,000 bushels that would give $300,000,000. If only 100,000,000 bushels are exported the profit would be on the 700,000,000 bushels $350,-000,000. The 100,000,000 bushels is sold at the world price, at no profit or less. There you have the profit. If 200,000,000 bushels exported of the 800,000,000 less the profit would be $300,000,000, or 3714 cents a bushel profit. If only 100,000,000 bushels are exported you have 433 cents a bushel profit. Mr. Taner. It is not difficult at all, if you go on the theory of automatic collections and no evasions. Unfortunately, Mr. Chairman, I have been acquainted with farmers in almost every State of the Union, and if you have a notion there is going to be automatic-collection of the equalization fee you are due for a mighty rude awakening: The Cuamrmax. I think many underestimates the intelligence of the farmer. I think they will be benefited by the equalization fee; if so, they will not object to its benefits. Mr. Taper. Mr. Chairman. I do not want to argue the equalization fee. The Carman. I have confidence in the American farmer. Mr. TaBer. So have I. The Crmamrman. I have confidence in our Government, but I also believe it is necessary in writing a bill to specify as far as possible what is to be expected. Mr. Jones. May I ask the chairman in that connection if in his figures he is taking into consideration the 75,000,000 or 80,000,000 bushels of wheat which the farmer sold as feed and the 87,000,000 bushels which the Department of Commerce estimates is used for eed ¢ The Cramman. There is always a carry-over, I understand. But my figures are based on 800,000,000 bushels in excess of the carryover and wheat used for seed and food. Mr. Jones. If you assume he does not use any for seed or feed. vou eliminate that. The Crarrman. Eliminate that and you would have out of a 900,-000,000 crop less than 100,000,000 carry-over, seed and feed, 800, 000,000 to sell. We all appreciate the larger the crop the larger the export, and the larger the equalization fee and the less the profit. Everybody understands that. os Jom Mr. Chairman, just one word in conclusion. I want ank the committee for their courtesy; and I want to make it very clear that I have not intended to make any statement that has any reflection on any member of this committee or on any person AGRICULTURAL RELIEF 425 anywhere that favors some other type of legislation. We are confident that the export-debenture program can pass Congress, can become a law, is constitutional, and will be fair to the producer and consumer alike. It is the only program ever suggested that can be made effective on the 1928 crop, and it is the only program that can be operated in such a manner that all the costs paid by either consumer or Government reflect to the pocket of the farmer. We have concluded our testimony. We shall not bother the committee unless we are called before the committee. But we again want to pledge to this committee the effort of an organization that has but one purpose in its program here, namely the bettering of the conditions of the men and women that produce the meal ticket for this great Nation. The CrairMaN. Thank you very much. Mr. Jones. I was just going to ask this question: Did your organization throw any obstacles in the way of the passage of legislation last year that was passed by the House? Mr. Taser. We have never directly or indirectly as an organization, before a committee of the House or Senate, or before the Chief Executive of the United States, placed a single particle of obstacle in the pathway of the bill sponsored by the distinguished gentleman from the State of Towa; and we are entitled to the same consideration for the Ketcham bill. Mr. AxpreseN. I want to make a brief statement, if I may, before we adjourn. The CrairmaN. You are through, Mr. Taber ? Mr. Taser. I have closed the case. Mr. AxpreseN. Mr, Chairman, I have been a member of this committee for the past three years, and during that time I have been using my best efforts toward securing farm-relief legislation which will be of real benefit to the American farmer. The farmers are entitled to a square deal at the hands of Congress and the administration, and no time should be wasted to secure the enactment of such legislation. Agriculture needs legislation at once, and I am sick and tired of having the farmer used as a political football during campaigns without any actual accomplishment. All the farm organizations should make another attempt to get together within the course of the next week to unite on a program for farm legislation. They should present a united front upon one plan. and then there will be né question as to final results. I have studied all of the plans presented to the committee and can see some good in-each one. However, the only plan which appears to both directly and indirectly benefit the largest number of farmers in this country, in my opinion, is the present McNary-Haugen bill with the equalization fee in it. It goes to the heart of the problem and should be given opportunity for trial. The majority of farm organizations want this legislation, and the farmers want to pay their own way. They are entitled to have it tried out ander a sympathetic administration. The Haugen bill, now before this committee, has met the majority of objections of the presidential veto. The equalization fee in the bill is to be administered bv a board appointed bv the President. so 126 AGRICULTURAL RELIEF that the Executive should have no fear as to proper administration of this provision of the law. As to the question of the constitutionality of the fee, it can be passed upon bv the courts without mjuring the rest of the bill. Mr. Chairman, in view of my earnest desire to secure farm legislation during the present session of Congress, I wish to serve notice at this t.me that on Friday of this week, unless all of the farm organizations get together, I will move to take up the Haugen bill in executive session, amend it, and report it out for approval by Congress and for submission to the President. Action should be taken at once by the committee and Congress. If the President in his judgment vetoes the bill, then we will be given another opportunity of reporting out another bill providing for a revolving or a debenture fund to carry out the provision of the bill, and I am not adverse to a subsidy for agriculture. Adopting this procedure will give us the opportunity of securing legislation this session of Congress. I am sincere, Mr. Chairman, in the statement that I have made. I want to see farm legislation during the present session of Congress, and ’I think we should get busy and conclude our hearings, unless all of the farm organizations get together before Friday of this week; and I will make the motion on Friday to take action on the McNary-Haugen bill. The Cramrmanx. We have a number of people here—I do not know how many—who have been waiting over a month to be heard. Mr. Hawn. Mr. Andresen has stated my sentiments quite thoroughly. I think we have been whittling along here very patiently on this farm-relief discussion. I think it is time for conclusion. if we are going to get anything done this session. ~ Mr. Jones. Mr. Chairman, I am perfectly willing to set Friday if they want to set it, but we agreed when we started out we would hear the evidence on all these bills, and I am willing for the committee to commit itself to one program and only one; I think we ought to have the opportunity of reporting any of these bills. The CramrmaN. That will be for the committee to determine next Friday. It might be well to find out how much time would be asked for. Mr. Jones. The contemplated motion was to limit it to one bill, and I am in favor of that. I think everybody ought to have his day in court and the chance to have his legislation presented to this committee for consideration. I do not care whether we are to have any more hearings, but I do not want the committee to limit it to and only consider one program or one bill. Mr. AxpreseN. That is not the idea. Mr. Jones. That is what I gathered, unless the farm organizations agreed among themselves, would be the motion. ’ “Mr. AxpreseN. I will make the motion on Friday that we consider the McNary-Haugen bill unless the farm organizations get together and agree definitely on something. Mr. JoxEs. Why does not the gentleman make his motion to close the hearing and begin writing the bill on Friday and not try to limit the program to one species of legislation? ae Grim, What I am trying to get straightened out is ¢ ave a number of people here who have been here a month AGRICULTURAL RELIEF 427 now, and it does not seem fair to send them home without the opportunity of a hearing. I have an idea that we mav be able to ret through by Friday. ~ Mr. Crarke. At the time Mr. Sydney Anderson was here an agreement was reached that when the proponents of the McNary-Haugen bill and the debenture bill had had their day that then Mr. Anderson and the opponents who had other proposals would be heard before this committee. The CuHamyax. We also have a request from a number of exchanges to be heard, and I think it 1s fair that we should hear them. Mr. Jones. I am perfectly willing for the McNary-Haugen bill to be considered with the fee in it. The Cuairman. I think we should endeavor to expedite the hearings. {Thereupon further informal discussion took place.) Mr. Menges. Mr. Chairman, is ‘not this committee obligated by motion duly passed that we hear these folks and that we give them an opportunity? They have been sitting here patiently for weeks relying upon the committee’s expression. The CrHairMaN. I think the committe for prolonging the hearings. The committee will now stand .t recess morning. (Thereupon, at 12.05 o’clock v. 1, the committee adjourned to meet to-morrow. Wednesd: Webrrr-- 1928, at 10 o’clock a. m.) vaock to-morrow 381 he can clear and put into cultivation. I happen to be in that position myself. The effect of those lower prices in the case of my land in the Mississippi Delta of Arkansas is to cause me to want to cut the trees down and get that land into cultivation so as to help carry its own charges. So where you have high taxes running upon land that is a factor in the case. Mr. KincuELOE. If you had a higher price to help you pay those taxes, you might want to cut the taxes and plant more, too. Mr. Stewart. I might not be in such a hurry if I were getting more rent from my land already cleared. Mr. Fort. What is your notion as to the effect of this debenture plan upon production? We will take wheat, getting the 5-year average of something like 800,000,000 bushels. That is certainly an ample margin of safety over our domestic requirements, is it not? Mr. Stewart. It is about 24 per cent. Mr. Fort. Do you think we need it all as a margin of safetv? Mr. Stewart. It is about 24 per cent. Mr. Fort. Do you think we need it all as a margin of safety? Mr. Stewart. Perhaps not. Our population is increasing at the rate of 115 per cent a year. I think we ought not to be in any deathly run to get ourselves to a see-saw condition where we can not tell from year to year whether we are to depend on Canadian wheat or United States wheat. I think, on the whole, that the consumers of the United States have to be thankful for the fact that we have a persistent and large exportable surplus. Mr. Fort. I am not questioning that, but I am asking you, does it need to be any larger? . Mr. Stewart. 1 do not think it needs to be any larger, but I do not think it needs to be apologized for. Mr. For. If it does not need to be any larger, do you feel that this plan would or would not tend to increase it? Mr. Stewart. I think that it would tend to cause some increase, but I do not expect it to be as much of an increase as some do. I am inclined to think that there will be less disturbance in that respect than might be expected. Mr. Fort. Now, you have said nothing, Doctor, about whether this bill would work equally—I assume it would under its language—on on Frade of commodities. What is vour view about the wisdom of that ¢ Mr. Stewart. My view on that would be this, that our tariff duties as now specified are lagging behind the opportunities afforded by the expert services which we are developing through the Federal grain supervision. Even at the time of the passage of the tariff act of 1922 it should have been possible to distinguish between No. 1 Dark Northern and other premium types of wheat as compared with lower grades of wheat. That could have been done. But in the tariff as it was drawn provision was made for a flat rate per bushel, thought to be high enough to keep out that particular type of export wheat upon which we are on the import basis, and with respect to which I might add that in my opinion the tariff has normally been considerably effective. But that is not the bulk of the wheat of the United States. The bulk of the wheat, which is upon an export basis, in my opinion would not require 42 cents a bushel in the wav of an import duty. 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