488

AGRICULTURAL RELIEF
Mr. AswreLL. Then he pays it, if he gets less.

Mr. Caverno. He gets 27 cents more than the world price, and
that is the 15 cents less than the world price plus the tariff. But he
gets 27 cents and fails to get the 15 cents; that is all.

Mr. AxprESEN. How is that going to cut down production if
he does not have to pay it?

Mr. CaverNo. It will have a tendency to cut down production,
because right before him is the proposition that if he does not raise a
surplus he will get this 15 cents—that is, he will get the Liverpool
price plus the 42 cents instead of 27 cents. Every day he knows that,
and it is more visible on wheat than on cotton. The increased
price for cotton is not so visible, because you have only the world
price to peg to. With wheat you have a world price at the bottom
and 42 cents duty, and so you can show every man just what he is
gaining and just what he is losing.

I want to make this statement in regard to the operations in cotton:
That it gives the board the opportunity to raise the price of cotton
by disposing of surpluses in whatever market they can, geographically
or otherwise, so that the total price of the crop to the producer will
be the maximum possible under the law of supply and demand.
And with the use of the equilization fee they could actually make an
experiment under the process of trial and error to find out exactly
what that is. It enables them to put the price up to the point
where they know that they have exceeded the maximum law of supply
and demand price, because they have accumulated a surplus, and
then save themselves from a loss on that surplus by having taken out
an equalization fee large enough to finance it.

Mr. Fort. Then by carrying that surplus they will have to have
a lower price next year to take off the surplus of the old cotton.

Mr. Caverno. it depends on the next year’s crop. But I think,
Mr. Fort, you will see what I am driving at in the experiment to
demonstrate what the maximum price under the law of supply and
demand is without accumulating a surplus.

Mr. AsweLL. Does Mr. Fort agree that the producer does not
pay the fee?

Mr. Fort. Of course, he does not, any more than the manu-
facturer of automobiles pays the 3 per cent tax on automobiles; he
ndds it to the price.

Mr. Caverno. Then he pays the fee, but he has a larger price so
that his net is greater.

Mr. Fort. Oh, that may be. But that does not make him pay
the fee. The farmer does not pay the fee if he gets a larger net
price.

Mr. Caverno. Yes; he gets a larger net price, but if he gets too
much then he has to take the excess out of the fee, leaving him with
the maximum net price that he could get under the law of supply and
demand.

Mr. Fort. He has already got his net price; he has been paid.

Mr. CaverNo. You are assuming a cotton operation now?

Mr. CORT. Yes.

Mr. Caverno. You are assuming the board has pegged the price
higher than the consumer will absorb it. and thorefors accumulated
a surplus?

Mr. Fort. Yes.