IV. THE FARM SURPLUSES AND PUBLIC COSTS The size of the farm surpluses, and their cost to the Government and the public. are important aspects of the farm problem. But the emphasis upon these aspects has been excessive. The surpluses, while undesirable, do not hurt our economy nor cost the public nearly so much as depressed farm income. Yet, national policies have been trying to cut these surpluses and public costs by continued deflation of farm income. This wrongful approach has also added to the surpluses and public costs. The size of the farm surpluses has been exaggerated To restore perspective, we must look at the size of the farm surpluses. One measure is the part of total farm production in each year not used in that year for domestic consumption and export. Since 1947, the total farm surpluses, thus measured, have never averaged for any two-year period as high as 5 percent of total production. In most two-year periods, the surpluses have been much smaller. During 1956 and 1957, they averaged only 0.3 percent of total production. The 1958 picture indicates close balance between production and use. This long-term record provides a very small margin of safety for an adequate food supply. Considering the loose-knit organization of farming, and the natural conditions which prevent farmers from adjusting their production overnight as others do, the moderate size of these surpluses in the long run seems noteworthy. For selected crops, the excess of annual production over use is more serious. But disposal programs have already shown that, with more vigor, this problem could be handled effectively. In cotton, annual use in each year from 1956 throngh 1958 considerably exceeded domestic production. In tobacco, there was large surplus production in 1956, but in 1957 and 1958 use substantially exceeded production. In wheat, use exceeded production by almost 8 percent in 1956, and by 11 percent in 1957; in 1958, about 28 percent of production was not used. Another way to measure the size of the farm surpluses is to look at stocks accumulated over a long period of years. The long-term accumulated inventories of wheat were almost 6 times as large by 1958 as in 1952: of corn, almost 3 times as large; and of tobacco more than 4 times as large. There was practically no accumulated surplus of cotton in 1952; but by 1958, it amounted to more than a million bales. Total Government investment in inventory and loans outstanding rose from less than 11⁄2 billion dollars in mid-1952 to 71⁄2 billion by the fall of 1958. These soaring surpluses indict the current farm program. But to correct this defect instead of being panicked by it, we must gain perspective by comparing these farm surpluses with other surpluses. Farm surpluses far less than other surpluses The farm surpluses represent the waste of goods produced but not used. Other surpluses represent the even more costly waste of idle productive resources. For the whole period from 1953 through 1958 on the average, only about 2 percent of farm output was not consumed. In vivid contrast, true unemployment as a percent of our civilian labor force averaged 6% percent; the amount of total U. S. productive power idle averaged more than 5%1⁄2 percent; the amount of steel capacity idle more than 17 percent; and the amount of automobile capacity idle almost 25 percent. On a cumulative basis from 1953 through estimated 1958, total farm production exceeded use by slightly more than 4 billion dollars, while our total national production fell short of full production by more than 150 billion. For the two most recent years, total farm production and use have been nearly in balance, while idleness in other areas has risen sharply. Such comparisons do not justify the excessive farm surpluses. But the exaggeration of these surpluses has been used as an excuse for the vain attempt to reduce them by impoverishing farmers. Public costs of the farm surpluses The public costs of the farm price support program are not fairly shown by the more than 7 billion dollars invested in it as of late 1958. They are more fairly shown by the realized net losses to the Commodity Credit Corporation on the price support program. Losses totaled less than 6 billion dollars for the 25-year period from October 1933 through September 1958, or averaged annually about 235 million. From July 1946 through June 1953, they averaged annually about 168 million. But from July 1953 through June 1958, they averaged annually about 913 million, or almost 51⁄2 times as much as during the previous sevenyear period. The Federal Budget for all agricultural programs has risen from about one billion dollars in fiscal 1952 to more than 6 billion estimated for fiscal 1959, an increase of about five times allowing for price change.* If these high costs were helping farmers to share fairly in American prosperity, they would seem moderate in the total Federal Budget. The benefits to our whole economy would be enormous. Further, a sound farm program would reduce public costs by adjusting production to consumption. But if we continue to try to reduce the surpluses and public costs by further deflation of farm incomes, with no real program to adjust production to consumption, our whole economy will pay an incalculable price. And we shall get still more surpluses and public costs. V. THE FARM DEPRESSION HURTS OTHER WORKERS AND CONSUMERS To count the hurtful effects of the farm depression upon others, we must look at our whole economy. During the six-year period 1953-1958, our total economic expansion (averaging only 1.3 percent a year) has been considerably less than a third of the amount needed for full production and full employment. In consequence, our total national production has been more than 150 billion dollars below full production. Man-years of employment opportunity have been about 10 million too low. The average American family, for this six-year period as a whole, has had about $2,800 less income than it would have had with full prosperity for all. How have these trends, so damaging to our whole economy, been influenced by the farm depression? All of our economic trouble has come largely from a deficiency in private consumption, which during the six-year period as a whole has been equal to about 63 percent of the total production deficiency. The farm population, during this period, has averaged only about 121⁄2 percent of our total population. But the deficiency in consumer spending by farm operators' families alone has amounted to about 17 percent of the total deficiency in private consumption. Farmers are also big spenders for capital goods, even when their incomes are depressed. And it is clear that capital expenditures by farmers would have been much higher, if agriculture had enjoyed prosperity. During the six-year period 1953-1958, the deficiency in capital spending by farmers came to almost 28 percent of the deficiency in total private capital spending. During this period, the deficiency in farm operators' net income has been about 23 percent of the total income deficiency of all American consumers. In 1958, total true unemployment in the United States was about 3.4 million higher than in 1953. Comparing the same two years, farm employment (as measured by he Department of Agriculture) declined by more than 1.3 million. The decline in farm employment thus was a substantial factor in the increase in unemployment throughout the Nation. Putting all of these facts together, it may be estimated that somewhere between one-fourth and one-third of our gigantic deficiencies in total production and employment opportunity, during the past six years, have been due to the farm depression. The next charts expand this discussion. The Budget figure, however, includes such programs as rural electrification. It also includes costs properly chargeable to our international economic policy, rather than to agriculture. 1958 estimoled by Conference on Economic Progress on basis of actual data for first three quarters DATA: Actual production and full-time unemployment, 1953 - 3ra Qtr 1958, Dept of Commerce, estimates of production deficits and of true unemployment, Conference on Economic Progress ΠΑΡΑ 1959 estimated by Conference on Economic Progress on basis of cate for first 10 months VI. THE DEFICIENT INCOMES OF OTHERS HURT FARMERS The farm depression is due mainly to bad national farm policies. Nonetheless, deficient incomes and consumption in other parts of the economy aggravate the farm depression. For the six-year period 1953-1958 as a whole, the total personal income of the American people was almost 134 billion dollars below the amount needed for full production and full employment. This resulted in a deficiency of almost 96 billion dollars in total private consumption. And as part of this, American families spent more than 32 billion less for food, clothing, and shoes than they would have spent under full prosperity conditions. Allowing for the spread between what the consumer pays and what the farmer gets, this reduced farm marketings by about 11 billion dollars. It reduced net farm operators' income by about 4.7 billion. There has been propaganda to the effect that farmers have been hurt by rising industrial wages. Just the opposite is true. Farmers have been hurt by the failure of wages and salaries to expand enough to help maintain full consumption and full prosperity for all. During the six-year period under review, the deficiency in wages and salaries was almost three-quarters of the total deficiency in con. sumer income. In 1958, the deficiency in wages and salaries was more than four-fifths of the consumer income deficiency. This is doubly significant to farmers, because wage earners spend much more of their total income for food than higher income families. Families with incomes under $2,000 spend about 70 percent of their income for food; families between $3.000 and $4,000 spend more than 40 percent; while families above $10,000 spend only about 18 percent. The wide extent of poverty among nonfarm families has an especially hurtful effect upon food consumption. American multiple-person families with annual incomes below $3,000, and single-person families below $1,000, now number almost seven million. It is estimated that the annual food expenditures of these families are more than a billion dollars less than the requirements for a moderate satisfactory diet. If these families could afford an adequate diet, it would lift total consumption of various food products in amounts ranging from one to three percent. This would be more than the "surpluses" of many of these products. Additional production would be needed. All this is illustrated by the following charts. |