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payments were going. Some of those who talked loudest against it were always willing to cash the checks.
Senator HOLLAND. How would you propose to make up the deficit in the budget, which is a very large deficit in the budget, which you would inflict on the country if this particular provision were adopted ?
Mr. Patton. You asked me that question. I personally think that it would be good fiscal policy to unbalance the budget for this purpose. We have unbalanced it for a lot of other purposes that probably did not have as much validity as this.
Senator HOLLAND. You are one, then, who feels that an unbalanced budget is nothing to be concerned about?
Mr. PATTON. I do not think it is a major concern as long as you have full employment and as long as you have long range fiscal plans for balancing it. We should not have reduced taxes when we did.
Senator HOLLAND. In other words
Mr. PATTON. We had the thing balanced during Truman's administration, but we reduced taxes at a point when we should not have.
Senator HOLLAND. Do you think it is sound governmental budget policy to keep piling up a bonded indebtedness to rest with greater impact our children and our children's children as far as we can
Mr. Patton. That is not what I said. But a country capable of producing $400 billion of goods and services has a much better position both budgetwise and in their ability to pay, than one that is heading for a depression. If the farm income continues to drop, it is going to drag the rest of the economy down, just as surely as it did in the twenties.
Senator HOLLAND. There are a great many questions that I would like to ask, but I realize that we have other witnesses.
There is just one other thing that I want to explore. I notice you say on page 12 of
your statement: Existing supplies of any commodity should be placed in a national safety reserve completely insulated from any effect upon prices in the market. Planned current production for any year should not be set that year below domestic consumption and exports, augmented by the programs mentioned earlier, that will return parity rewards to farmers in a full employment economy.
That is a correct quotation; is it not?
Senator HOLLAND. Do I understand you to mean there that you think that we can just forget about these $8 billion of surpluses if we just call them a national safety reserve instead of a surplus, and if we say by law, or say from the various rostrums throughout the country, that we are now insulating these surpluses from any effect on prices in the market, and therefore prices in the market are not to be affected, because we have said they must not, by the existence of this $8 billion worth of surpluses? Do you think that would be an effective way of dealing with the thing?
Mr. Patron. In view of the fact that we have been on the brink of war 3 times in the last 3 years without most of us knowing it, I think that we could well afford adequate safety reserve. I have proposed 2 or 3 times that this country do what Civilian Defense people tell me should be done, and that is place caches of this valuable food and water around every town above 20,000 in population so that if
we do have the terrible fatality of a tragic atomic war, that we will have food. I do not consider these surpluses burdensome, myself. I think here we are trying to fight a cold war with the most imperialistic, dangerous enemy that any nation has ever faced, and that we ought to be using substantial quantities of them there, and we ought to be using them in relation to school lunches in a very substantially increased way, and that we should have a national safety reserve charged to civilian defense and not charged to the American farmer, as they are now charged.
Senator HOLLAND. In other words, you think that by charging it to Civilian Defense and by saying by law that it is insulated from any effect on prices in the market, are you really serious in your statement that you think that that would create a complete freedom from any surplus effect in the future
Mr. PATTON. In the future.
Senator HOLLAND. And that the market would react just as if that $8 billion worth of products were not in existence and on hand?
Mr. Patron. Out in my country, we are great supporters of the copper and metal-support program, and they tell me, those people who ought to know, that they have some $7 or $8 billion of that stuff piled around, and they keep it pretty well insulated from the market. The market is pretty well above the support level all the time. And if metals piled up to that extent, which we cannot eat in the event of war—the only two things that we need worse than anything else in the case of a total war are food and water. It just makes as much sense to me to have a national safety reserve of food as it does $7 or $8 billion worth of copper and other metals that we keep insulated from the market and do not permit to affect the market.
Senator HOLLAND. Now, since you say that this situation results from the strategic reserve of metals, you are stepping also to the conclusion that the same thing would result if we set aside the butter and the cheese and called it a strategic reserve, that dairy customers, dairy distributors, and the general public would regard that as being completely out of the picture and would give no effect
Mr. PATTON. If it were so handled. If it were so handled, and it could be, if it were not permitted to get into the market.
Senator HOLLAND. Then your position is that all of these products, whether perishable or not, should be insulated in the same way that the copper and the zinc are that are in the strategic reserve ?
Mr. PATTON. I think first that many of the perishables that would go into such a reserve would be canned. But I think if we had a proper price-support program, we would not have any so-called surplus of some of these perishables; in other words, if we let it move into the market and make a production payment for the difference between the market price and the 100 percent of parity.
Senator HOLLAND. You think that you would have a good market very shortly if you did that with reference to butter and cheese?
Mr. Patron. Of course, if we began to lift the nutritional value of the 20 million people who are not getting an adequate nutritional level at the present time, we would actually very probably within a year and a half have to increase dairy production.
Senator HOLLAND. All right, sir.
The CHAIRMAN. Any further questions?
Mr. Patton, you refer to these two stages of the soil-bank program. I started to offer this awhile ago.
How do you interpret stage No. 1, the acreage reserve? I mean, not as presented in testimony and as presented in a Presidential mes. sage, which is always one side of the coin in this administration, but as also presented in the legislation !
Mr. PATTON. I think it is a wheel-spinning operation. I have not seen the particular legislation presented; so I cannot comment on that. But as I heard of it at first, it seemed to be a wheel-spinning activity, so far as I am concerned. The Secretary of Agriculture gives the farner a certificate for a bushel of wheat and then he takes a bushel out of the Commodity Credit Corporation supply and sells it into the market. We are just trading off here, and with the danger that the selling of that commodity into the market might further depress the so-called free market price.
But I cannot comment, Senator Humphrey, on the bill, because I have not seen it, that is, the administration bill which was mentioned here this morning.
Senator HUMPHREY. It is in the record today. I guess it was before you had a chance to get hold of it.
Mr. PATTON. Yes.
Senator HUMPHREY. The interesting part of it is under “Compensation of Producers":
Producers shall be compensated for participating in the acreage reserve program through the issuance of negotiable certificates which the Commodity Credit Corporation shall redeem in the commodity or cash in accordance with the regulations prescribed by the Secretary. Such compensation shall be at such rate or rates as the Secretary determines will provide producers with a fair and reasonable return for reducing their acreage of the commodity, taking into consideration the loss of production of the commodity on the reserve acreage, any savings in cost which result from not planting the commodity on the reserve acreage, and the incentive necessary to achieve the reserve acreage goal. Commodities delivered to producers in redemption of such certificates shall not be eligible for tender to Commodity Credit Corporation under the price-support program.
The Commodity Credit Corporation is authorized to sell at market prices, without regard to sales price limitations which would otherwise be applicable, a quantity of the commodity equal in sales value to the cost of redeeming certificates in cash.
Now, what does this add up to? It adds up to this, that if you give a farmer a cash certificate at a price support level, at 80 percent, and your market price is below 80 percent, you dump enough from the Commodity Credit bins into the market to get enough cash to redeem the certificate at an 80 percent support level ?
Mr. Patron. That is right. So you are further
Senator HUMPHREY. So you push down, push down, push down, push down the market
Mr. PATTON. That is right.
Senator HUMPHREY (continuing). In an effort to raise prices, which is as ridiculous as standing on your head when somebody says, “Look straight ahead."
Mr. PATTON. I agree with you.
Senator HUMPHREY. This is the biggest gimmick that has ever been devised, and I wondered if your organization has really given it economic analysis.
I have had two economists working on this thing since I sensed what Mr. Benson was up to in his testimony
Mr. Patron. We opposed
Senator HUMPHREY (continuing). And two darn good ones, and I am going to bring my evidence before this committee. I have a statement on it this afternoon.
But I say that this is nothing more or less than another one of these income-reducing mechanisms. This is exactly what has happened, may I say, in corn, in my part of the State. I have been looking up my records last night. I stayed up a little late looking up the records on corn, and I find that we have dumped corn out of Conimodity Credit bins into the market as spoiled corn, which is not spoiled at all, and reduced the cash price in the cash market, and thereby forced more and more farmers to put their corn into Commodity Credit.
The Government of the United States today is destroying the free market. This very market that Mr. Benson loves and that this administration prizes is literally being destroyed by making the Government the entire holding company for all commodities, and I think it is about time, Mr. Chairman, that we get these traders in here to find out how many of them are really holding inventories. They are not holding inventories any more. They are letting the Government hold the inventory.
And this is what happened in butter. This is what I said was going to happen when Mr. Benson fooled around with the price-support program. Every creamery in the Midwest dumped every pound of butter they had in the Government's hands at 90 percent of parity and then bought it back for less.
I said it was going to happen. You did not need to have a Harvard degree to figure that one out. You could have been born as dumb as Mortimer Snerd and known that. And it happened.
Now, we are about to do exactly the same thing again.
I hope that your organization, Mr. Patton, will look into this. You have got some good economists over there, and I would like to have you present, for my purpose, if for no one else's purpose, an analysis of that program.
Mr. PATTON. We will be very glad to.
Senator HUMPHIREY. I want to say that I do not think many people knew what was in it. I, frankly, did not. I was asked about it yesterday by some of the reporters here. I had a suspicion. But I stayed up a long time last night with some good top men around this town to find out what was in it. By the time I got through, I could not sleep.
I want to say right now that if the farmers get this kind of deal, they can close up shop right now. What this administration is trying to do under that provision is to dump out the surplus so that they can say, "We got rid of the surplus," and after they have gotten rid of the surplus, they will be rid of the farmers, and then they will not have any more surplus.
Mr. PATTON. That is right.
Senator HUMPHREY. This is a low-price, surplus dumping, and lowering the boom on the farmer program. That is what that thing amounts to, and I want to say it is a scandal.
The CHAIRMAN. Are there any further questions?
Senator HUMPHREY. That is no question. That is a comment, Mr. Chairman.
Mr. PATTEN. Mr. Chairman, I would like to call Senator Humphrey's attention, on page 12 of my testimony, to a statement which I made in relation to that, where I said that they would sell Commodity Credit stocks at bargain-basement prices in the usual commodity channels.
Then on page 14, I said: Taking these considerations into account, we recommend that phase 1 of the soil bank not be enacted.
Senator HUMPHREY. Yes. I got that general phrase there, Mr. Patton. And may I say, that is what stimulated this rather early statement of what I was going to say something about a little later today. But I want your organization, if you can, to go over that section and relate it to the actual amount of commodities in storage and what might happen under this acreage reserve program.
You have made some other estimates here of costs and production payments. Let us just take a look and see what would happen if this thing really went into effect.
Mr. PATTON. We would have to include the costs that the Commodity Credit Corporation had in the commodity at the time they sold it at bargain-basement prices, too.
Senator HUMPHREY. Fire-sale prices, Mr. Patton.
Senator HUMPHREY. Now, I notice you have a statement here that the farmers are dangerously close to the average age of 60. Whereabouts did you get that figure? I thought it was 50.
Mr. Patton. Fifty-six to 60.
Senator HUMPHREY. I was very much interested in that. I had used the figure myself of 47 to 50.
Mr. Patton. This is one of the key problems of America.
You have mentioned about these reserves of food, and I am delighted to hear you speak up as you did about this. Did I hear you say that the civil-defense people had recommended storage of food around major cities?
Mr. Patron. I do not think they have publicly. I have talked with some of the civilian-defense people, and their feeling, as they expressed it to me, seemed to be –I do not know what it actually is seemed to be one of hopelessness, because they could not get such a thing adopted.
I made this proposal that I mentioned to Senator Holland, that we store the equivalent of 3 bushels of wheat, 4 pounds of beef, 4 pounds of pork, 4 pounds of lard, and 2 pounds of cheese and equivalents of butter along with water.
Senator HUMPHREY. Have you ever thought about the practicality of storing, for example, where we are putting in over $1,500 million in Spain in airbases, in a country that is short on food, that it might be well
to have some food stashed away? Mr. PATTON. Yes, sir.