4. Full use of abundant United States farm production of which America's farmers are so efficiently capable should be implemented by laws such as the following:

(a) Enactment of the Reciprocal Trade Agreements Extension Act; (b) Enactment of the Customs Simplification Act;

(c) Broaden and expand the authorities provided for sale and donation of United States farm commodities under the Agricultural Trade Development and Assistance Act (with provision that a major purpose of such donations and soft currencies would be to establish and operate universal free systems of general and vocational education in nations now at beginning stage of economic development);

(d) Negotiation and establishment of the international food and raw materials reserve or world food bank;

(e) Establish additional international commodity agreements similar to the International Wheat Agreement;

(f) Expand United States technical assistance and other point 4 programs to encourage economic development throughout the nations of the free world.

5. Establishment and execution of a serious and responsible national policy of maintaining a national safety reserve of food and fiber commodities equal to the risks of crop failure, livestock diseases, and of destruction and disruption that might be brought on by atom and hydrogen bombs and biological warfare.

6. Enactment of the proposed conservation acreage reserve legislation to provide when required a downward adjustment in national total farm production to bring it into balance with the volume of production that will be purchased at 100 percent of parity price in an expanding full-employment economy with foreign and domestic demand augmented in the ways recommended above.

7. Extension of authority to use marketing quotas to producers of other farm commodities for application when needed to encourage desirable production adjustments from one farm commodity to another within the framework of the full recommended program.

8. A vast expansion in the authority and funds provided to Farmers' Home Administration or similar agency along the lines proposed in the Family Farm Development Act and the Kerr farm-credit bill, both now pending consideration before this committee, so that a really significant start can be made toward reducing the root causes of low farm-family incomes on the approximately 2 million currently inadequate farm units, to provide a responsible program of farm-disaster credit, and to serve as a yardstick operation to prevent excessive interest charges and other onerous terms of cooperative and private farm-credit agencies.

9. Restoration and revitalization of the Federal crop-insurance program so that it can become a truly nationwide universal protection of farmers' income against the hazards of crop failure due to natural causes.

10. Enactment of the farm perishables terminal market facilities improvement credit program.

11. Improved and expanded market regulatory laws, particularly for terminal market inspection of perishable farm commodities; and

12. Initiate a joint congressional investigation of the increasing spread between prices received by farmers and those paid by consumers to determine to what extent inefficiency, economic waste, poor operating methods, and the existence of monopolistic conditions in processing, handling, and marketing agencies are responsible.

As can be seen from this long list, we consider farm price support legislation to be only a part, albeit in our opinion a vitally essential part of a complete Federal full parity family farm income program that should be enacted into law.

NATIONAL INTEREST IN FULL PARITY FAMILY FARM INCOME PROTECTION To be permanent and desirable, the farm program should be based upon wide public interest, not on the economic interests of farmers alone. The program must contribute to and accord with the attainment of broad national aims and goals as well as provide price and income protection to farmers. We believe that these aims are consistent and can be accommodated by the program we are recommending.

Our approach to the construction of a truly national public-interest farm program is grounded upon a fundamental observation and belief. It is this. There

is a level below which it is not in the broad national interest to allow farm family income to fall. The minimum desirable level is in the neighborhood of that attained in 1951 and 1952, when prices received by farmers averaged between 100 and 107 percent of parity. We believe that total national welfare will be best served by this level of farm-family income for four major reasons: (1) To provide one of the essential elements for national economic growth and prosperity in an expanding full employment economy; (2) to prevent the progressive deterioration of the agricultural plant of the country to the extent of endangering future food and fiber supplies for an increasing population; (3) the vital need to preserve and improve the family-farm pattern of American agriculture as a necessary bulwark of political democracy; and (4) to provide economic justice to an important segment of the national population.

PARITY FARM INCOME ESSENTIAL TO EXPANDING FULL EMPLOYMENT ECONOMY There has been no successful or persuasive contradiction of the statement we have made many times: "Major national depressions (and its little recessions) are farm led and farm fed." Of course, President Eisenhower's Secretary of Agriculture has characterized this statement as being the tail-wagging-the-dog theory. But we assume that this statement was made at the height of passion in the moment of argument and is not a true reflection of his own mature judgment. In many other statements and speeches even that gentleman has acknowledged that the purchases by farm families of farm production goods and family living items is an important segment of the national market for the goods and services of workers who do not live on farms.

Whatever the state of mind of President Eisenhower's Secretary of Agriculture on this matter, another spokesman of the Eisenhower administration has given further evidence of the vital importance of an economically healthy agriculture to the rest of the economy. We refer to the remarks before the 59th Annual Congress of American Industry, in New York City on December 3, 1954, by Clarence Randall, president of Inland Steel, and a high official in the Eisenhower administration. Mr. Randall said, and we quote from an official copy of his address:

"You remember the prosperity the farmer had shortly after the war? That prosperity was transfererd to the agricultural implement companies. Some of you here tonight wish you had that prosperity back. It was transferred to the steel companies from the implement companies. The farmer was buying every piece of equipment he had ever heard of.

**** What would happen to the businesses represented in this room if the farmer were cut back 12 percent? We would have hard work to get together for this meeting because it is from that 12 percent that the farmer buys our product."

That is the statement of an industrialist talking to his colleagues. It is based upon a true recognition that prosperous farming is essential to national prosperity. Less than parity farm income means more unemployment for labor and fewer sales for business. Parity farm income means more jobs, more sales, and more profits. Spokesmen for organized labor have recognized this. Because of it they have given all-out support to repeal of sliding-scale farm-price supports. They have appeared before many committees of the Congress to explain their understanding of the principle that decent incomes for farmers are essential to attainment of full employment and improved wages and living conditions for industrial and office workers.

Practically all reputable farm general economists agree that farm income is important to national income, that farm prosperity is important to national prosperity.

Without overloading this statement with quotations, here is a typical statement of a university economist, Prof. Willard W. Cochrane, of the University of Minnesota :

"A depressed agriculture acts as a drag or brake on the rest of the economy. I don't say that a depressed agriculture will necessarily pull the economy into a general business depression. But a depressed agriculture will pull down the level of national income, unless that contraction is offset by an expansion in some other part of the economy."

If the Nation desires to maintain a condition of full employment and rising standards of living and, therefore, a situation of expanding industrial production and economic growth (and we feel sure that the great majority of

American people think that we should) the record of history strongly suggests that farm incomes must be maintained at an adequate level. To repeat an earlier statement, there is a level below which the Nation cannot afford to allow farm income to fall. That national depressions are farm led and farm fed is the lesson of history. A part of the historical record is presented in chart A appended to this statement.

Another part of the record is that when prices received by farmers is below parity we have less prosperity among other segments in the following year. For example, after each of the 17 years since 1928 when farm prices were below 100 percent of parity, unemployment in the next following year averaged 13.2 percent of the civilian labor force; in the years next following the 10 when farm prices were 100 percent of parity or above, unemployment averaged only 3 percent of the civilian labor force. Changes in the index of industrial production in any year shows a similar reaction to below- or above-parity farm prices, if military orders are excluded from the figures.

NATIONAL DEPRESSIONS ARE FARM LED AND FARM FED

Farm depression led the panic of 1830; the even worse depression of 1844: the big recession from 1858 to 1860; and each of 12 depressions between 1870 and 1914. Falling farm prices led the drop from 1919 to 1922. They led again in 1929-32, 1937-38, in 1949, and now they are falling again.

In 27 years of history, since 1928, only once did above parity farm prices fail to be reflected in full employment the following year (1948-49); and in only 2 years (1928-29 and 1942-43) did below parity farm prices fail to boost the level of unemployment the following year to above 3.5 percent of the civilian labor force.

Quotations of authorities and examples and demonstrations of the type just cited could be multiplied many times. The influence of falling or rising farm income on the health of the rest of the economy simply cannot be scared away with comments about tail-wagging by President Eisenhower's Secretary of Agriculture. The facts of the situation remain regardless of what he says or does not say. The facts strongly suggest that there is a level below which the Nation cannot afford to allow farm income to fall if it wishes to maintain full employment and other elements of national prosperity and economic health.

FULL EMPLOYMENT FARM INCOME

According to our figuring, and based upon the official forecasts of the United States Department of Agriculture, it looks as if, in 1955, national farm gross income will be $7 billion lower and farm family net income will be over $32 billion less than would be consistent with the goal of an expanding full employment economy. The details of our calculations are included in chart B. Briefly, our figures indicate that for farmers to make their full contribution to a full employment economy, farm families' net income ought to be somewhere close to $15.4 billion in 1955 instead of the $11.4 billion now predicted by the United States Department of Agriculture. National farm gross income should be in the neighborhood of $39.7 billion instead of the $30.5 billion projected by the Department. It is of more than passing interest to note that prices received by farmers in 1955 should average 100 percent of parity instead of the current level of only 86 percent, national farm gross income would probably rise to $38.5 or $39 billion.

CALCULATION OF FULL EMPLOYMENT FARM INCOME

The farming segment of the national economy should be enabled to make its full contribution to the attainment and sustaining of an expanding full employment economy. To do so, it must be able to earn by sale of its products a sufficient national farm gross income to pay all farm production and capital depletion and replacement costs and leave a national farm net income that will give farm families a purchasing power equivalent to their numbers in an expanding full employment economy.

Admittedly, there is room for argument as to the amount of national gross farm income that is required to keep farmers from being a drag on national prosperity. Outlined in the paragraphs that follow is one logical method of arriving at such a figure.

To do their part to maintain an expanding full employment economy in future years, farm families should have at least the same relative per worker income as they had in high employment years of the immediate past. The most recent 5 individual years in which the number of unemployed averaged less than 3.5 percent of the civilian labor force were 1953, 1952, 1951, 1948, and 1945 (chart C). The average realized farm net income per unpaid family worker during those years was $1,914, as reported by the United States Department of Agriculture. In a real sense this figure can be considered as the farmworker income that was consistent with a full employment economy in the immediate past.

For the national economy to grow at the rate required to maintain full employment, the incomes and purchasing power of consumers must keep pace with the increasing productivity per man-hour made possible by advancing technology. The nearest approach to this by any large group of consumers in the economy has been the workers in manufacturing establishments, although their wages have seriously lagged behind the required rate in past 2 years. Certainly, the family workers on America's farms should be enabled to keep pace with the retarded rate of increase in hourly wages of manufacturing workers. This is the minimum that an expanding full employment economy can allow, if depressive maladjustments are to be prevented.

Hourly wages of manufacturing workers averaged $1.48 during the 5 most recent maximum employment years. In December 1954, the figure was $1.83 or 24 percent greater. To keep pace, the average net farm income per farm family worker should, in 1955, be at least $2,373.

The Department of Agriculture reports an estimated 6.5 million family workers on farins in 1954.

For each of these to be enabled to earn a full employment income of $2,373 would mean a national realized net income of farm operators of $15.3 billion. Turning now to the production cost component of farm gross income, annual national farm operating costs, in the 5 full employment years of the past period, averaged $19.9 billion. During the same period, farm operating costs were 58 percent of the gross income. By 1954 farm operating costs took up 63 percent of the gross income, owing largely to increased mechanization, higher land values and thus higher variable and overhead farm costs of production per unit of product. This was a further extension of a constant trend observed over the entire 45 years of which statistics are available to chart it.

Income available to cover farm operating costs and capital impairment and depreciation in 1954 had to be 9 percent higher than in the base period years.

Moreover, the per unit cost of production items (prices, wages, interest, and taxes) rose from the average of the base-period years from an index of 259 (1910-14 equals 100) to 284 (1910-14 equals 100) or by 9 percent. Farmers in 1954 not only had to buy 9 percent more off-farm goods and services relative to output, but also had to pay 9 percent more per unit for what they bought.

If farm production is not to lag behind population increases, provisions must be made to cover the increased cost of producing the increased supply required by a larger national and world population. Since the base-period years, United States population increased by 7 percent meaning that food and fiber consumption and production and therefore income to cover production costs needed to be that much greater to maintain per person consumption rates. And, it should be noted that in none of the base-period years, except 1953, did increases occur in so-called agricultural surpluses.

It would be reasonable to suppose therefore, that a full employment economy in future years should be equally capable of using and paying the production cost of an equivalent supply of farm output as in the base-period years. In any event, increased output means increased production costs and the income needed to pay production costs must be greater. Total farm output in 1955 is expected to be about 3 percent higher than in the base period years (an index of 107 as compared to 104).

Multiplying the $19.9 billion base period average farm production costs by the several adjustment percentages just discussed gives a 1955 full-employment farm cost and production figure of $24.3 billion.

Adding national full employment farm net income of $15.3 billion to national full employment farm costs of production of $24.3 billion results in a 1955 full employment farm gross income total of $39.7 billion.

If farmers are to maintain the farm plant of the Nation and make their full contribution to production and purchasing power to an expanding full-employment economy, national total farm gross income in 1955 should be close to $40 billion instead of the approximately $311⁄2 or $32 billion now forecasted by United States Department of Agriculture.

At the expected national farm production this level of income could be obtained if prices received by farmers should average 103 percent of parity as now calculated instead of the current 86 percent of parity level.

CHART B.-Calculation of 1955 full employment farm gross and net income (a) Acreage annual realized net income of farm operators (base period years).

(b) Average number farm family workers (base period years)_.
(b) Average number farm family workers (base period years)
(d) Wages per hour of manufacturing workers (base period
years)

January 1955.

Index for January 1955 (base period 100).

(e) 1955 Full Employment Farm Net Income per family
worker___.

(f) Number of family workers on farms, 1954, average.
(g) Total 1955 full-employment national realized net income of

farm operators_.

(h) Average annual farm operating costs (base period years) --(i) Increase in ratio of operating costs to gross income

(index)____

(j) Increase in farm output (index base period=100). (k) Farm cost of production index:

Base period.
January 1955_.

Increase over base.

(1) Total 1955 full-employment level farm cost of production
(m) Total 1955 national full-employment farm gross income_-_-

$13.9 billion.
7.2 million.
$1,914.

$148.
$1.83.

$1.24

$2,373.
6.5 million.

$15.4 billion. $19.9 billion.

$109.

103.

266.

290.

109.

$24.3 billion. $39.7 billion.