the farmer is unable to purchase the industrial goods that his city cousin would like to produce. Lost farm purchasing power is a problem, too, for businessmen who see their sales dropping in rural areas.

In short, our entire economy suffers from the depressed condition of agriculture.

This costly problem can be solved by a proper Federal farm policy. It is our responsibility to formulate that policy. Each month that we delay means a loss of many millions of dollars to the American economy.

What kind of a Federal farm program would be of maximum benefit to the farmers and to the Nation as a whole?

We believe that any such program must take into consideration four major factors: (1) It must be of maximum benefit to the family-size farmer who makes up the great bulk of our rural population. (2) It must not raise food costs to city consumers. (3) It must not be unreasonably costly to the Federal Treasury. (4) In view of our position as a leading world power, a Federal farm policy should be related to our opportunities and responsibilities abroad.

With these considerations in mind and working with the assistance of experienced agricultural experts, we have drafted comprehensive farm legislation (H. R. 10966 by Mr. McGovern and H. R. 10967 by Mr. Roosevelt).

The following are the major provisions of this legislation:

(1) Building on the concept of "parity of income," it maintains returns to farmers at not less than 80 percent of full parity of income in relationship to comparable labor and investment in the nonfarm elements of society. Such protection is extended to all types of farm commodities, not just a few favored "basics."

(2) In return for this assurance, farmers would establish marketing quotas and other forms of market adjustment to remove the necessity of expensive price support and storage operations during periods of full prosperity. Quotas would be assigned so that farm marketings would clear the market during periods of full employment and prosperity.

(3) During years of less than full employment (when the number unemployed is 3 percent or more of the civilian labor force), farm prices would be permitted to drop while farmers continued to produce for market a volume equal to what would clear during full employment. To the extent that resulting prices were less than the parity prices set by the act, the differences would be paid directly to farmers in the form of parity income deficiency payments.

Such payments would, in effect, be a subsidy to consumers designed to offset declining consumer purchasing power by enabling the farmer to sell for less than he would during a period of full employment. This would be an excellent antirecessionary device.

(4) The benefits of the program are limited to family farm production. No farmer would be given more than $3,500 of parity income deficiency payments in any 1 year. Larger producers would be required to take greater cuts under the marketing restrictions of the bill.

(5) The Commodity Credit Corporation and its Board would be converted to a Federal Farm Income Improvement Corporation and Board. Five farmer members would be named to the Board by elected members of the State farmer committees.

It will be recognized that the above proposals follow in part some of the principles suggested by former Secretary of Agriculture Brannan in 1949. The Brannan principle has been operating through the National Wool Act for several years and has been extremely effective. With some modifications and adjustments, it can work equally as well with other farm commodities.

A more detailed discussion of the proposed legislation may be found in the Congressional Record of February 27, 1958, pages 2671-2673, under the heading "Family Farm Income Improvement Act of 1958."

We trust that you will be able to find time in your busy schedule to consider this proposal. We think it is significant that one of us is a representative of a predominantly agricultural district, while the other represents a metropolitan area. Our legislation is drafted with the best interests of both areas in mind. It is most urgent that the Congress move now in this session to meet the agricultural depression which is taking such a heavy toll throughout our entire national economy.

Very sincerely yours,

GEORGE MCGOVERN (First District, South Dakota).

JAMES ROOSEVELT (26th District, California).

23886-58- -3

Mr. McGOVERN. If the members will turn to page 2 of the attached letter that I have referred to and which I have just provided for the record, you will find five statements which summarize very briefly the principles of the bills and I would like just quickly to touch on all of those points.

The bill speaks of the concept of "parity of income," which is a comparatively new formula. It is a formula which is simply designed to bring the income of the farmer into line with the income enjoyed by other segments of the economy.

I might say that the concept of "parity of income" has been endorsed by the National Farmers Union, the Grange and by 35 individual commodity associations which make up the National Conference of Commodity Organizations.

The second principle of the bill is this:

In return for this "parity of income" assurance, not less than 80 percent of the parity level, the farmers would agree to establishing marketing quotas and other forms of market adjustments so as to remove the necessity of expensive price support and storage operations during periods of full prosperity or full employment.

Thirdly, during years of less than full employment, when the number of unemployed is 3 percent or more of the civilian labor force, farm prices would be permitted to drop while farmers continued to produce for market a volume equal to that which would clear during periods of full employment.

I might say in that connection, Mr. Chairman, that in other segments of the economy, for example, the automobile industry and the steel industry, during periods that would ordinarily result in falling prices on those commodities, it is customary for the industry to cut back on production and to administer the prices. We have seen it happen in the steel and automobile industries in recent months, and in that fashion they maintain without regard to a fall-off in demand.

What we are suggesting is that food is such an essential part of our way of life and our standard of life that farmers must be encouraged to maintain production even during periods of recession at a level that they would normally produce during periods of full employment and when the market drops, as in all probability it will, then the Secretary of Agriculture would be authorized to make direct payments to compensate farmers for the difference between the market price and 80 percent of parity of income.

We picked the figure of 3 percent unemployment as the point at which that provision of the program would go into effect; that is, when the production payment feature would go into effect. It may be that the committee would feel that 3 percent is too low and a figure somewhat higher ought to be selected.

The fourth principle is this: The benefits of the program are limited to family-farm production; that is, no farmer would be given more than $3,500 of parity income efficiency payments in any one year. Larger producers would be required to take greater cuts under the marketing restrictions of the bill.

The fifth point and finally, the Commodity Credit Corporation and its Board would be converted to a Federal Farm Income Improvement Corporation and Board. Five farmer members would be named to the Board by elected members of the State farmer committees.

There is considerably more that could be said about the bill, Mr. Chairman, but I think that I shall yield at this point to my colleague, Mr. Roosevelt, who has a brief statement, and then the former Secretary of Agriculture, Mr. Brannon, will explain its technicalities.

Mr. POAGE. Thank you, Mr. McGovern. You know the limitation of time which exists and which I regret very much.

Mr. McGOVERN. I understand that.

Mr. POAGE. We want to go more thoroughly into these bills and into your statement. We wish to go into it at length but we will have to defer the questioning at least for today because of our time limitation.

STATEMENT OF HON. JAMES ROOSEVELT, A REPRESENTATIVE IN CONGRESS FROM THE 26TH CONGRESSIONAL DISTRICT OF THE STATE OF CALIFORNIA

Mr. ROOSEVELT. Mr. Chairman and members of the committee, with your permission may I follow the same procedure in order to save the committee's time and ask that my full statement be put into the record and that I just sort of summarize it, if I may, extemporaneously? Mr. POAGE. Without objection.

(Statement referred to is as follows:)

STATEMENT OF HON. JAMES ROOSEVELT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman and members of the committee, may I say that I deeply appreciate your committee calling a hearing on this legislation and granting me time to appear before you.

In the passage of Senate joint resolution, the Congress has done its part in erecting a farm price protection shield which, if approved by the President, will help halt the drop in farm income in 1958. This will give Congress and the administration an opportunity to consider and adopt a comprehensive longrange farm income improvement program, and your committee has acted with commendable dispatch in initiating this series of hearings.

Let me say that I am not wedded to the specific detailed language of the bills introduced. In fact, I know they are subject to definite improvement. But Congressman McGovern and I are convinced of the principles involved. It is very similar to the income protection and market supply adjustment features of the Metcalf bill. Our bill is along the same lines as those introduced by Congresswoman Coya Knutson, a member of your committee, and the McCarthy livestock and feed grains bill. To a very large extent, our bill is similar to the Pace bill which this committee approved in 1949. The bill puts into legislative language the principles of combined farm income protection provisions and market supply adjustment provisions of the proposals submitted to the Congress in 1949 by former Secretary of Agriculture Charles F. Brannan.

All of these bills, and various others I have not mentioned, contain some basic principles which I feel should be incorporated in the Federal farm program. It is to the nature and necessity of these principles that I wish to direct my discussion.

A basic concept in the bill we have introduced is the family farm limitation on eligibility. I do not believe that we should make use of Federal farm programs to provide unlimited income protection to industrialized agricultural production enterprises that are larger than the family farm. On the other hand, I do believe that we are justified in the national interest to adopt special measures to require the executive branch to improve the bargaining power and income of family farmers. My bill leaves the exact determination of what is a family farm in each type of farming area to the Federal Farm Income Improvement Board and the Secretary of Agriculture. An upper limit of $3,500

is placed upon the total amount of parity income deficiency payments that could be received by any one farmer in any one year.

At this point, perhaps I should digress to say that such family farm support will not, as some critics charge, suspend the rule of competition. As always, the more efficient operators will gradually go ahead of the less efficient. Our proposal is not an absolute shield for the tail-enders and the ne'er-do-wells; there will continue to be some winnowing out. But under our proposal, these changes should remain within historical bounds; good family farmers will be protected from destruction by the "giantism" of corporate-type operations.

I now invite the attention of the committee to the provisions of this bill which place a limit upon the Federal expenditures that may be made through payments but which also put a limit upon the extent to which supply restriction may be used to protect market prices of farm commodities. This is the provision that specifies that the national marketing quota shall be set at the volume of the commodity that will clear the market at the specified protection level in a full employment and full prosperity economy. The latter is measured as a situation where less than 3 percent of the civilian labor force is unemployed.

This particular provision, if enacted, would enable and require the program to operate with practically no cost to the Federal Treasury in periods of full employment. In such periods no parity income deficiency payments would be made, because none would be required. This is because the national marketing quotas for each commodity, for each commodity group, and for the all-commodity farmwide marketing quota program would be set at the volume that would clear the market at the price goal. Since the price received by farmers would be at the specified level there would be no need nor necessity to make payments and the only cost of the program would be the extent to which administrative costs might exceed the collections made from the sale of within-quota marketing certificates.

On the other hand, to return again to the price-supply formula, in years and periods of time less than a year, when unemployment rises to 3 percent or more of the civilian labor force, the established marketing quota would not clear the market at the protection level price. Market prices would be lower than the price goal. The difference would be made up with counterrecessionary payment, which would be a desireable public expenditure to help bring the depression to an end. The payment would keep farmers' income from dropping but would permit consumers to buy and farmers to sell a full employment, full prosperity volume of supply under the established marketing quotas.

What, it may be asked, is the basis for thinking that the formula I have just outlined will result in a matching of supply and price such as fully to yield (under full employment) the desired net farm income? Furthermore, will the adjustment in marketings necessary to obtain this matching leave the American people with plenty of food?

I am satisfied, after having noted the extreme inelasticity of total agricultural demand in recent years, that it wouldn't take much of a shift in supply to make a remarkable difference in farm income. As for the impact on retail food prices, the record shows that on many finished food products-bread, for example-price changes, even large ones, on the raw product have historically made very little difference.

On other food items, the farmer's share of the consumer dollar has now declined to such an extent that even if all of any farm price change was passed on completely, the retail rise would not be substantial. Of course, the middleman has been widening his margin as farm prices fell so that there is some basis for expecting absorption if farm prices should now rise.

May I invite your attention that this significant provision is included not only in the bills which Congressman McGovern and I have introduced and which we are discussing this morning. This provision is also a major feature of the milk stabilization bill introduced by Congressman Johnson, a member of your committee.

I am in full accord with my colleagues, and with the 40 to 44 farmer groups, that farmers need more bargaining power. In our generally administered-price economy, farmers need and deserve control over the supply, marketing, and pricing of their commodities. The bill I have introduced gives this authority to farmers and provides a means to exercise it through democratically elected committees and boards of farmers.

First, the bill I have introduced would amend existing law and extend the authority to make use of marketing orders to all farm commodities, rather than the few now so authorized. Under this authority, farmers would not be authorized to operate a marketing order to raise the farm price of the commodity above the parity income equivalent price. Under existing law, marketing orders are limited in operation to prices lower than the price calculated by the price parity formulas in existing law.

Producers of those commodities for which marketing orders had not been placed into operation would be made eligible and required to make use of marketing quotas both for groups of related commodities and for individual commodities. In addition, enactment of the bill would establish the operation of an all-commodity farmwide marketing quota system for all commodities as a whole. The establishment and operation of this system of commodity market supply adjustment and proration programs, marketing orders or marketing quotas, as determined by farmers, would be subject in each case to a referendum vote of the producers involved. But there is no compulsion. Those who want no controls may so decide, in which case they would be completely on their own. Under some price and income stabilization bills before your committee, farmers would be given the authority to utilize marketing quotas to maintain price of their products, but there is no limit placed upon its use. In one sense this would give to the farmers no more than the same authority to regulate supply and set price that we as a nation already have given to labor unions and large industrial corporations such as farm machinery, steel, and chemicals. But in my view, there is a significant difference between food and finished steel. One can stay alive for quite a while without finished steel but not very long without food.

Because of this, in the bill we have introduced, we have provided that the national marketing quotas in each case shall be set as the volume of a commodity, a group of commodities or of all commodities, as the case may be, which will clear the market at the price level specified, assuming that we will be operating in a full employment economy. Thus through use of marketing quotas the annual supply would be tailored to a full employment-parity income level. No more of the commodity than would clear the market at the specified price would be allowed to reach the market. This would be determined on the basis of the most complete and most accurate statistical and economic estimates to be the amount that consumer demand would take if no more than 3 percent of the labor force were unemployed. The national marketing quota would also include an allowance for necessary additions if any to a national safety reserve and for the volume of exports that would move under applicable laws and economic conditions into foreign trade.

Thus the consumer market at all times would be supplied with a full prosperity supply of food and fiber products. Then, if in any year this full prosperity supply would not return the specified price level to farmers because of reduced consumer demand, Mr. McGovern's and my bill provides that the farmers and consumer shall not be asked to pay for increased unemployment and reduced demand through higher prices and reduced volume, as has characterized industrial operations the past 10 months. Instead, the extent to which farm prices fall below the price goal would be made up by an antirecessionary parity income deficiency payment direct to farmers, as I have explained earlier. Thus under the program we are proposing, farm income would not be allowed to drop when recessions such as we are now in begin to reduce consumer demand. Nor would the market supply be restricted below the full prosperity level by use of marketing quotas.

Many of us in the Congress represent not only farmers but a great many high, medium, and low income consumers. The farm legislation we enact must be good both for farmers and for consumers. I believe that consumers who are fully employed in an expanding economy are and will be willing to pay fair retail prices based upon a parity of income for family farmers, just as they have been willing to pay prices for automobiles and radios and shirts and television sets that reflect the costs of a reasonable profit for the corporation, collective bargaining contracts and minimum wages and other market supply and proration devices in everyday use in nonfarm sectors of the economy.

But I do not believe that consumers, or we here in Congress, can afford to set up a farm program that will allow farmers to cut supply enough to follow consumer demand down when unemployment increases and a depression sets in. Last July the steel industry raised prices by $6 per ton and thereby decided to reduce output to 55 percent of capacity. We can hardly afford to allow