condition like this: About one year average production, one year overproduction, and one year underproduction right here in our country. So that if we can get in some way the retention of these surpluses, handling them in an orderly way by the producers themselves, and a carrying over, this country will absorb them, if we can get that kind of shock absorber in there to lengthen the period when the surplus should be marketed.

Senator RANSDELL. The principles of this bill seem to me to apply to products where there is a surplus produced in America. How would it apply, for instance, to the beet sugar of your State, because there is no surplus there. We always have to import a large quantity into this country. How would the sugar growers of America receive any benefit from the principles of this bill?

Mr. Cox. The sugar growers of America need proper tariff protection.

Senator RANSDELL. They would not be specially benefited, then, by this bill?

Mr. Cox. No; I do not think that it would apply to them, because of the unusual way in which the sugar crop is handled. It is a contract crop, with the great industry manufacturing sugar built right on the production, with tariff protection. I believe, however, with such a board in existence, it would consider sugar problems and would be an aid in protecting that industry and the growers in it when they need it. It would come later, under proper provisions to aid in the sugar situation.

The CHAIRMAN. We will have to adjourn now until 10.30 tomorrow morning.

(Whereupon, the hearing was adjourned until 10.30 o'clock tomorrow, Wednesday, March 31, 1926.)

AGRICULTURAL RELIEF

WEDNESDAY, MARCH 31, 1926

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in room 326, Senate Office Building, Senator George W. Norris presiding.

Present: Senators Norris (chairman), Capper, Smith, Ransdell, Kendrick, Heflin, Ferris, and Mayfield.

The CHAIRMAN. The committee will come to order. Doctor Stewart, you may take the stand.

STATEMENT OF DR. CHARLES L. STEWART, ASSOCIATE PROFESSOR OF ECONOMICS, UNIVERSITY OF ILLINOIS, URBANA, ILL.

Mr. STEWART. Mr. Chairman and gentlemen of the committee, I have here a brief statement of what I am going to present to you, and it might be of some use to have it in your hands. Perhaps this statement says enough about me to identify me.

The CHAIRMAN. Well, you had better state it for the record.

Mr. STEWART. For the record I will say that I am associate professor of economics, University of Illinois; that I am chief in agricultural economics of the experiment station; that I am an owner of farm land in Illinois and in Arkansas, former head of the department of economics and sociology of the University of Arkansas. I would rather not plead guilty to any other crimes. I will just submit this statement.

(The statement referred to is as follows:)

The plan which will bring our farmers American prices for their products at least cost to consumers is an Illinois plan known in the Senate as the McKinley export debenture bill. It would help producers of cotton, tobacco, corn, corn-fed products, rice, and oats. It avoids Treasury cash subsidy by using exemption from import tariff duties but does not reduce those import duties. It avoids equalization fees or taxes either upon producers or consumers. It does not ask consumers to submit to a sales tax to shield the wealthy from taking a share in a national program of agricultural encouragement. It has been operated in other countries successfully, but without putting their governments into business enterprise or into price fixing. It carries out a recommendation which Alexander Hamilton, the first Secretary of the United States Treasury, made to the Congress in 1791, but does it so as to avoid constitutional difficulties brought to light in 1896. It is adapted to compromise, but is specific at all points. It requires no Federal board, but the Congress might use a board's recommendations in reducing or increasing its premium rates. It can operate at cost to conumers from a fourth to a half loss than plans for causing consumers to pay foreign-sale losses.

In other words, this plan would secure for the producer increased prices without dipping into the Public Treasury and without taxing the farmer.

The debenture plan allows exporters to replace goods shipped out of the United States by manufactured goods from abroad, but without lowering import tariff rates. Debentures issued to exporters sending wheat or corn-fed products to foreign points would be usable by these same exporters to pay duties on manufactured imports, or would be salable to professional importers. Importers would not be induced to embark upon operations now performed by exporters. Cooperative organizations would not be prevented from making contracts direct with foreign receivers, but would not be compelled to undertake export activity unless attracted on ordinary business grounds or through failure of established exporters to bid farm prices up by the full amount which debenture rates would enable them to offer.

HOW DEBENTURE RATES WOULD BENEFIT FARMERS

A debenture rate of 10 cents a bushel on wheat would enable exporters and jobbers to bid for wheat not merely the amount which world-market quotations would permit, after deducting for costs, insurance, and freight to foreign markets, but 10 cents more. If the wheat rate were 20 cents a bushel the bid price in interior American points would be that amount above the price otherwise sure to prevail. As a result, the plan would effect a like increase in the price of wheat actually shipped abroad and in the price of all other wheat in interior American markets.

By relieving farmers or consumers from paying excise taxes or equalization fees, many difficulties are avoided. Hard northern spring wheat, so long as it is on an import basis, benefits by a high wheat tariff of 42 cents. This protection should not be withdrawn from the small group of producers raising that type of wheat. Nor should these producers pay an excise tax or equalization fee to raise the price of export wheat, unless producers of other products, mainly non-agricultural products, also submit to excise taxes. To tax import-basis wheat producers in order to benefit export-basis wheat producers is of doubtful soundness as a public policy. Its constitutionality is questioned by some students of the law. Debentures would avoid the questions surrounding efforts to throw upon consumers through producers or even producers alone the costs of operating bounty plans of either the disguised or the undisguised variety.

PLAN BASED ON FOREIGN EXPERIENCE

This plan for American prices for farm products is in line with recommendations of Alexander Hamilton, the first Secretary of our Treasury. Hamilton apparently based his recommendations on the English system of cash export bounties which had operated for a hundred years before he gave the Congress his report on manufactures. Even the debenture feature in the McKinley plan is not new, having been perfected in Germany a hundred years after Hamilton's recommendations were filed. Owing to constitutional objections to cash bounties not foreseen by Hamilton and not revealed until 1897, the debenture plan seems best suited to the United States. By setting up a rational system of import tax exemptions in behalf of our rapidly-increasing agricultural exports, this plan would pass protection around to producers whose need has been emphasized for several years.

FARM EXPORTABLES A NATIONAL ASSET

The low level of agricultural exports existing just before the World War threatens to return too soon for our national comfort. Of the great wheatexporting countries the United States promises to be the first to take the plunge from the position of national food independence which we have enjoyed through. out our history. That plunge may come long before 1940. At the pre-war rate of decline of agricultural exports it would be hazardous to say that food independence may not pass with the second Coolidge administration.

When England felt herself slipping toward food dependence two-thirds of a century before the French and Indian Wars, she put export premiums into effect and staved off for many years the distressing period of alternating trade currents which precedes the descent to the import basis. English consumers supported the bounties, but the national taxpayers shared the burden.

The United States can plunge all the more rapidly into food dependence because our national policies force high costs on our farmers. Our foreign

trade has been largely built around farm exports. The fatherly hand of the Government should no longer be lifted to sacrifice the firstborn of our exports. If a national surplus of farm products were a danger in time of war there would be less ground for concern. The reverse is the case, however. The nation needs to restore agricultural exports to a position of equality in our foreign trade. The debenture plan affords a corrective. No nation should hesitate to adopt such a corrective so long as international peace is far from guaranteed.

Mr. STEWART. On the 26th of December Senator McKinley, having heard of a plan which I had described in lectures at the University of Illinois, asked that I put it into bill form in order that it might be introduced for your consideration. That bill was introduced January 7, is known as Senate 2289, and provides for a plan of farm relief known as the export debenture plan.

I wish to talk primarily with reference to the machinery of this plan. I have certain information about the conditions of farmers in my State which I would be glad to bring to your consideration, if you need to have such facts as that.

The CHAIRMAN. Of course we do not want to shut any witness off, but I think the committee is pretty well informed as to the agricultural conditions. My own judgment would be that we are more interested in methods of relief rather than description of conditions. Mr. STEWART. I came prepared for that.

Senator MAYFIELD. We are interested in a solution of the problem. Mr. STEWART. Yes, sir; that is what we have undertaken to do. Senator FERRIS. That is what we want.

Mr. STEWART. This bill, I may say, is also introduced in the House and is known as H. R. 7392, introduced by Mr. Adkins. The McKinley-Adkins bill, therefore, is before you for consideration. I want to say that if this plan were put into effect July 1, 1926, the result that should be expected from it would be about as follows:

Those who are engaged in exporting selected farm products would receive by issue from the Treasury of the United States so-called debentures or, as a French writer has called them, import orders. That is to say, the exporter would receive a type of benefit of drawback, as our tariff experts would say, which would amount to an export premium or bounty. It would not be in the form of cash from the United States Treasury. It would be in the form of an exemption from the payment of import tax to the fixed amount set in the rates indicated here in Schedule 1 on page 5 of this bill, and in schedule 2 shown on pages 6 and 7 of the bill

Senator MAYFIELD. Pardon me for interrupting, and I will not do it any more. What are you reading from?

Mr. STEWART. Senate 2289.

Or such other rates as might be decided by the Congress as preferable to the schedule of rates which was placed in this bill for your consideration. I will say that the rates of debenture, as they are called here, are made so as to be the same as the import duty on these same products. Wheat, for example, is subject to debenture at the rate of 42 cents a bushel; flour at the rate of $1.04 per hundredweight. The only difference is that there has been added in here an item which is not found in the dutiable list in the tariff act of 1922. I refer to the item in paragraph 8, cotton and cotton waste, which is here put in on page 6, line 6, for a rate of 5 cents per pound.

The CHAIRMAN. Have they not got a tariff?