The Farm ‘Parity’ Fraud

October 24, 1955

The myth of a farm “crisis” has been built up in recent months by the farm bloc in Congress. Farm income is of course below the Korean-war boom level. But nothing justifies the label of a “crisis.” And apart from this, the “remedies” proposed are utterly devoid of economic sense.

The whole notion of a price “parity” that ought to be perpetually maintained between farm and nonfarm prices is absurd. So is the whole idea that any group of producers is perpetually entitled to some fixed “fair share” of the national income. If there were any merit in such a notion, it ought to be universally applied. If farm prices are to bear the same relationship to nonfarm prices that they bore in the extremely favorable period from 1910 to 1914 (now more than 40 years past), then the price of everything ought to bear that 1910–14 relationship to the price of everything else, and the public Treasury ought to be used to maintain this relationship. Nobody has so far been brazen enough to propose anything so preposterous. Everyone knows that the supply and demand and conditions of cost of production for every commodity change every year. The market, as well as “fairness,” must reflect such changes.

The parity nonsense is not applied consistently even to farm prices. It is applied to half a dozen so-called “basic” commodities—wheat, cotton, corn, tobacco, rice, and peanuts—and about twenty “nonbasic” commodities. Taken all together the value of price-supported items is less than half of total farm cash income. The farmers who raise the other commodities must depend on themselves. But the price supports distort farm-price interrelationships and often increase the pressure on farmers raising unsupported commodities. Cattle raisers, for example, are hurt by the artificially high prices they must pay for feed.

The methods of providing price supports are also inconsistent, one-sided, and about as mischievous as could be imagined. The government makes “loans” to farmers for some crops at the high price level that Congress prescribes. If the price rises even above that level the farmer can sell his crop and make the extra profit. If it falls below that level he can let the taxpayer take the loss.

One result of this system has been the piling up of huge artificially created farm surpluses in warehouses. The government now holds $7 billion worth of farm products in storage. More and more storage space, expensive and but for this foolish plan entirely needless, is being built to hold these mounting surpluses. Even a large number of second-world-war freight ships are now being used to hold millions of bushels of grain.

These surpluses hang over the market, and exercise a depressing effect on market prices. To maintain our artificial farm-price levels we impose import quotas on foreign farm commodities. Worse, we try to dump our government-created surpluses on foreign markets. We thereby create an immense amount of ill will abroad and make a mockery of all our pious advice that the world should lower international trade barriers. The American city worker pays these artificial farm prices both as a taxpayer and as a consumer who is charged more for his foodstuffs in the market.

It would be easy to suggest a less preposterous “farm policy” than the present one. The real gain from the Benson program is not that it provides “flexible” price supports but that it makes possible lower price supports. But the main problem is to get the government altogether out of this fantastic fiasco. It is the program itself that is today creating most of the farmer’s problems. Without it he would not have been encouraged to raise unsalable crops, but could have adjusted himself to actual demand as every other producer must do.

On the economic side it would not be too difficult for the government to get out from under the present program. It could announce a halt in further price support within a year. But what is primarily needed—and what seems to be altogether lacking—is the political courage in Washington within either party to talk sense to the American people on this issue.