Monday, Jan. 11, 1926

An Issue Born

With the reopening of Congress, political observers began to look one at another, questioning eye to questioning eye, and ask, "Hasn't the question of the dominant political issue during the coming year been settled during the holidays?"

They wanted to answer "Yes," but their respect for their reputations kept them from committing themselves. What they were strongly inclined to believe was that the problem of surplus agricultural products and consequent low returns to farmers had become predominant. Already that issue has involved the dormant tariff issue.

It may involve other issues. It may affect the whole legislative program in Congress through log-rolling by the farm bloc. It is likely to be an important factor in the Congressional elections next fall. Its influence may go even further.

The Trouble. All issues arise from somebody's trouble. This issue arises out of financial misfortune in farming communities. It centres for the present in Iowa: the price of corn, bank failures, etc.--the entire round of agricultural depression. The leaders of the issue-makers are Senator Capper of Kansas and Representative Dickinson of Iowa, both Republicans, champions in the two Houses of Congress of a rapidly reviving farm bloc.

In Iowa a farm meeting called by bankers passed resolutions calling for disposal of surplus crops through a government organization. All thirteen Iowa Representatives in Congress were-present at the meeting. Representative Dickinson announced the preparation of a bill creating a Farm Commission to aid private organizations to dispose of surpluses of various crops, lending them Government money. Senator Capper worked on a bill for an export "corporation also to be aided by Government funds.

Conflict of Principle. The Administration classes this sort of proposition loosely as price fixing (TIME, Jan. 4), holds that it will not benefit the farmers permanently, holds that somebody will have to stand a great financial loss--and does not want the Government to be the loser. Whether or not these measures would leave the Government to pay the bill depends on their details--not yet announced by Messrs. Capper and Dickinson. Whether the Administration would permit private organizations to take a risk which they regard as unsound for the Government to assume, is a matter of policy not announced by Messrs. Coolidge, Jardine and Hoover.

Administration Attitude. Secretary of Agriculture Jardine is doing all he can to placate the farmers. Within a few days he is to confer in Washington with farm editors, with farm leaders of note (Frank 0. Lowden, Aaron Shapiro, Sam Thompson), with a conference of cooperative marketing associations. Some of the supporters of the Administration's position blame Iowa's troubles largely on Iowa's banks. Iowa normally feeds about four fifths of her corn to hogs. Last year the corn crop was small, and Iowa farmers sold many hogs, presumably under bankers' advice. This year the corn crop is large. That of itself tends to lower the price. The quality of the crop is poor, which tends to lower the price further. And since there are fewer hogs, more than the usual proportion of the corn crop is forced on the market, lowering the price still further. The argument is that the bankers gave bad advice last year. Moreover, the argument goes on, Iowa has 1,625 banks ana 2,500,000 people--one bank to every 300 families--too many banks, hence weak banks, hence more trouble in a bad year.

Farm Attitude. The farmers answer in effect that these considerations are not fundamental. Because of our protective tariff, all we buy is high priced. Because we have a crop surplus, the prices of what we sell are determined by foreign prices. We buy expensively and sell cheaply.

From this argument pressure for lower tariffs again comes into the controversy. (See TARIFF.)

Three Avenues. There are three ways of going about a solution of the farmers' difficulties:

1) To go about price fixing.or its equivalent--some sort of export device to get rid of the farm surplus--the proposal of the farm bloc. They argue that prices are low because all the farm produce in which there is a surplus is sold at European prices. They say let a barrier be put up to maintain a high price in the domestic market, and take a loss if necessary on the surplus sold abroad. To this the Administration answers: If the farmers profit on their product, they will produce more; the surplus will grow larger until the loss on the surplus will eat up the domestic profit.

2) To reduce the tariff by bringing down the level of domestic prices until the farmer can buy at prices in proportion to what he sells. To this proposal the Administration and industry in general, object vigorously--they do not want the price level torn down.

3) To go about direct restriction of farm production--to get rid of the problem of the surplus by getting rid of the surplus. There are practical difficulties in the way of such procedure, although they might perhaps be overcome. It might lead to foreign ill-will and would look a bit inconsistent in the face of U. S. protest against British restriction on rubber production (TIME, Jan. 4). This third avenue is apparently not being forcibly suggested by any group, although the Department of Agriculture hinted at it in a report on 1924 crops last week:

"Potatoes, with a 7% cut in acreage, a 24% smaller production, but a gross crop value about 2 1/2times that of 1924, give an inkling of what ultimate curtailment on the farms might mean."

The Future. Farm depression as an issue depends 1) on future U. S. crops and the world trend of prices; 2) on whether the Administration can find some proposal satisfactory to the farm bloc without agreeing to either or both of their demands-- "price fixing" or tariff reduction.