Houses Divided

As Congress met last week, Senator Arthur Capper of Kansas, his face stamped with anxiety, visited the White House. To President Hoover he stated his problem: Kansas granaries bulged with 40,000,000 bushels of 1928 surplus wheat held for export. It hung over the incoming crop, an imminent incubus. It could not be moved to seaboard with a transportation loss to the producers of 8-c- per bushel--a freight rate advantage enjoyed by Canada and Argentina on the wheat for the world market. Said Senator Capper: "This wheat must be moved in the next three months, as July wheat will then be coming into the market. Otherwise there would be no storage facilities. ... I have proposed to the Interstate Commerce Commission that they permit railroads to revise freight rates for 60 days so as to place the Kansas farmer on a parity with Canada and Argentina. . . ." Leaving the President's office, issuing his statement to the press, posing for photographers, Senator Capper was not an impressive figure. Nevertheless his words started a visible commotion in the grain world. Next day, the mild vagueness of President Hoover's message to Congress on farm relief heightened the unrest. Wheat prices dropped 4-c- per bushel.

President William Beatty of the New York Produce Exchange tried to counter-balance the Capper statement by calling it premature, by picturing "the vicissitudes of drought, too much moisture, frost and hot winds" through which the next wheat crop must pass before it is harvested. But while Mr. Beatty was trying to bolster up the market, estimators in the U. S. Department of Agriculture were putting together initial figures which pointed toward the bumpingest U. S. wheat crop of recent years. The G. O. P. promised farm relief absolutely-without-fail for this year. U. S. farmers planted accordingly, lavishly. House Bill. Across this agricultural scene, the Congress continued to plod its well-worn legislative path. The House debated the Administration's bill in the old familiar manner, though agricultural thoughts once green with originality, theories once juicy and new, were now sere. The Administration bill is aimed at the middlemen, the grain-dealer and his elevators, the speculator in the trading pit. It provides a strong Federal Board and a half-billion of U. S. credit, to encourage the farmers to join co-operative associations and do their own marketing. The Northwestern Grain Dealers' Association met last week at Cedar Rapids, Iowa, to denounce the Administration bill, to complain that, as citizens, they would be taxed to help kill off their own business. Senate Bill. The Senate Agricultural Committee brought forth its relief bill containing a bar of politico-economic dynamite so hot that the Senate put the measure aside to cool for a few days. In principle the Senate bill mirrored the House legislation--a powerful Federal Farm Board with $500,000,000 to finance farm co-operatives--but with this difference: in place of the "Equalization Fee" which wrecked all attempted farm bills in the Coolidge Administration, there was introduced something called "Export Certificate Debentures." Export Certificate Debentures. The export debenture plan, left optional with the Farm Board in the Senate bill, was as follows: Commodity exporters would be given a bounty equal to one-half the import tariff* rate on their commodities, not in cash (that would be subsidy) but in script negotiable only against U. S. import duties. Example: At Duluth, a farmer or a co-operative marketing association sells 1,000 bushels of wheat for export. The tariff on wheat is 42-c- per bushel. The exporter gets the world price. In addition, he gets his Federal bounty of half the tariff rate, or 21-c- per bushel, in the form of a debenture certificate--$210 for 1,000 bushels. The U. S. does not cash these certificates. But the exporter can present them in payment of tariff duties on anything he wants to import, such as British motor cars, Paris gowns, German toys. Or, the exporter can sell his certificates (within the year) to an importer who in turn presents them at a Customs House. The U. S. Treasury pays out no money, but its tariff revenue is reduced in direct proportion to agricultural exports. The purposes and effects of the export Debenture plan are obvious: 1) to encourage agricultural exporting, thus reducing the domestic surplus; 2) to equalize the benefits of the tariff. Objections. To three members of his Cabinet--Secretaries Mellon, Hyde and Lament--President Hoover assigned the task of discovering weaknesses, faults, economic sophistries in the export debenture plan. They dutifully assembled all possible arguments, which President Hoover then consolidated in a ten-point broadside against the plan. In a public letter to Chairman McNary of the Senate Committee on Agriculture, he contended that export debentures would: 1) Be a $200,000,000 per year "direct subsidy"; 2) be a "gigantic gift" to speculators "without a cent return to the farmer"; 3) cause overproduction; 4) retard diversification; 5) be resorted to by the Federal Farm Board because "the tendency of all boards is to use the whole of their authority"; 6) produce "manipulation" in the export market; 7) necessitate further tariff revision; 8) invite foreign retaliations; 9) put U. S. livestock men at a disadvantage by raising U. S. feed prices; 10) increase U. S. taxes. President Hoover summed up: ". . . [its] theoretical benefits would not be reflected to the farmer; it would create profiteering; it contains elements which would bring American agriculture to disaster." Division. The Hoover blast against the debenture plan came after farm politics had divided House and Senate. Farm lobbyists were once more in full, though discordant, cry. The American Farm Bureau Federation had backed the administration (House) bill. The National Grange had favored the debenture (Senate) plan. Careful not to blame Congress too early in the session and talking over its head to the lobbyists behind the legislators, President Hoover had "deplored" the dissension among the farmers themselves, urged them to compromise their differences. Senator McNary was blown around to President Hoover's view, but his committee voted eight to six to ignore the President's objections and argue out debentures in full senate. President Louis John Taber of the Grange, good Hoover friend though he was, said: "Our opinion as to the workability of the debenture plan has not been changed." ^

*In the U.S. "import tariff" and "tariff" are synonymous. Export tariffs are prohibited by the Constitution.