to the farmer in the manner which I have described in a way that would not elevate the price.

I think that could be done by means of a contract between the Farm Board, or some Federal agency, whereby the farmer would agree to accept this tariff benefit, this equalization fee, if you call it such, provided he did not increase his acreage; provided he did not increase the acres which he had planted or would plant, and possibly agree to decrease them. So that we have injected this element in it, you see, this contract-this contractual relationship, taking the income which comes from the excise tax, making it voluntary with the farmer as to whether or not he cared to accept it. If he did care to accept it, then he would accept it on the basis of the contract that he would not increase his acreage, or, if required, that he would slightly decrease his acreage.

Another element has been the element of putting it up to the people themselves; consequently, we here propose that if such a plan were to be put in operation, the movement for it should be started by a petition from 10 per cent of the farmers producing a commodity, or 10 per cent of the acreage. It has been our idea that this should be a voluntary thing, and not a compulsory measure, and that it should start, we will say, with this petition representing 10 per cent of the producers, after which the Farm Board would offer a cooperative memorandum of agreement with the governors of the various States whereby a vote would be taken on-I prefer to talk about wheat, because I am more familiar with wheat than with the other commodities whereby a vote would be taken by the producers of wheat as to whether or not they wanted to go into this plan. I think that vote could be taken with very little expense, through the agricultural colleges and through the experiment stations-through the extension. services. If the plan were put into operation-well, I should say that I do not believe that a plan should be put into operation unless 60 per cent of the producers would vote in favor of the plan. This would mean that a meeting would be held in every township in the United States in which wheat is produced. The plan would be discussed thoroughly by all producing farmers, who would understand it, and it would develop a morale and develop a sense of responsibility and a sense that this was something which they, as wheat producers, wanted, and they had put forth these efforts and this campaign in order to get it.

If the proposal carried

The CHAIRMAN (interposing). May I ask, Professor, has this proposal of yours ever been reduced to writing and introduced in the form of a measure?

Mr. WILSON. We have worked out a bill, Senator, which is practically complete. There are a few minor items that might be changed slightly, but it is practically ready for introduction.

Senator BROOKHART. You say it would increase the prices about $700,000,000?

Mr. WILSON. It would increase the purchasing power, if we applied it to those five commodities I gave you, at the rate I gave. Senator BROOKHART. If we require $5,000,000,000 increase in purchasing power, it would not do much good, would it?

Mr. WILSON. It would do good to the extent

Senator BROOKHART (interposing). It would be cutting a short piece off the dog's tail, that is all it would amount to. What we need is increased purchasing power of $5,000,000,000 or $6,000,000,000. Mr. WILSON. This would add 3 cents a pound to pork.

Senator BROOKHART. That would leave it about half of what it ought to be.

Mr. WILSON. It would add 42 cents to wheat. The cost of administration would be taken out of

Senator BROOKHART (interposing). Now you have had some experience with figuring on the cost of production. You were at the head of that at the Department of Agriculture, I believe you said, a couple years?

Mr. WILSON. Yes, sir.

Senator BROOKHART. Now, what were the elements you used down there in figuring the cost of production?

Mr. WILSON. Well, that is a long story, Senator

Senator BROOKHART (interposing). Well, we do not care

Mr. WILSON. The ordinary figures on the cost of production have to give way

Senator BROOKHART (interposing). All you allowed the farmer for his work was what he got out of the low prices, and the wages that were paid; you did not give him a living wage for his work; you did not figure that in?

Mr. WILSON. We gave him, as I recall-it is said that the labor cost is what he paid for labor. His living cost and those things were over and above that, which remained after this

Senator BROOKHART (interposing). Is that the wage you figured, at what he got out of the low prices?

Mr. WILSON. Yes, sir.

Senator BROOKHART. And depreciation, what allowance was made on that?

Mr. WILSON. Well, that would vary with the kind of things, whether it was the house, or whether it was a binder. We tried to get at the rate of depreciation that was real. If a binder would last 10 years, we depreciated it 10 per cent.

Senator BROOKHART. Work animals and breeding animals, were depreciation allowed on those?

Mr. WILSON. Yes, sir.

Senator BROOKHART. Well, now, the farmer is entitled to the cost of production price for his products with depreciation figured as industry figures it, and with a wage that would be a comparable wage to the industries for his labor, is he not?

Mr. WILSON. Well, I would not argue about his being entitled to it, Senator, but how to get it, do not ask me that question.

Senator BROOKHART. Well, we learned how to get it in the Wheat Corporation during and after the war, and did get it. And what worked then would work now and would get it, and anything short of that is not going to give us farm relief, is it?

Mr. WILSON. The plan that I have suggested is one of making the tariff effective, tie this benefit down to individual farmers, so that that elevation in price will not cause any increase in the production, and decentralizing the administration of it, so that the farmers in the counties do it.

The CHAIRMAN. Well, your plan resembles, in some respects, the equalization fee plan that was in the two bills which were vetoed by President Hoover. It is the exportable surplus necessary to meet the market demand.

Mr. WILSON. Yes; that part of it.

The CHAIRMAN. And 90 per cent of the whole crop is used for domestic purposes?

Mr. WILSON. Yes, sir.

The CHAIRMAN. You will issue an allotment certificate to cover that and, therefore, you attempt to make your price equal the world price, with 42 cents?

Mr. WILSON. Yes, sir.

The CHAIRMAN. That was the equalization plan.

Mr. WILSON. All right.

The CHAIRMAN. And the 10 per cent you turn loose to the farmer. He can export it or burn it up, or do what not with it. In my view, it is not nearly as beneficial to the farmer as the old plan, which attempted to help him to handle the exportable surplus. I am curious to know why you turn him loose with the 10 per cent that he could not handle.

Your plan is not new to me. I had it sent to me by the professor from Harvard. I am not contending with it. I am just pointing out that it is an old plan that was vetoed by President Hoover.

Go ahead, Professor, and let us have the rest of it.

Mr. WILSON. Those are the essential features, Mr. Chairman. Mr. SIMPSON. I want to get a bit of information, Mr. Chairman. In arriving at the cost of production, did you figure interest? Mr. WILSON. Yes, sir.

Mr. SIMPSON. At what rate?

Mr. WILSON. We figured cost of production in every possible way. If you tell us how you want it figured, we will figure it that way. Mr. SIMPSON. I just wanted it for information. Do you remember how you figured it?

Mr. WILSON. We figured the rate on the land, at the prevailing rate. In Oklahoma it might be 8 per cent, and in Nebraska it might be 6 per cent. The going rate might be 6 per cent or 8 per cent.

But the essential change that is developed in this, Senator, since you have seen it from Doctor Black, is the contract to prevent the increase of acreage on the one hand, and keeping its operation level on the other.

Senator BROOKHART. Now, since the acreage has been declining per capita and yield, and everything else, since 1900, and is still declining, why do we have to be so particular about the overproduction proposition?

Mr. WILSON. Well, we have some commodities now, Senator, that we would kind of like to dispose of, I guess.

Senator BROOKHART. Yes; but the Industrial Economic Board, in analyzing it, shows that an economic plan has been and is now in operation, and has been since 1900; and the consumption rate should increase. In other words, the population is growing faster than the production, and that is going to continue in the future. So why be so particular, when the surplus is declining?

Mr. WILSON. How about the foreign markets, Senator, when

Senator BROOKHART (interposing). We have the same job we have always had. The foreigner is not buying anything of us unless he has to. We have always had a foreign market for our products. We brought billions into the United States by the exporting of foreign products. And Germany will buy from us when they do not produce enough for themselves. England has to buy from somebody all the time. France will buy when they do not produce enough for themselves. But if we have a centrally financed control, one centrally financed control could make better contact with the world than 40 or 50 selling agencies. One agency, properly financed, could do better with that cotton and wheat than the many that now export. Now, that is my theory of the way to go at that. Do you see anything wrong with that?

Mr. WILSON. Well, that takes us over into another field, Senator, that, I am afraid, would take up too much time this morning. The CHAIRMAN. Any further questions of the Doctor? [After a pause:] We are very much obliged to you.

At this point I want to introduce a letter containing the plan of Doctor Black, which has been commented on by Doctor Wilson this morning. Iwant to place this in the record, without objection.

(The letter and statement are here printed in the record in full, as follows:)

Hon. CHARLES L. MONARY,

CHICAGO, ILL., April 20, 1932.

United States Senator, Senate Office Building, Washington, D. C. DEAR SENATOR MONARY: I am inclosing a brief statement touching upon the principles of the so-called allotment plan developed in principle by Prof. John D. Black, of Harvard University.

I will be in Washington within the next day or two and hope to have an opportunity of discussing this plan with you in the expectation that your committee may desire its presentation to them when hearings are conducted on farm legislation, which the press reports say will be next week.

I have been requested to transmit this memorandum to you by a meeting held in Chicago this week at which some of the eastern industrialists and insurance companies were represented.

I am at present professor of agricultural economics of the College of Agriculture of Montana and formerly was chief of the division of farm management in the United States Department of Agriculture.

Will you kindly advise me at the Cosmos Club in Washington what time it will be convenient for me to see you?

Very sincerely yours,

M. L. WILSON.

APRIL, 20, 1932.

The domestic allotment plan contempltes makes the tariff effective for the farmer on that portion of his crops consumed in America, leaving the surplus free to flow into the world markets at world prices. It is intended to apply to all crops of which we produce an exportable surplus (except corn).

As applied to wheat it contemplates that, under proper supervision and direction from the Federal Farm Board or the Secretary of Agriculture, a local committee in each county in every State producing wheat

(1) Will issue a negotiable certificate (allotment certificate) to produce the same number of bushels of wheat on a given acreage as was produced on an average during the five preceding years. This allotment certificate is issued to the landowner, is transferable and made of public record.

(2) Upon the sale of the crop, the local buyer will issue to the seller a negotiable certificate (equalization certificate) covering the proportion processed for the domestic market (roughly estimated at 80 per cent of the amount of the crop) at 42 cents a bushel (the amount of the tariff).

(3) For the remaining 20 per cent no equalization certificate will be issued and this portion of the crop will flow into the world's markets at the world price, used for feed, or otherwise disposed of.

(4) No processor will be permitted to manufacture any wheat product for the domestic market without having in his possession an equalization certificate or certificates representing the number of bushels processed. The processor will thus be compelled to buy the certificates.

(5) Intermediate credit banks may be named as the depositories in which equalization certificates may be deposited and from which purchases of certificates may be made.

(6) (a) The purpose is to give to the wheat producer an American price (world price plus the tariff) for the proportion of his crop consumed in America, independent of the world price for the surplus.

(b) There is no limit placed upon the amount of the farmer's production but all of the excess above domestic requirements (for which certificates are not issued) must be sold at the lower world price, used for feed, or otherwise disposed of.

(c) There is no tax or fee imposed upon the farmer but the benefits of the plan upon the crop are measured by the size of the crop (the larger the crop above domestic requirements, the smaller the benefits).

It is believed by the proponents of the plan that by bringing home to the farmer in such a direct manner the effect upon his price of products for export markets will result in his not increasing his acreage, particularly if the benefits of the plan are extended to all major crops.

(d) The resulting higher price for the domestic market will be paid by the processor and, of course, collected ultimately from the consumer so far as competitive conditions permit and in this respect its effect is identical with the practice of industry operating under the protective tariff.

(e) Example of farmer producing 1,000 bushels of wheat on 5-year acreage as determined by local committee operating under direction and supervision of Federal Farm Board or Secretary of Agriculture.

At present: 1,000 bushels of wheat, at world price, 60 cents, Chicago----- $600

Under allotment plan:

800 bushels, at world price, 60 cents plus 42 cents tariff ($1.02) 200 bushels, at world price, 60 cents, at Chicago---

816

120

Or 33.6 cents per bushel on the 1,000 bushels.

(f) The only reduction of the benefits from the equalization certificates in this example would be a slight discount from the face value in the event the farmer sold his certificate in anticipation of its use by the miller.

(7) Tobacco, cotton (with a tariff upon all grades), rice, and other crops of which we produce an exportable surplus, may be brought in under the plan. (8) Livestock and corn: These products are so interrelated that it may be possible that simpler methods may be devised either under the equalization fee or the debenture plans. In the latter plan, however, provision should be made for the cost of the debentures to be recovered probably by a tax or fee on processing of the livestock.

The CHAIRMAN. Now I think from the statement made yesterday that Mr. Stone, chairman of the Federal Farm Board, will appear before the committee.

Senator NORBECK. I would like, Mr. Chairman, to remain with this committee throughout the rest of the session. I realize that matters of a most far-reaching importance are before the committee, probably as important as anything in Washington; but I am chairman of another committee that has a meeting this morning and I shall have to go into another meeting.

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