AGRICULTURE: Domestic Allotment

What the Equalization Fee was in 1927, the Export Debenture in 1929. Price Stabilization by the Farm Board in 1931, Voluntary Domestic Allotment is to become in 1933—the phrase-of-the-moment on farm relief. Unlike the Fee and the Debenture, it will probably become reality. Whether it will work better than Price Stabilization is the pudding President-elect Roosevelt must prove. Last week Chairman Marvin Jones called his House Committee on Agriculture together to start hearings on his Domestic Allotment bill. Thirty-seven representatives of the National Grange, the Farm Bureau Federation, the National Farmers’ Union and 33 other farm organizations, after a three-day Washington meeting, united solidly for Domestic Allotment. President-elect Roosevelt sent Henry Morgenthau Jr., son of the onetime Ambassador to Turkey, to the Capital as his personal agent. If the Jones bill, amended, passes the present Congress, a Hoover veto is viewed as a certainty. Thereupon Domestic Allotment will become the first business of a special session of the new Democratic Congress. In 1926 the Department of Agriculture’s late Dr. William Jasker Spillman first seriously proposed Domestic Allotment. Professor Milburn L. Wilson of the Montana State College of Agriculture & Mechanical Arts is generally regarded as author of the plan in its present form. His associates in perfecting it include Henry Ingraham. Harriman, now head of the U. S. Chamber of Commerce; Rogers R. Rogers of Prudential Insurance Co.; Henry Agard Wallace, Iowa farm publisher; Louis S. Clarke, president of Mortgage Bankers Association of Nebraska, and William Roy Ronald, editor of the Mitchell (S. Dak.) Evening Republican. As set forth in the “purely tentative” Jones bill, Domestic Allotment would work approximately as follows: Thirty days after enactment, the Secretary of Agriculture would publicly estimate what percentage of the 1933 U. S. production of cotton, wheat, tobacco and hogs will be absorbed by U. S. consumers. To each producer of these four staples he would give an “adjustment certificate” stating his share of the output to be thus consumed. Example: If two-thirds of the wheat crop is for domestic consumption and a farmer is raising 600 bu. of wheat, he would get a certificate for 400 bu.

The certificates, negotiable, would have fixed values as follows: wheat 42¢ per bu.; cotton 5¢ per lb.; tobacco 4¢ per lb.; hogs 2¢ per lb. After harvest the farmer would sell his full crop in the open market. Thereupon the Treasury would step in and collect as an excise tax 42¢ from millers on every bushel of wheat they bought for flour, 5¢ from spinners on every pound of cotton, 4¢ from cigaret & cigar manufacturers on every pound of tobacco, 2¢ from meat packers on every pound of hog. Thus special treasury funds would be created out of which the Secretary of Agriculture would pay off the adjustment certificates held by the producers. The wheat man, for example, if the market were 50¢ per bu., would get $300 for the regular sale of his 600 bu. and in addition. $168 as a Government subsidy, collected from the miller, on his 400 bu. for domestic consumption.

In 1934, under the Jones bill, the Secretary of Agriculture would estimate the domestic consumption before the farmers planted their new crops, and this time “adjustment certificates” would be issued only to those farmers who voluntarily contracted with the Government to accept an “allotment” of production. This allotment might be as much as 20% less than the farmer’s last crop. Those who refused to accept 1934 production allotments would not share in the tax distribution. Producers who broke their contracts and overproduced would likewise be deprived of bounty benefits.

At the House hearings Frederick Lee, lobbyist for the United Farm Organizations, proposed two major changes in the Jones bill: 1) make the 1934 system, with a mandatory 20% acreage cut, apply to 1933; 2) leave the excise tax rates on the four commodities unspecified so that the Secretary of Agriculture could fix them at whatever level would be necessary to restore pre-War price parity for the producers.

First objectors to Domestic Allotment before the House Committee last week were flour millers and cotton manufacturers from whom the special taxes would be first extracted (and who, of course, would pass it along to U. S. consumers in higher prices). Fred Lingham of the Millers’ National Federation warned that bread prices might double and untaxed flour would become a profitable bootleg commodity “unless there was a policeman at every grinding mill.” Said he: “Today not one consumer in a thousand has any knowledge of what is proposed in the way of taxing his actual necessities of life. To him the words ‘domestic allotment plan’ have no definite meaning. What will he say when he understands?”

Charles Cannon. North Carolina towel man, argued the plan would reduce consumption and drive people to the use of untaxed substitutes. He saw ruin for U. S. cotton manufacturers competing with British producers for world markets.

Off the record one skeptical member of the House Committee asked: “How are you going to control hog production? The hogs can’t control themselves and can’t read the bill anyway.”

At present price levels of cotton and wheat, Domestic Allotment means a 100% sales tax, collecting possibly $350,000,000 per year. Its critics promptly pointed out that farm representatives were largely responsible for the defeat of general sales tax legislation as a burden on the poor and yet now they champion that same principle of taxation for their special benefit. Obviously under the plan, consumers would be paying producers a bonus to up commodity prices. Other objections envisaged: 1) a gigantic Federal bureaucracy from Washington down to the smallest farm; 2) possible refusal of a vote-hungry Congress to suspend the taxes x after the emergency; 3) Socialism at its rawest.

Even so, Washington observers reported that many a conservative business man was quietly for the plan. Their attitude: “We must try something drastic to break the circle of depression, so why not this?” Pundit Walter Lippmann thinks Domestic Allotment is “the most daring economic experiment ever seriously proposed in the United States.”