FARMERS: Poor Prophets

Fortnight ago Senator Walter F. George of Georgia declared: “I am absolutely certain that a 12¢ cotton loan on the 1935 crop will be approved and announced within 36 hours.” Echoed Georgia’s other Senator, Richard B. Russell Jr.: “I am expecting the announcement hourly. My only regret is that the loan will not be more than 12¢ —say 14¢ or 15¢ a Ib.” Undeterred by the fact that his two Georgia colleagues had been proved poor prophets, Alabama’s Senator John H. Bankhead last week stoutly asserted: “I think a 12¢ loan is absolutely sure. I have been in constant communication with the President and I have had no intimation of a change in his views. Yesterday the President told Senator George that he was not considering anything but a 12¢ loan.” Two days later AAA announced the Government’s loan offer for 1935 cotton. —9¢ per Ib. Like all false prophets, Senators George, Russell and Bankhead were hopping mad. Either Franklin Roosevelt had deliberately misled them at the White House or they had deliberately misled the cotton-growing South, with a view to putting the President in a hole from which only 12¢ cotton would get him out. Cotton loans at or above the market generally turn out to be not loans at all but an obligation by the Government to GEORGIA’S GEORGE He was absolutely certain. buy cotton that no one else wants at the price. Of the three cotton loans made by the Government, two have been disastrous. The first, at 16¢ a Ib., made by Herbert Hoover’s Federal Farm Board in the autumn of 1929, resulted in the Government’s acquiring several millions of bales of cotton at a price at which cotton has never sold since.— The second, at io/ a Ib., made by the New Deal in 1933, was a success because the price climbed to 12¢; and the Government could get out. The third of 12¢ made last year was followed by a slump of cotton prices to 117¢ with the result that farmers dumped their surplus on the Government which today is sunk with some 5,000,000 bales.

For weeks President Roosevelt has been pulled and hauled between two conflicting ideas on cotton loans. Secretary of Agriculture Wallace saw that the 12¢ loan policy, if extended, would mire the Governmentin surplus cotton, perhaps sink the AAA in financial failure. Therefore he argued stoutly against any continuation of the 12¢ loan. Southern Senators and Representatives, thinking only of political effects, yowled and yammered for another year of 12¢ cotton, warned the New Deal it would lose all its Southern friends if it did otherwise. An able compromiser, President Roosevelt finally approved the AAA plan announced last week. To guarantee farmers 12¢ and still avoid having the Government acquire their surplus at higher than market prices, the Government would 1) lend only 9¢ so that the farmers would get more by selling their product than by borrowing on it from the Government, and 2) pay farmers a direct subsidy to make up the difference between the average market price from September to January and 12¢. The subsidy would be paid only to farmers signed up for AAA’s cotton restriction contracts for 1935 and 1936.

Cotton Senators fumed and spluttered at this open flouting of their predictions. “Disastrous to the entire cotton-growing South!” cried Senator George. “Cotton shippers won a great victory. . . . The plan will be very confusing!” snapped Senator Bankhead. When the market price of cotton slumped nearly 1¢ a Ib. on the news, their outcry rose to a roar. “I am embarrassed and confused!” exclaimed Senator Ellison D. (“Cotton Ed”) Smith of South Carolina. Another South Carolinian, Franklin Roosevelt’s good friend James F. Byrnes, jumped in with an amendment to the Third Deficiency Bill requiring a 12¢ loan on cotton. To get enough votes to ensure victory the Cotton Senators teamed up with the Wheat Senators, helped jam into the bill a 90¢ Government loan on wheat. Such a rampant combination in the Senate wrecked the plan for Congressional adjournment Saturday night (see p. 10).

From the Administration standpoint the advantage of the 9¢ loan & subsidy plan was that it would allow the price of cotton to seek its natural level and thereby encourage cotton exports which have fallen off badly as a result of the pegged price. This long-range advantage did not appeal to Southern Senators. They bellyached mightily to the effect that a 9¢ loan sounded cheap and shoddy to their constituents who had learned to expect bigger and finer things from the generous New Deal. Unexpressed, but probably more potent, was the fact that Cotton Senators knew that cotton mills and speculators in the South who had bought cotton at 11¢ would suffer a loss if AAA moved its price peg down 3¢. Two days later, anxious to send Congress packing. President Roosevelt offered to lend 10¢ instead of 9¢, and Congress adjourned in a flare of fireworks staged by Senator Huey Long, unassisted (see p. 10).

—Last week a special Senate subcommittee investigating the price-pegging cotton and wheat operations of the late Federal Farm Board disclosed a loss of $344,000,000 (69%) of its $500,000,000 revolving fund in trying to buck the law of supply & demand.