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No. 36 "The Farmers' Home Bill: An Analysis of a Proposed Experiment in Socialism Which Would Increase Government Obligations by a Billion Dollars, Encourage Farmers to Contract Debts Without Improving Their Ability to Pay Them, Subsidize a Particular Class of Citizens and Afford an Opportunity for Scandal and Political Favoritism," May 20, 1935.
No. 36 "The Farmers' Home Bill: An Analysis of a Proposed Experiment in Socialism Which Would Increase Government Obligations by a Billion Dollars, Encourage Farmers to Contract Debts Without Improving Their Ability to Pay Them, Subsidize a Particular Class of Citizens and Afford an Opportunity for Scandal and Political Favoritism," May 20, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_36 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 36 "The Farmers' Home Bill: An Analysis of a Proposed Experiment in Socialism Which Would Increase Government Obligations by a Billion Dollars, Encourage Farmers to Contract Debts Without Improving Their Ability to Pay Them, Subsidize a Particular Class of Citizens and Afford an Opportunity for Scandal and Political Favoritism," May 20, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. Pamphlets Available â˜… Copies of the following pamphlets and other League literature may be obtained upon application to the League's national headquarters: Why, The American Liberty League? Statement of Principles and Purposes American Liberty League Its Platform An Analysis of the President's Budget Message Analysis of the $4,880,000,000 Emergency Relief Appropriation Act Economic Security A Study of Proposed Legislation The Bonus An Analysis of Legislative Proposals Inflation Possibilities Involved in Existing and Proposed Legislation The Thirty Hour Week Dangers Inherent in Proposed Legislation The Pending Banking Bill A Proposal to Subject the Nation's Monetary Structure to the Exigencies of Politics The Holding Company Bill An Analysis of Proposed Legislation "What is the Constitution Between Friends?" Speech by James M. Beck Where Are We Going? Speech by James W. Wadsworth Price Control An Analysis of Experiments and Recommendations for the Future Yesterday, Today and Tomorrow A Review of Factual Analyses and a Discussion of the Legislative Situation The Labor Relations Bill An Analysis of an Undesirable Measure Government by Experiment Speech by Dr. Neil Carothers How Inflation Affects the Average Family â– Speech by Dr. Ray Bert Westerfield The AAA Amendments A Study of Proposals Illustrating a Trend Toward Fascist Control of Agriculture and Other Industries Political Banking Speech by Dr. Walter E. Spahr The Bituminous Coal Bill An Analysis of a Proposed Step Toward Socialization of Industry Regimenting the Farmers Speech by Dr. G. W. Dyer Extension of the NRA A Recommendation for Action to Rescue American Business from a Quicksand of Bureaucracy and Visionary Experimentation Human Rights and the Constitution Speech by R. E. Desvernine â˜… AMERICAN LIBERTY LEAGUE NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… THE FARMERS' HOME BILL â˜… â˜… â˜… An Analysis of a Proposed Experiment in Socialism Which Would Increase Government Obligations by a Billion Dollars, Encourage Farmers to Contract Debts Without Improving Their Ability to Pay Them, Subsidise a Particular Class of Citizens and Afford an Opportunity for Scandal and Political Favoritism AMERICAN LIBERTY LEAGUE T^ational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… Document No. 36 May, 1935 The Farmers' Home Bill â˜… The Farmers' Home Bill (S. 2367) proposes an adventure in paternalism which offers no real solution of the existing tenant problem and would prove costly to the taxpayers. It is one of a group of measures which, however worthy in purpose, would prove impractical in operation and would serve to delay recovery. Some of the objectionable features of the bill are: 1. It proposes without constitutional authority to authorize the government to buy land. 2. It is a step towards socialization of agriculture. 3. It provides a subsidy to enable one class of farmers to compete against another. 4. It is inconsistent with other present policies in that it encourages new agricultural production by fanners hit by AAA restrictions. 5. It proposes to allow governmental loans up to 100 per cent of the value of the collateral. 6. It makes it easy for farmers to contract new debts but offers no promise of improved ability to pay them. 7. It increases the contingent obligations of the government by a billion dollars. 8. It offers an opportunity for scandal and political favoritism. 9. It is unnecessary inasmuch as rural rehabilitation is provided for in the four-billion-dollar work-relief appropriation, if that act is held to be constitutional. History of Bill The bill, introduced by Senator Bankhead of Alabama and approved by the Secretary of Agriculture, is intended, according to its title, to promote more secure occupancy of farm homes and to correct the economic instability resulting from some present forms of farm tenancy. While applicable to the entire country, it is especially designed to provide assistance to tenants and share-croppers in the South. The Senate Committee on Agriculture reported the bill favorably on April 11, 1935. It was debated in the Senate and returned to Committee on April 24 with instructions to report it back with modifications by May 12. The Committee 3 approved on May 9 a revised measure containing restrictions and safeguards which were not in the original bill. Its Terms The bill creates a Farmers' Home Corporation under the management of a Board of Directors of five members, consisting of the Secretary of Agriculture and the Governor of the Farm Credit Administration as members ex-omcio and three members appointed by the President at salaries not in excess of $10,000. The revised bill provides that not more than two of the appointive members shall belong to the same party. Capital to the amount of $50,000,000 shall be subscribed by the President from funds appropriated by the Emergency Relief Act of 1935. Bonds in an aggregate amount of not to exceed $1,000,000,000 may be issued, fully and unconditionally guaranteed both as to interest and principal by the United States. The Treasury is authorized to purchase the bonds and to borrow money for the purpose. The revised bill provides that none of the bonds shall be issued within one year after the enactment of the law and not more than $300,000,000 within three years. The Corporation is given authority to establish and to assist in the establishment of small individual farms and farm homes, together with the necessary buildings and other structures, live stock, equipment, implements and machinery, furnishings, supplies and facilities. The revised bill is broadened to include farms and homes on the public domain and in reclamation projects. Preference shall be given applicants for the purchase of farm homes who are married or who have dependent families and who are or recently were farmers, farm tenants, share-croppers or farm laborers. New provisions in the revised bill seek to guard against unsound loans. Amortization of loans may be provided for over periods as long as 60 years. The interest is at as low a rate as the government can secure the money plus a reasonable administration charge of not to exceed one per cent per year. The Corporation is given power to employ and fix the compensation of officers, employees, attorneys and agents. The revised bill, unlike the original measure, requires appointments to be made within Civil Service and Classification laws. 4 The Tenant Problem Farm tenancy has increased in the United States in recent years. Latest available census figures show that on April 1, 1930, there were 6,-288,648 farms of which 2,664,365, or 42.4 per cent, were operated by tenants. Two-thirds of the tenants were white and one-third colored. Between 1920 and 1930 white tenants increased by 200,000, while colored tenants decreased by 4,000. The percentage of tenants is larger in the South than elsewhere. In the southern states there are what are known as share-croppers, who rank below tenants in the social scale. The system in the South is an outgrowth of the situation existing after the Civil War, when the former slaves were glad to have the security afforded by tenancy on the plantations where they always had lived. A unique plan grew up wherein tenants and sharecroppers were financed by landlords who in turn were financed by local merchants. The collapse of cotton prices in the depression led to a breakdown of the credit system. The subsequent curtailment of cotton acreage under the Agricultural Adjustment Act forced out thousands of tenants and share-croppers. At present, according to officials of the Federal Emergency Relief Administration, there are 300,-000 farmers in the South on the relief rolls as compared with 300,000 in the drought states and 200,000 in all other states. If the AAA program were effective, the destitution among farmers in the South should be relatively less than elsewhere. Cotton has been most prominent among the commodities involved in benefit and crop curtailment plans. Recovery Impeded Some of the sponsors of the pending bill are actuated by a desire to reform the social system and improve the living conditions of the tenant and share-cropper classes in the South. Admittedly, there are evils which should be remedied. The current acute situation, however, represents primarily a relief problem, caused in part by mistaken policies of the present administration, which have destroyed foreign markets for American cotton and driven thousands of workers into the relief lines. The attempted remedy merely complicates and 5 obstructs the progress of recovery. The best assurance of a correction of conditions in the South will come with the abandonment of these policies. Paternalistic policies offer no hope of a permanent solution of the problems. The invariable fate of paternalism was illustrated in the failure of two land settlement colonies promoted by the State of California under an act of its legislature in 1917. A report of the Division of Land Settlements of the Department of Agriculture of California, commenting upon reasons for the abandonment of the project, said under date of June 30, 1931: "The conclusion is unavoidable that few human beings are fashioned from sufficiently rugged fiber to withstand the weakening influences of paternalism, that few can resist the temptation to lean too heavily on a paternal government where the opportunity offers." Constitutionality The constitutionality of the bill has been questioned by Senators of both parties. A few of the comments during debate in the Senate follow: Senator Alva B. Adams, Democrat, Colorado "My honest, deliberate judgment is that the pending bill is unconstitutional. There is a fundamental in the levying of taxes that they must be for a public purpose. The purpose of this bill is to appropriate money to buy farms for private individuals. That is not a public purpose and cannot be sustained under the Constitution of the United States. It is no answer to that question to say that the Congress has passed other unconstitutional measures." Senator Josiah W. Bailey, Democrat, North Carolina "If anyone has ever found anything in the Constitution authorizing the government to buy real estate, I should be glad to have him show it to me." Senator Carter Glass, Democrat, Virginia "It seems to me that the bill is clearly in conflict with the express provision of Section 8 of Article I of the Constitution, which prohibits the government of the United States from acquiring by purchase any property in any state without the specific consent of the legislature of the state." Senator William H. King, Democrat, Utah "In my opinion, this measure may not be defended upon constitutional grounds, and it is saturated with socialistic, or at least paternalistic, qualities foreign to democratic ideals and the concepts of the founders of the Republic." | Senator Warren R. Austin, Republican, Ver- I mont "It seems to me that the whole effect of the Constitution is against the theory of the \ Federal Government reaching over the boundary of the state and undertaking to become a proprietor, in a business sense, of any of the lands of that sovereign state." Senator L. J. Dickinson, Republican, Iowa "I do not believe the government under the Constitution was ever expected to go into the land business. I believe that what the government cannot do directly it cannot possibly do by the agency of setting up a Corporation." American Principles The bill represents a radical departure from American principles. It is a step toward socialization of land. It means a Russianization of agriculture. It points to an intrusion by the Federal Government into the ownership and management of farm land in competition with private owners. It subsidizes one group of farmers and gives them an unfair advantage over others. The bill gives authority to establish and assist in the establishment of farms and farm homes, including the financing of buildings and equipment, and the further authority, as set I forth in the language of the bill, "to acquire by | purchase, gift, or otherwise, any real or personal i property or any interest therein, and to improve, develop, maintain and sell any such property or interest therein." Such authority is ample basis for almost any kind of socialistic experiment. The provisions of the bill are so confused that it is impossible to know what may actually be done if it is enacted into law. It may be noted that the Corporation is given authority to develop and maintain farm properties as well as to finance prospective home owners. If present tenants and share-croppers are elevated to nominal ownership, their equities will be so small that the Corporation, as the mortgage holder, will be in a position to dominate them. Whether the Corporation retains title to the land or finances its purchase, the enterprise is definite Socialism. Policies Involved Strange contradictions are involved in the policy of encouraging farm ownership by present and former tenants and share-croppers. Much of the present distress in the South is due to the reduction of cotton acreage which has meant the elimination of many tenants and farm laborers. The pending bill proposes to put these persons back on the farms. In the South it can mean only more cotton acreage. The theory doesn't square with the production curtailment policies of the AAA. Senator Ellison D. Smith, Democrat, of South Carolina, the Chairman of the Senate Committee on Agriculture, which reported both the Farmers' Home Bill and the pending amendments to the Agricultural Adjustment Act, frankly told the Senate that there was no consistency in policy in the two measures. "On the one hand," he said, "we are restricting, curtailing, licensing, regimenting, and, on the other hand, we are throwing the door wide open with a billion dollars to increase the number of farmers." One important question of policy involves the desirability under present conditions of encouraging farm ownership. To aid tenants to acquire their homes in normal times when a farm is a reasonably good investment is one thing. To impose responsibility for ownership upon tenants in a period when it means a constant drain on capital is quite another. Settlers on reclamation projects, which were financed on a much more conservative basis and on which the chances for successful farming were more favorable, in many instances went broke. Many of the tenants and share-croppers lack sufficient training to manage farms successfully. A large proportion would be unable to keep up their payments. Unless the government used harsh measures, ejecting delinquents, the farmers soon would be living on its bounty. The result would be a government-sustained peasantry. The United States cannot stand that. It is not in our heritage. 8 Financial Unsoundness The bill is unsound from a financial standpoint and, significantly, was not submitted to the Treasury Department for an opinion. The measure creates a billion-dollar banking institution entirely independent of other government agencies. Never before in legislation applying to a permanent credit agency has it been proposed that the government should lend an amount equal to 100 per cent of the value of the collateral. There is no requirement for any kind of initial payment. Under the 60-year amortization limit a principal payment of $50 annually on a $3,000 farm would be sufficient. A very low interest rate would be fixed. While the bill encourages a farmer to get into debt to the government, what happens if he cannot or will not pay? An individual who has been unable to accumulate enough to make an initial payment toward a farm is unlikely to be any better off by assuming a debt equal to its entire value. The burden of debt has been responsible for much of the agricultural distress of the period since the World War. Governmental encouragement of new indebtedness involves the farmer in new difficulties and goes counter to time-honored principles of thrift. In the end it will be the taxpayer who bears the load. The government assumes a new contingent liability in $1,000,000,000 of bonds which it guarantees as to principal and interest. There is a much greater prospect of defaults than in the case of the $2,000,000,000 of farm mortgage refinancing under the Federal Land Banks, on which the government has assumed a contingent liability. The bonds issued under the pending bill might not command a ready market, because of the doubtful security, and the Treasury would be forced to purchase them. It is inevitable that political favoritism, if not outright scandal, would follow where large tracts of land, representing a liability rather than an asset to the owners under existing agricultural conditions, might be unloaded on the government at excessive prices. There would be a temptation to locate land settlements at points where they would be most effective in influencing elections. Partizan regularity might be required or expected of applicants for government loans. There would be opportunity for all sorts of petty as well as major graft in the handling of so large a fund. No Reason or Excuse for Bill The support given by many members of the Congress and by the Secretary of Agriculture to a bill involving as much as $1,000,000,000, and contemplating a credit policy which would not be tolerated in any private banking institution or even in any existing governmental agency, offers a disheartening commentary on present policies of the administration. The public should be on guard against dangers involved. Each large appropriation makes another inevitable. Each relaxation of sound principles to meet a supposed emergency weakens resistance to improper measures. It is time to call an abrupt halt on legislation of this character. 10