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The original documents are located in Box 30, folder "9/30/75 HR9497 Increase Tobacco
Price Support (vetoed)" of the White House Records Office: Legislation Case Files at the
Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
Departmentative to
SEP 25 1975
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 9497 - Increase tobacco
price support
Sponsors - Rep. Jones (D) North Carolina,
Rep. Wampler (R) Virginia and Rep. Rose (D)
North Carolina
Last Day for Action
October 1, 1975 - Wednesday
Purpose
Amends the formula used for calculating the level of price
support for tobacco in a manner that could increase Federal
outlays an estimated total of $240 million over the next
5 years.
Agency Recommendations
Office of Management and Budget
Disapproval (Veto
Message attached)
Department of Agriculture
Disapproval (Veto
Message attached)
Council of Economic Advisers
Disapproval
Discussion
Under existing law, the Secretary of Agriculture proclaims
marketing quotas on an acreage or poundage basis for each
tobacco crop in order to balance supply and demand. If
two-thirds of the tobacco growers endorse the Secretary's
quota in a referendum prior to the normal planting time, then
that specific type of tobacco qualifies for Federal price
support. The level of price support is calculated by
multiplying the appropriate 1959 tobacco crop support level
by the ratio of (a) the average index of prices paid by farmers
FORD LIBRARY i GERALD
Digitized from Box 30 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
DEPARTMENTO
AGRICULTURE
DEPARTMENT OF AGRICULTURE
FUNITED
OFFICE OF THE SECRETARY
WASHINGTON 31d 20250
18
SEP MANAGEMENT &BUDGET
September 18, 1975
Honorable James T. Lynn
Director, Office of
Management and Budget:
Dear Mr. Lynn:
In response to the request of your office, the following report is
submitted on the enrolled enactment H.R. 9497, "To amend the computation
of the level of price support for tobacco." The bill provides for the
use of the preceding three marketing years instead of the preceding
three calendar years in computing the level of price support for tobacco.
This Department recommends that the President disapprove the bill.
Over 50 percent of the entire 1975 flue-cured tobacco has already been
marketed. Therefore, many growers who have already sold their crop will
not get the benefit of this price increase.
Present legislation provides that the level of price support for any crop
of tobacco (for which producers have not disapproved marketing quotas)
shall be the 1959 crop support level multiplied by the ratio of (1) the
average of the index of prices paid by farmers for the preceding three
calendar years and (2) the average index of prices paid by farmers in
1959. The bill provides for the use of the three preceding marketing
years instead of calendar years. The marketing year for flue-cured tobacco
is July 1-June 30, and for other kinds of tobacco October 1-September 30.
By changing from calendar years to marketing years, the bill increases the
level of support for the 1975 crop of flue-cured tobacco by seven percent
and ten percent for other kinds of tobacco.
The United States leads the world in tobacco exports, and ranks third in
tobacco imports under the present program. During fiscal year 1975, our
tobacco exports were valued at $1.2 billion and our imports at $.2 billion.
The approval of H.R. 9497 would stimulate the production of tobacco in
foreign countries, would reduce our tobacco exports, and increase our
tobacco imports. Under the marketing quota program which is in effect
for most U.S. tobacco, reduced exports and increased imports would
necessitate reductions in marketing quotas in subsequent years.
GEBALO FORD VIBRARY
Honorable James T. Lynn
2
It is estimated that the increase in the level of price support provided
in H.R. 9497 would increase program outlays an average of about $48 million
annually during the 1976 and four subsequent fiscal years.
A veto message is enclosed.
Sincerely,
Earl L Berty
Secretary
Enclosure
FORD is LIBRARY
To the House of Representatives:
I return herewith without my approval H.R. 9497, a bill "To amend the computation
of the level of price support for tobacco." This bill, if signed, would:
1. Increase government outlays;
2. Treat some tobacco producers unfairly as they have already
sold their 1975 crop;
3. Reduce our cash dollar exports;
4. Increase our net imports, thus harm our balance of payments;
5. Cause the government to accumulate a surplus; and
6. Reduce grower income because individual acreages would be cut
in following years.
The level of price support for the 1975 crop of tobacco under present legislation
is already 12 percent higher than the 1974 crop support. H.R. 9497 would, if
approved, increase the 1975 crop support for flue-cured tobacco an additional seven
percent, and an additional ten percent for other kinds of tobacco--making a total
increase of 19 percent over the 1974 crop. The bill would increase the 1976 crop
supports an additional five percent in the case of flue-cured tobacco, and seven
percent for other kinds of tobacco. Such increases would not only increase government
loan stocks but would stimulate the production of tobacco in foreign countries,
While the United States leads the world in tobacco exports and ranks second in
production, our share of the world market has declined in recent years. During the five
years 1960-64, world production of flue-cured tobacco averaged 3.3 billion pounds
annually, of which 40 percent was produced in the U.S. This has dropped to only 26
percent of the world's production in 1974. During 1960-64, 80 percent of the world's
production of burley tobacco was produced in the United States, while reports indicate
now that only about 53 percent of the world's production of burley tobacco in 1974 was
produced in the U.S. In summary, the U.S. share of the world export market which
stood at 35 percent during the 1965-69 period has plummeted to 24 percent in 1974.
During the 1975 fiscal year, U.S. exports of unmanufactured tobacco and manufactured
tobacco products were valued at $1,231 million and our tobacco imports for consumption
(duty paid) were valued at $209 million. The Census Bureau reports "general imports"
of foreign grown flue-cured and burley tobacco into the U.S. during the 1975 fiscal
year of 82 million pounds, declared weight, an increase of 85 percent over the
FORD
previous year. "Imports for consumption:, duty paid, were reported as 42 million Press
- 2 -
pounds during fiscal year 1975, an increase of 239 percent over the previous year.
Reports submitted by manufacturers and dealers pursuant to the Tobacco Stocks and
Standards Act show that they had in their inventories in the U.S. on July 1, 1975,
215 million pounds, farm-weight basis, of foreign grown flue-cured and burley
tobacco. THIS WAS AN INCREASE OF 89 PERCENT OVER THE INVENTORIES REPORTED A YEAR EARLIER!
Marketing quotas are in effect for most'kinds of tobacco. Quotas are designed to
maintain supplies in balance with demand. Under the quota legislation, any
reduction in our tobacco exports or increase in our tobacco imports would necessitate
reductions in farm marketing quotas. Despite increases in prices, REDUCTIONS IN QUOTAS
WOULD RESULT IN REDUCED FARM INCOME. Reductions in tobacco exports or increases in
imports would adversely affect tobacco's contribution to our balance-of-payment
position.
This bill would raise the support level for tobacco and thus would increase
government outlays by $71 million for the remainder of the 1975 crop. Over a
five-year period, nearly a quarter billion additional tax dollars would be spent
on tobacco programs because of this bill.
The worst kind of inequity or discrimination would be committed if this bill were to
become law in that nearly 50 percent of all the flue-cured tobacco has already been
marketed. Therefore, many growers who have already sold their crop could not get the
benefit of this price increase.
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
September 18, 1975
Dear Mr. Frey:
This is in response to your request for our views on Enrolled
Bill H.R. 9497, an amendment to the Agricultural Act of 1949. We
recommend that the President veto this legislation. The bill would
have the effect of increasing the price support level for tobacco,
requiring either that the government buy more of the crop to clear
the market at the higher support price or that tobacco quotas be
reduced to restrict supply at the higher price. In either case, enact-
ment of the bill would move us away from this Administration's goal
of a more market-oriented agricultural sector of the economy.
Sincerely
DR Alan Greenspan
Mr. James Frey
Assistant Director for Legislative Reference
Office of Management and Budget
GREAT FORD
Washington, D. C. 20503
AMERICAN REVOLUTION BICENTENNAL
1776-1976
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 372
Date: September 25
Time: 130pm
FOR ACTION: Paul Leach
CC (for information): Jim Cavanaugh
Bill Seidman sign
Jack Marsh
Max Friedersdorf sign
Ken Lazarus veto
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: September 26
Time: 500pm
SUBJECT:
H.R. 9497 - Increase tobacco price support
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
FORD & LIBRARY GERALD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
BOB HARTMAN
Only a veto is consistent with our other farm production in
free market philosophy, it also seems silly for the U.S.
Government to subsidy cancer.
FORD i LIBRARY CENALD
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
September 18, 1975
Dear Mr. Frey:
This is in response to your request for our views on Enrolled
Bill H. R. 9497, an amendment to the Agricultural Act of 1949. We
recommend that the President veto this legislation. The bill would
have the effect of increasing the price support level for tobacco,
requiring either that the government buy more of the crop to clear
the market at the higher support price or that tobacco quotas be
reduced to restrict supply at the higher price. In either case, enact-
ment of the bill would move us away from this Administration's goal
of a more market-oriented agricultural sector of the economy.
Sincerely,
Alan Greenspan
Mr. James Frey
Assistant Director for Legislative Reference
Office of Management and Budget
Washington, D. C. 20503
FORD & LIBRARY
REVOLUTION
1776-1976
DEPARTMENT OR RIGRICULTURE
OFFICE OF THE
WASHINGTON
September 18, 1975
Honorable James T. Lynn
Director, Office of
Management and Budget:
Dear Mr. Lynn:
In response to the request of your office, the following report is
submitted on the enrolled enactment H.R. 9497, "To amend the computation
of the level of price support for tobacco. " The bill provides for the
use of the preceding three marketing years instead of the preceding
three calendar years in computing the level of price support for tobacco.
This Department recommends that the President disapprove the bill.
Over 50 percent of the entire 1975 flue-cured tobacco has already been
marketed. Therefore, many growers who have already sold their crop will
not get the benefit of this price increase.
Present legislation provides that the level of price support for any crop
of tobacco (for which producers have not disapproved marketing quotas)
shall be the 1959 crop support level multiplied by the ratio of (1) the
average of the index of prices paid by farmers for the preceding three
calendar years and (2) the average index of prices paid by farmers in
1959. The bill provides for the use of the three preceding marketing
years instead of calendar years. The marketing year for flue-cured tobacco
is July 1-June 30, and for other kinds of tobacco October 1-September 30.
By changing from calendar years to marketing years, the bill increases the
level of support for the 1975 crop of flue-cured tobacco by seven percent
and ten percent for other kinds of tobacco.
The United States leads the world in tobacco exports, and ranks third in
tobacco imports under the present program. During fiscal year 1975, our
tobacco exports were valued at $1.2 billion and our imports at $.2 billion.
The approval of H.R. 9497 would stimulate the production of tobacco in
foreign countries, would reduce our tobacco exports, and increase our
tobacco imports. Under the marketing quota program which is in effect
for most U.S. tobacco, reduced exports and increased imports would
necessitate reductions in marketing quotas in subsequent years.
THE WHITE HOUSE
WASHINGTON
September 26, 1975
MEMORANDUM FOR:
JIM CAVANAUGH
FROM:
MAX L. FRIEDERSDORF m.b. m
SUBJECT:
H.R. 9497 - Increase tobacco price support
The Office of Legislative Affairs concurs with the agencies
that the bill be signed. Department of Agriculture figures
indicate a cost of $55 million over 5 years, NOT $240 million.
Attachments
FORD i LIBRARY 938838
THE WHITE HOUSE
WASHINGTON
September 27, 1975
MEMORANDUM FOR:
JIM CANNON
FROM:
MAX FRIEDERSDORF m6
SUBJECT:
Tobacco Bill
Jim, as an addendum to my recommendation that the President
>
sign the tobacco bill, I would further recommend that if
signed, the President announce the new support prices would
be effective for the 1976 crops only. The reason for this
is that the 1975 crops are mostly in by now, and the growers
already paid.
FORD & LIBRARY
THE WHITE HOUSE
SEP 25 RECD
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 372
Date: September 25
Time: 130pm
FOR ACTION: Paul Leach
CC (for information): Jim Cavanaugh
Bill Seidman
Jack Marsh
Max Friedersdorf
Ken Lazarus
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: September 26
Time:
SUBJECT:
H.R. 9497 - Increase tobacco price support
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
FORD i LIBRARY
Please return to Judy Johnston, Ground Floor West Wing
This is a fair way
to in dex puil supports of
we are against price supports
we should move to repeal them,
not make the present system
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED. am foir.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Signa approl
telephone the Staff Secretary immediately.
Jus.
AC
N MEMORANDUM
WASHINGTON
LOG NO.: 372
Date: September 25
Time: 130pm
FOR ACTION: Paul Leach
CC (for information): Jim Cavanaugh
Bill Seidman
Jack Marsh
Max Friedersdorf
Ken Lazarus
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date: September 26
Time: 400pm
SUBJECT:
H.R. 9497 - Increase tobacco price support
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
Recommend veto. Ken Lazarus 9/25/75
GERALE FORD LIBRARY
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
telephone the Staff Secretary immediately.
"Id
THE WHITE HOUSE
DECISION
WASHINGTON
September 30, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM CANNON
Enrolled Juni H.R. 9497: Tobacco
SUBJECT:
Price Support Change
The purpose of this memorandum is to obtain your
decision on whether to sign or veto this bill.
A decision must be made by Wednesday, October 1.
THE BILL
This bill makes a technical change in the method of
computing the level of price support for tobacco and
results in additional increases in the support levels.
The bill, if approved, will increase the 1975 crop
supports 7 to 10 percent for the various types of
tobacco. In 1976 crop supports would be raised
5 to 7 percent. The bill is more fully discussed in
the Enrolled Bill Memorandum at Tab A.
This bill was passed--after very little debate--by
voice votes in both the House and Senate. The
legislation is strongly supported by Representatives
and Senators from the major tobacco-growing states;
i.e., Virginia, Georgia, North and South Carolina,
Tennessee, and Kentucky.
USDA's revised estimates show that the increase in
support price levels resulting from this legislation
would raise program outlays about $157 million for the
remainder of fiscal 1976 and the transition quarter. In
subsequent years, if tobacco production is cut back
substantially, much of this outlay would be recouped.
On the other hand, if production is not cut back
substantially, additional outlays for the tobacco
support program could be anticipated. A memorandum from
Jim Lynn discussing the revised estimates is at Tab B.
GERALO FORD CIBRARY
-2-
DISCUSSION
Present legislation provides substantial price
support for tobacco: Under the support price
computation formula already in effect, the level of
price support for the 1975 crop is 12 percent higher
than in 1974 and support levels in the next few years
will continue to rise substantially. However, tobacco
producers and their Congressional representatives
argue that this current support system is not able to
offset sharply rising farm production costs.
The U.S. leads the world in tobacco exports. During
fiscal year 1975, our net tobacco exports (i.e., exports
less imports) were valued at $1 billion. However, the
present system of price support has already resulted
in a decline in the U.S. share of the world export
market from 35 percent in the 1965-1969 period to
24 percent in 1974. USDA argues that approval of
H.R. 9497 would stimulate the production of tobacco in
foreign countries, reduce our tobacco exports and
increase our tobacco imports. Congressman Perkins
argues that there will be no adverse effect on tobacco
exports.
To maintain market prices above the higher support
prices in order to prevent excessive accumulations of
tobacco by the U.S. government, USDA indicates that
marketing quotas (i.e., the pounds or acres of tobacco
under cultivation) in 1976 and subsequent years would
have to be reduced. Despite increased tobacco prices,
USDA feels that these required reductions in tobacco
production would result in lower incomes for tobacco
farmers.
Since some tobacco produced in 1975 has already been
marketed (e.g., over 50 percent of this year's crop of
flue-cured tobacco), H.R. 9497 may discriminate against
those tobacco producers who have already sold their 1975
crop and thus would not benefit from this change in the
support price system. Supporters of this bill, however,
argue that there is little concern about this alleged
inequity among producers.
FORD
GERALD
-3-
SIGN OR VETO ARGUMENTS
A.
Arguments in Favor of Signing H.R. 9497.
1. There is strong support for this legislation
among tobacco-state Congressmen and Senators.
2. Farmers favor an increase in the level of
support so that tobacco prices can catch up
with the costs of production.
3. "This is a fair way to index price supports.
If we are against price supports, we should
move to repeal them, not make the present
system unfair." (Bill Seidman)
4. The Congressional supporters argue that this
legislation is vital to the economic health
of their states and the well-being of the
approximately 500,000 tobacco farmers in the
nation.
5. If production is cut substantially in 1976 and
future years, the $157 million short run cost
of this legislation could be largely recouped.
B. Arguments in Favor of Veto of H.R. 9497.
1. The passage of the bill through Congress
occurred with little debate and in a way which
has been described as irregular.
2. The bill increases Federal government outlays
by an estimated $157 million in fiscal 1976
and the transition quarter.
3. "The bill would move us away from this
Administration's goal of a more market-oriented
agricultural sector of the economy." (Alan
Greenspan)
4. "Approval of H.R. 9497 would be inconsistent
with your veto of the farm commodity price
support bill in May, and would very likely
lead to new Congressional attempts to increase
other farm commodity price supports." (Jim Lynn)
5. H.R. 9497 treats unfairly some tobacco producers
who have already sold their 1975 crops.
GERALD FORD
-4- -
6. It would reduce net exports of tobacco, harm
our balance of payments and lower tobacco
grower income if production were restricted
to support prices and reduce government-held
tobacco surpluses.
7. It would add to the accumulation of surplus
tobacco by the government unless substantial
production restrictions were imposed in
fiscal 1977 and subsequent years.
PRESIDENTIAL DECISION
Sign H.R. 9497. (Proposed statement at Tab C.)
Favored by: Bill Seidman
Max Friedersdorf
Veto H.R. 9497. (Proposed statement at Tab D.)
Favored by: Department of Agriculture (Butz)
Jim Lynn
Alan Greenspan
Counsel's Office
Robert T. Hartmann
FGRD & LIBRARY CERRID
$1.40
PRESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
CELLING
OFFICE OF MANAGEMENT AND BUDGET
STATE
WASHINGTON, D.C. 20503
SEP 25 1975
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 9497 - Increase tobacco
price support
Sponsors - Rep. Jones (D) North Carolina,
Rep. Wampler (R) Virginia and Rep. Rose (D)
North Carolina
Last Day for Action
October 1, 1975 - Wednesday
Purpose
Amends the formula used for calculating the level of price
support for tobacco in a manner that could increase Federal
outlays an estimated total of $240 million over the next
5 years.
Agency Recommendations
Office of Management and Budget
Disapproval (Veto
Message attached)
Department of Agriculture
Disapproval (Veto
Message attached)
Council of Economic Advisers
Disapproval
Discussion
Under existing law, the Secretary of Agriculture proclaims
marketing quotas on an acreage or poundage basis for each
tobacco crop in order to balance supply and demand. If
two-thirds of the tobacco growers endorse the Secretary's
quota in a referendum prior to the normal planting time, then
that specific type of tobacco qualifies for Federal price
support. The level of price support is calculated by
multiplying the appropriate 1959 tobacco crop support level
by the ratio of (a) the average index of prices paid by farmers
GERALD FORD
2
for the preceding three calendar years (numerator) and
(b) the average index of prices paid by farmers in 1959
(denominator).
Largely in response to growing foreign demand for American
tobacco, Agriculture has raised tobacco marketing quotas by
10, 10, and 15 percent, respectively, for the 1973, 1974,
and 1975 marketing years. However, worldwide recession,
the Communist takeover in Southeast Asia, and the imposition
of significantly higher import duties by Britain (usually
our largest foreign consumer of flue-cured tobacco) have all
combined to seriously inhibit the strong growth in foreign
demand and thus put downward pressure on prices. Furthermore,
poor weather in key tobacco growing States has yielded an
inferior-quality crop, depressing prices even more.
H.R.9497 would revise the tobacco price support formula explained
above by stipulating that the price index numerator use the three
preceding marketing years instead of calendar years. Since the
marketing year is (a) July 1 - June 30 for flue-cured tobacco
and (b) October 1 - September 30 for other kinds of tobacco,
the effect of the enrolled bill would be to push the escalator
deeper into a period of higher costs. With respect to the
1975 crop, this translates into increases in the price support
level (a) of 7 percent for flue-cured tobacco (from 93.2 to
99.3 cents/lb.) and (b) of 10 percent for other kinds of
tobacco (from 96.1 to 105.8 cents/lb).
Agriculture estimates that H.R.9497 would increase Federal
outlays (a) by $71 million in fiscal year 1976 and (b) by
about a total of $240 million for the 5 years ending in 1979
(this assumes no reduction in marketing quotas).
In reporting to the House Agriculture Committee on a sub-
stantively identical bill (H.R.9000), Agriculture opposed
enactment of the legislation on the basis that it would:
(a) reduce our competitive position in world markets and
thus endanger a net trade surplus of some $1 billion in
tobacco products; (b) require lower marketing quotas in
future years, thereby reducing tobacco growers' income;
(c) increase Federal outlays significantly; and, (d) be
inequitable because nearly 50 percent of all flue-cured
tobacco has already been marketed and the increase in price
could not benefit those growers who have already sold their
crop.
3
The Congress did not respond to Agriculture's concerns, as
the enrolled bill was passed in both the House and Senate on
a voice vote without being reported out of committee in
either body. In fact, the Senate did not even hold hearings
on H.R. 9497 or any related bills.
Agency views
Both Agriculture and the Council of Economic Advisers strongly
recommend veto. Agriculture reiterates the concerns it ex-
pressed in reporting to the House Agriculture Committee while
CEA notes that the enrolled bill "would move us away from
this Administration's goal of a more market-oriented agri-
cultural sector of the economy."
We concur in Agriculture's analysis and veto recommendation.
The adverse impact on our tobacco exports, the reduction in
tobacco growers' income over the long term, the increase in
outlays, and the discriminatory nature of the enrolled bill
are all objectionable features. In addition, and probably
most important of all, approval of H.R. 9497 would be incon-
sistent with your veto of the farm commodity price support
bill (H.R.4296) in May, and would very likely lead to new
congressional attempts to increase other farm commodity
price supports. In this regard, there are already indications
that milk price support legislation is beginning to move in
the Senate.
We have prepared, for your consideration, a veto message
representing a revision of the draft message submitted by
Agriculture.
Joe Director
FORD LIBRARY is GERALD
B
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503
MEMORANDUM FOR THE PRESIDENT
FROM:
JAMES T. LYNN
SUBJECT: Agriculture's Revised Tobacco Estimates
Ag's lowered estimate of the increased costs attributed to
H.R. 9497 result from the following:
1. Later and higher estimates of production for this
year's crop:
Original Estimate
Revised Estimate
(Million Pounds) *
2,061
2,205
2. A change in the assumptions under H.R. 9497. Earlier
the Department assumed that for comparison purposes
production would be the same under both present
and proposed legislation. For the latest estimate
USDA assumes that even tighter planting restrictions
would be imposed, as follows:
Fiscal Year
Original Estimate
Revised Estimate
(Million Pounds)
*
1976
2,061
2,205
1977
2,269
2,060
1978
2,268
2,050
1979
2,235
2,040
1980
2,218
2,040
*
Flue-cured and burley only
FORD & LIBRARY CERALD
3.
With the reduced production, the amount of surplus and
CCC loan outlays would decline:
Net Outlays
(Million Dollars)
Original Estimate
Revised Estimate
Fiscal
Current
H.R.
Current
H.R.
Year
Law
9497
Difference
Law
9497
Difference
1976
39
110
71
319
442
123
TQ
not computed
105
139
34
1977
60
109,
49
24
- -34
-58
1978
66
99
33
5
- 12
-- -17
1979
102
150.
48
-14 -
-34
-20
1980
68
106
38
-25 -
- 31
-6
(5 yr. average
(5 yr. average
is $48 mil.)
is $11.2 mil)
4.
In thinking about the prospect of lowering the acreage/
poundage allotments by the 10%-15% as in the revised
estimates, one should keep in mind
-- there may be some political pressure in the future
against such decrease (although the pressure to
date has all been for such a decrease)
-- the consequent increase in price will further
erode the U.S. position in the world market, and
exports will continue to decline
-- the imposition of further production restrictions
is directly contrary to the Administration's "full
production" policy underlying the Farm Bill veto
earlier this year.
FORD & LIBRARY GERALD
o"per
DRAFT:
APPROVAL MESSAGE
H.R.
I am today signing HR 9497, an Act "To amend the computation
of the level of price support for tobacco."
from calender year to nop year
This bill makes a technical changes of the methodief
computing the level period of price support for tobacco, from although
calondar - The present formula has been
in effect since 1956 - developments in the tobacco
since then demonstrate The need to change
industry during this period indicate this 19-year-old
formula should be changed.
H
D
b12
IL
IAT
DRAFT: VETO MESSAGE
I return herewith, without my approval, H.R. 9497, an
Act "To amend the computation of the level of price
support for tobacco."
(aimt
am
concerned
Although I
that many U.S. tobacco growers
have encountered
this year due to adverse
weather conditions and lower-than-expected export markets,
the long-range interests of the grower will best be served
industry
by a vigorous domestic tobacco
which can compete
successfully in international markets.
H.R. 9497 would be an obstacle toward achieving this goal.
In the face of slackening world demand for U.S. tobacco,
higher prices would make our product less competitive,
thus endangering the $1 billion net trade surplus we now
enjoy in this commodity.
At a time when we are attempting to reduce inflationary
pressures in the economy by holding down the size of
federal deficits, H.R. 9497 would increase budget
during this fiscal year and the transition period by/$157
million.
FORD i LIBRARY RATO
2
In summary, I believe this bill would adversely affect
our tobacco exports, lower farm income in the long run
D
and increase federal spending at a critical time in our
economic recovery.
GERALD FORD
EXECUTIVE OFFICE OF THE PRESIDENT
CENTRAL
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
SEP 25 1975
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 9497 - Increase tobacco
price support
Sponsors - Rep. Jones (D) North Carolina,
Rep. Wampler (R) Virginia and Rep. Rose (D)
North Carolina
Last Day for Action
October 1, 1975 - Wednesday
Purpose
Amends the formula used for calculating the level of price
support for tobacco in a manner that could increase Federal
outlays an estimated total of $240 million over the next
5 years.
Agency Recommendations
Office of Management and Budget
Disapproval (Veto
Message attached)
Department of Agriculture
Disapproval (Veto
Message attached)
Council of Economic Advisers
Disapproval
Discussion
Under existing law, the Secretary of Agriculture proclaims
marketing quotas on an acreage or poundage basis for each
tobacco crop in order to balance supply and demand. If
two-thirds of the tobacco growers endorse the Secretary's
quota in a referendum prior to the normal planting time, then
that specific type of tobacco qualifies for Federal price
support. The level of price support is calculated by
multiplying the appropriate 1959 tobacco crop support level
by the ratio of (a) the average index of prices paid by farmers
GERALD FORD LIBRAHT
2
for the preceding three calendar years (numerator) and
(b) the average index of prices paid by farmers in 1959
(denominator).
Largely in response to growing foreign demand for American
tobacco, Agriculture has raised tobacco marketing quotas by
10, 10, and 15 percent, respectively, for the 1973, 1974,
and 1975 marketing years. However, worldwide recession,
the Communist takeover in Southeast Asia, and the imposition
of significantly higher import duties by Britain (usually
our largest foreign consumer of flue-cured tobacco) have all
combined to seriously inhibit the strong growth in foreign
demand and thus put downward pressure on prices. Furthermore,
poor weather in key tobacco growing States has yielded an
inferior-quality crop, depressing prices even more.
H.R.9497 would revise the tobacco price support formula explained
above by stipulating that the price index numerator use the three
preceding marketing years instead of calendar years. Since the
marketing year is (a) July 1 - June 30 for flue-cured tobacco
and (b) October 1 - September 30 for other kinds of tobacco,
the effect of the enrolled bill would be to push the escalator
deeper into a period of higher costs. With respect to the
1975 crop, this translates into increases in the price support
level (a) of 7 percent for flue-cured tobacco (from 93.2 to
99.3 cents/lb.) and (b) of 10 percent for other kinds of
tobacco (from 96.1 to 105.8 cents/lb).
Agriculture estimates that H.R.9497 would increase Federal
outlays (a) by $71 million in fiscal year 1976 and (b) by
about a total of $240 million for the 5 years ending in 1979
(this assumes no reduction in marketing quotas).
In reporting to the House Agriculture Committee on a sub-
stantively identical bill (H.R.9000), Agriculture opposed
enactment of the legislation on the basis that it would:
(a) reduce our competitive position in world markets and
thus endanger a net trade surplus of some $1 billion in
tobacco products; (b) require lower marketing quotas in
future years, thereby reducing tobacco growers' income;
(c) increase Federal outlays significantly; and, (d) be
inequitable because nearly 50 percent of all flue-cured
tobacco has already been marketed and the increase in price
could not benefit those growers who have already sold their
crop.
GERALD R.FORD
3
The Congress did not respond to Agriculture's concerns, as
the enrolled bill was passed in both the House and Senate on
a voice vote without being reported out of committee in
either body. In fact, the Senate did not even hold hearings
on H.R. 9497 or any related bills.
Agency views
Both Agriculture and the Council of Economic Advisers strongly
recommend veto. Agriculture reiterates the concerns it ex-
pressed in reporting to the House Agriculture Committee while
CEA notes that the enrolled bill "would move us away from
this Administration's goal of a more market-oriented agri-
cultural sector of the economy."
We concur in Agriculture's analysis and veto recommendation.
The adverse impact on our tobacco exports, the reduction in
tobacco growers' income over the long term, the increase in
outlays, and the discriminatory nature of the enrolled bill
are all objectionable features. In addition, and probably
most important of all, approval of H.R. 9497 would be incon-
sistent with your veto of the farm commodity price support
bill (H.R.4296) 4296) in May, and would very likely lead to new
congressional attempts to increase other farm commodity
price supports. In this regard, there are already indications
that milk price support legislation is beginning to move in
the Senate.
We have prepared, for your consideration, a veto message
representing a revision of the draft message submitted by
Agriculture.
Joe Director T.by
TO THE HOUSE OF REPRESENTATIVES
I return herewith, without my approval, H.R. 9497, an
Act "To amend the computation of the level of price support
for tobacco."
Although I fully appreciate that many U.S. tobacco
growers have encountered hardships this year due to
sub-par weather and lower than expected export markets,
I am also mindful that government price supports for the
1975 crop are already 12% higher than in the previous
year. H.R. 9497 would not only serve to raise this
differential to about 20%, but would result in higher
price support levels in subsequent years.
The interests of the grower and, ultimately, the
American people will be best served by a vigorous
domestic tobacco sector which can compete successfully
in international markets. Unfortunately, H.R. 9497 does
not contribute to, but conversely would be counter-
productive to achievement of this objective:
-- In the face of slackening world demand for
LIERANY
U.S. tobacco, higher prices would make our
tobacco less competitive, thus endangering
the $1 billion net trade surplus we enjoy in
that commodity.
-- 2 -
-- In subsequent years, growers' income could
very well be reduced by the combination of
higher support prices and shrinking export
opportunities which would force the government
to impose stringent marketing quotas on growers
to keep supply from exceeding demand. A higher
price per pound does not help a grower when he
sells less and less tobacco.
-- Many growers would not benefit from higher support
prices even in the short-run since they have
already sold their 1975 crop. For example,
over 50% of this year's crop of flue-cured
tobacco has already been purchased.
-- At a time when we are attempting to reduce
inflationary pressures in the economy by
restraining the size of the Federal budget
deficits, H.R. 9497 would increase government
outlays by an estimated $71 million this
fiscal year, and by as much as nearly a
quarter of a billion dollars over the next
five years.
FORD
In summary, I am not prepared to accept a bill that
would adversely affect our tobacco exports, lower farm
income in the long run, create serious inequities between
growers, and increase Federal spending at such a critical
time in our economic recovery. Accordingly, I have withheld
my approval of H.R. 9497.
THE WHITE HOUSE
September , 1975
THE WHITE HOUSE
WASHINGTON
October 1, 1975
FORD is LIBRARY 076839
Bob Linder -
To keep you up-to-date on
what happened on this --
Jim Connor had a copy
of the veto message dexed to Ron Nessen
with the notation that it was not to be
released until Max Friedersdorf gave
the OK signal.
Tom Jones was here at the
time and he said he was going to tell
Larry Speakes in the Press Office about
the Lid that was on the Veto Message.
He also checked with Jim Connor about
the dating -- they agreed it would have
to be dated yesterday (the day signed)
but release to be later today when
approved by Friedersdorf.
Trudy
Deliver at 3:00 pm. RDC per Tridersdorf.
10.1.75
THE WHITE HOUSE
WASHINGTON
September 30, 1975
MR PRESIDENT
Attached (Tab A) is the
Tobacco Support Bill and a brief
signing statement. Attached (Tab B)
is a veto message should you wish
to veto the bill.
Jim Connor
/ LIBRARY 175839
STATEMENT BY THE PRESIDENT
I am today signing H.R. 9497, an Act "To amend the
computation of the level of price support for tobacco."
This bill changes from calendar year to crop year
the computing period of price supports for tobacco.
Although the present formula has been in effect since
1956, developments in the tobacco industry since then
demonstrate the need to change this 19-year-old formula.
TO THE HOUSE OF REPRESENTATIVES:
I return herewith, without my approval, H.R. 9497,
an Act "To amend the computation of the level of price
support for tobacco."
Although I am concerned about the hardships that many
U.S. tobacco growers have encountered this year due to
adverse weather conditions and lower-than-expected export
markets, the long-range interests of the grower will be
best served by a vigorous domestic tobacco industry which
can compete successfully in international markets. H.R. 9497
would be an obstacle in achieving this goal. In the face of
slackening world demand for U.S. tobacco, higher prices would
make our product less competitive, thus endangering the
$1 billion net trade surplus we now enjoy in this commodity.
At a time when we are attempting to reduce inflationary
pressures in the economy by holding down the size of federal
deficits, H.R. 9497 would increase budget outlays during this
fiscal year and the transition period by an estimated
$157 million.
In summary, I believe this bill would adversely affect
our tobacco exports, lower farm income in the long run and
increase federal spending at a critical time in our economic
recovery.
Heald R. Ford
THE WHITE HOUSE,
September 30, 1975
FORD LIBRARY is 07820
FOR IMMEDIATE RELEASE
OCTOBER 1, 1975
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE HOUSE OF REPRESENTATIVES:
I return herewith, without my approval, of H.R. 9497, an Act
"To amend the computation of the level of price support for
tobacco. "
Although I am concerned about the hardships that many United
States tobacco growers have encountered this year due to adverse
weather conditions and lower-than-expected export markets, the
long-range interests of the grower will be best served by a vigorous
domestic tobacco industry which can compete successfully in inter-
national markets. H.R. 9497 would be an obstacle in achieving
this goal. In the face of slackening world demand for United
States tobacco, higher prices would make our product less competitive,
thus endangering the $1 billion net trade surplus we now enjoy in
this commodity.
At a time when we are attempting to reduce inflationary pressures
in the economy by holding down the size of federal deficits, H.R.
9497 would increase budget outlays during this fiscal year and the
transition period by an estimated $157 million.
In summary, I believe this bill would adversely affect our tobacco
exports, lower farm income in the long run and increase federal
spending at a critical time in our economic recovery.
GERALD R. FORD
THE WHITE HOUSE,
September 30, 1975
#
#
#
GERALD FORD LIDRARY
THE WHITE HOUSE
WASHINGTON
10.3.75
TO: Tom Jones
For Your Information:
For Appropriate Handling:
Theisapproved texts.
for your files.
DDC.
Robert D. Linder
plc
6
IAT
DRAFT: VETO MESSAGE
I return herewith, without my approval, H.R. 9497, an
Act "To amend the computation of the level of price
support for tobacco."
am concerned (ahut the handships
Although I
that many U.S. tobacco growers
have encountered
this year due to adverse
weather conditions and lower-than-expected export markets,
the long-range interests of the grower will best be served
industry
by a vigorous domestic tobacco
which can compete
successfully in international markets.
H.R. 9497 would be an obstacle toward achieving this goal.
In the face of slackening world demand for U.S. tobacco,
higher prices would make our product less competitive,
thus endangering the $1 billion net trade surplus we now
enjoy in this commodity.
At a time when we are attempting to reduce inflationary
pressures in the economy by holding down the size of
federal deficits, H.R. 9497 would increase budget outlays
during this fiscal year and the transition period by $157
million.
FORD is LIBRARY 9ERVID
2
In summary, I believe this bill would adversely affect
our tobacco exports, lower farm income in the long run
0
and increase federal spending at a critical time in our
economic recovery.
FORD is LIBRARY GERALD 39
ovjer
DRAFT:
APPROVAL MESSAGE
H.R.
I am today signing 9497, an Act "To amend the computation
of the level of price support for tobacco."
from calender year to app year
This bill makes a techmical changeSin the methodingf
computing the level period of price support for tobacco, although
The present formula has been
in effect since 1956 developments in the tobacco
since Then demonstrate The need to change
industry during this period indicate this 19-year-old
formula should he changed.
Hk
FORD is LIBRARY GERALD
Earlydraft- Natused
TO THE HOUSE OF REPRESENTATIVES
I return herewith, without my approval, H.R.9497, an
Act "To amend the computation of the level of price support
for tobacco."
Although I fully appreciate that many U.S. tobacco
growers have encountered hardships this year due to adverse
weather conditions and lower-than-expected export markets,
I am also mindful that current government price supports
for the 1975 crop are already 12 percent higher than last
year. Estimated support payments will total $424 million
in fiscal year 1976 and the so-called transition quarter.
H.R. 9497 would raise this support price differential to
about 20 percent and would cost the taxpayer another $157
million by September 30, 1976. In addition, higher price
support levels would be required in subsequent years.
The interests of the grower and, ultimately, the American
people will be best served by a vigorous domestic tobacco
sector which can compete successfully in international
markets. Unfortunately, H.R. 9497 would be an obstacle
toward achieving this goal. In the face of slackening world
demand for U.S. tobacco, higher prices would make our product
less competitive, thus endangering the $1 billion net trade
surplus we now enjoy in this commodity.
FORD LIBRARY & GERALD
-2-
There are other reasons why I cannot support this bill:
--
In the 1976 crop year and subsequent years, growers'
income very well could be reduced by the combination
of higher support prices and shrinking export
opportunities which would force the government to
impose stringent marketing quotas on growers to keep
supply from exceeding demand. A higher price per
pound does not help a grower when he sells less and
less tobacco.
--
Many growers would not benefit from higher support
prices even in the short-run, since they have already
sold their 1975 crop. For example, more than 50
percent of this year's crop of flue-cured tobacco has
already been sold.
At a time when we are attempting to reduce inflationary
pressures in the economy by holding down the size of
Federal deficits, H.R. 9497 would increase budget
outlays during this fiscal year and the so-called
transition period by $157 million. Unless further
Federal restrictions were placed on tobacco production--
which almost surely would occur if this bill became
law-these increased outlays would continue in future
years.
- -3-
In summary, I am not prepared to accept a bill that
adversely affects our tobacco exports, lowers farm income
in the long run, creates serious inequities between growers
and increases Federal spending at such a critical time in
our economic recovery. Accordingly, I have withheld my
approval of H.R. 9497.
FORD CLBSARY
H. R. 9497
Rinety-fourth Congress of the United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday, the fourteenth day of January,
one thousand nine hundred and seventy-five
An Act
To amend the computation of the level of price support for tobacco.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That subsection
(b) of section 106 of the Agricultural Act of 1949, as amended, is
further amended by striking the words "three calendar years imme-
diately preceding the calendar year in which the marketing year
begins for the crop" and insert in lieu thereof the words "three
marketing years immediately preceding the marketing year".
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
TO THE HOUSE OF REPRESENTATIVES
I return herewith, without my approval, H.R. 9497, an
Act "To amend the computation of the level of price support
for tobacco."
Although I fully appreciate that many U.S. tobacco
growers have encountered hardships this year due to
sub-par weather and lower than expected export markets,
I am also mindful that government price supports for the
1975 crop are already 12% higher than in the previous
year. H.R. 9497 would not only serve to raise this
differential to about 20%, but would result in higher
price support levels in subsequent years.
The interests of the grower and, ultimately, the
American people will be best served by a vigorous
domestic tobacco sector which can compete successfully
in international markets. Unfortunately, H.R. 9497 does
not contribute to, but conversely would be counter-
productive to achievement of this objective:
-- In the face of slackening world demand for
U.S. tobacco, higher prices would make our
GERALD FORD LIBRARY
tobacco less competitive, thus endangering
the $1 billion net trade surplus we enjoy in
that commodity.
- 2 -
-- In subsequent years, growers' income could
very well be reduced by the combination of
higher support prices and shrinking export
opportunities which would force the government
to impose stringent marketing quotas on growers
to keep supply from exceeding demand. A higher
price per pound does not help a grower when he
sells less and less tobacco.
-- Many growers would not benefit from higher support
prices even in the short-run since they have
already sold their 1975 crop. For example,
over 50% of this year's crop of flue-cured
tobacco has already been purchased.
-- At a time when we are attempting to reduce
inflationary pressures in the economy by
restraining the size of the Federal budget
deficits, H.R. 9497 would increase government
outlays by an estimated $71 million this
fiscal year, and by as much as nearly a
quarter of a billion dollars over the next
GERALD R. LIBRARY FORD
five years.
In summary, I am not prepared to accept a bill that
would adversely affect our tobacco exports, lower farm
income in the long run, create serious inequities between
growers, and increase Federal spending at such a critical
time in our economic recovery. Accordingly, I have withheld
my approval of H.R. 9497.
THE WHITE HOUSE
September , 1975
September 19, 1975
Dear Mr. Director:
The following bill was received at the White
House on September 19th:
H.R. 9497
Please let the President have reports and
recommendations as to the approval of this
bill as soon as possible.
Sincerely,
Robert D. Linder
Chief Executive Clerk
The Honorable James T. Lynn
Director
Office of Management and Budget
Washington, D. C.
FORD LIBRARY i 938839