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1975/04/29 - Farm Veto Message Meeting
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1975/04/29 - Farm Veto Message Meeting
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The original documents are located in Box 44, folder "1975/04/29 - Farm Veto Message
Meeting" of the James M. Cannon 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 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
Digitized from Box 44 of the James M. Cannon Papers at the Gerald R. Ford Presidential Library
April 28, 1975
To the House of Representatives:
I am returning without my approval H.R. 4296, referred
to as the Emergency Agricultural Act of 1975. Although the
aim of this bill is laudable, its results would be counter-
productive for farmers, other taxpayers, and for America's
economic recovery and world market position.
The bill would remove a considerable amount of economic
independence from farmers while burdening consumers with
higher prices and boosting the already overly-inflated Federal
deficit.
Approval of this bill would, therefore, not be in the
public interest.
In the conduct of the Government's fiscal affairs, a line
must be drawn against excesses. I drew that line in my address
to the Nation on March 29. I promised all Americans that,
except where long-range national security interests, energy
matters, or urgent humanitarian needs were involved, I would
take action to hold our fiscal year 1976 deficit to no more
than $60 billion.
New spending programs which the Congress is considering
could easily raise the Federal deficit to an intolerable level
of $100 billion. This must not happen.
2
H.R. 4296 is an example of an intolerably high spending
program. In fiscal year 1976, it could add an estimated $1.8
billion to the Federal deficit. If used as a point of departure
for longer-term legislation -- as was strongly indicated during
its consideration -- it could lead to an excalation of farm
program subsidies in succeeding years.
Approval of this bill would undermine the successful market-
oriented farm policy adopted by this Administration and the
Congress. It is a step backward toward totally discredited
policies.
Prospects for farmers, it is true, are not as bright this
year as in the recent past. Farm production costs have been
pushed upward by the same inflationary pressures that have
affected other industries. At the same time, demand for
certain farm products has slackened because of the recession.
Fortunately, however, current agricultural laws are
working well. In spite of the financial difficulties many
farmers are experiencing, farm exports, farm net income and farm
cash receipts are at high levels.
This Administration has taken a number of positive: steps to
assist farmers. The 1976 wheat acreage allotment was recently
increased by 8 million acres to 61.6 million acres. This action
provides wheat producers with additional target price and disaster
protection. We have also increased the 1975 crop cotton price
support loan rate by 9 cents a pound. And we recently announced
an increase in the price support level for milk, which, combined
3
with easing feed prices, should assist dairy producers.
Within the past several days, we have completed negotiations
with the European Community to end the export subsidies on
industrial cheese coming here -- a step that ensures that surplus
dairy products will not be sold in the U.S. market at cut-rate
prices At the same time, we have worked out arrangements which
enable the Europeans to continue selling us high-quality table
cheese. This solution has enabled us to keep on mutually
agreeable trading terms with our best customers for American
farm exports.
We have also taken action to protect our cattle producers
against a potential flood of beef imports from abroad. The
Department of State is completing negotiations with 12 countries
limiting their 1975 exports of beef to this country. These
voluntary export restraint agreements are intended to keep
imports subject to the Meat Import Law to less than 1,182 million
pounds.
In contrast to the development of the Agriculture and Consumer
Protection Act of 1973 -- which was the result of considerable
thought and study -- H.R. 4296 was hastily conceived with
inadequate hearings and without sufficient opportunity for
consumers and taxpayers to have a voice in its preparation.
Most farmers have already made their plans and bought their
seed, Many are well into their planting season. These plans
have obviously been completed without any dependence on the
provisions of H.R. 4296.
4
In the long haul, this bill ultimately would lead to
constraints on production, resulting in loss of jobs in food-
related industries. It would induce farmers to grow more cotton --
already in surplus -- and less soybeans -- badly needed for
food. The bill would jeopardize the competitive position of our
cotton in world markets.
American farmers have responded magnificently during the
past several year to produce food and fiber for this Nation
and the world. This has made agriculture our leading source
of foreign exchange. This year, despite very trying circumstances,
most farmers are again going for all-out production. They have
my support for a vigorous export policy for their products. Our
farm products must have unfettered access to world markets.
The act, in short, is anti-consumer, anti-farmer, anti-taxpayer,
and even anti-humanitarian:
--It is anti-consumer because it would cause higher prices
and result in crops produced for Government storage instead of
for the demands of the marketplace.
--It is anti-farmer because it would price our farm commodities
out of world markets, and lead to cutbacks in production.
--It is anti-taxpayer because of the cost of subsidies for
export purposes, for crop loans, for storage of inventories of
Government-controlled farm commodities, and for not growing crops.
--It is anti-humanitarian because once our export markets
are cut and our farmers are denied the profits of full production,
then consumers in a world stalked by hunger would face higher
5
food costs caused by reduced world supplies.
I cannot, in good conscience, approve this act. I return
it herewith.
Mr. Cannon: This is a retyped version of
the 2a page which was marked "to omit" on
the draft.
Judy
(Note: This section on page 2a needs a policy decision.)
To help relieve current financial difficulties for producers,
I am today directing the Secretary of Agriculture to take action
to increase price support loan rates for wheat, corn, and other
feed grains.
In addition, I realize that farmers face serious problems
in producing food ; and fibers that the rest of us depend upon. I
sincerely seek to solve these problems -- not aggravate them. That
is why I have taken the action earlier described to help the wheat
and feed grain farmers adjust to the severe increase in the cost of
production occurring since the 1973 farm bill was enacted.
I would like to be as responsive to cotton growers as well,
but unfortunately, the law is not as clear nor as flexible in the
case of cotton as in the case of grain. I therefore have directed
the Secretary of Agriculture to thoroughly reexamine existing cotton
legal authority both in regard to calculating and establishing loan
levels and in the exercise of authority to make open market purchases.
This we will do in an effort to help insure the confidence of cotton
producers that this Administration does indeed concern itself with
their vital interests.
(MORE)
April 28, 1975
To the House of Representatives:
I am returning without my approval H.R. 4296, referred
to as the Emergency Agricultural Act of 1975. Although the
aim of this bill is laudable, its results would be counter-
productive for farmers, other taxpayers, and for America's
economic recovery and world market position.
The bill would remove a considerable amount of economic
independence from farmers while burdening consumers with
higher prices and boosting the already overly-inflated Federal
deficit.
Approval of this bill would, therefore, not be in the
public interest.
In the conduct of the Government's fiscal affairs, a line
must be drawn against excesses. I drew that line in my address
to the Nation on March 29. I promised all Americans that,
except where long-range national security interests, energy
matters, or urgent humanitarian needs were involved, I would
take action to hold our fiscal year 1976 deficit to no more
than $60 billion.
New spending programs which the Congress is considering
could easily raise the Federal deficit to an intolcrable level
of $100 billion. This must not happen.
2
H.R. 4296 is an example of an intolerably high spending
program. In fiscal year 1976, it could add an estimated $1.8
billion to the Federal deficit. If used as a point of departure
for longer-term legislation -- as was strongly indicated during
its consideration -- it could lead to an excalation of farm
program subsidies in succeeding years.
Approval of this bill would undermine the successful market-
oriented farm policy adopted by this Administration and the
Congress. It is a step backward toward totally discredited
policies.
Prospects for farmers, it is true, are not as bright this
year as in the recent past. Farm production costs have been
pushed upward by the same inflationary pressures that have
affected other industries. At the same time, demand for
certain farm products has slackened because of the recession.
Fortunately, however, current agricultural laws are
working well. In spite of the financial difficulties many
farmers are experiencing, farm exports, farm net income and farm
cash receipts are at high levels.
ThisAdministration has taken a number of positive: stepsi to
assist farmers. The 1976 wheat acreage allotment was recently
increased by 8 million acres to 61.6 million acres. This action
provides wheat producers with additional target price and disaster
protection. We have also increased the 1975 crop cotton price
support loan rate by 9 cents a pound. And we recently announced
an increase in the price support level for milk, which, combined
3
with easing feed prices, should assist dairy producers.
Within the past several days, we have completed negotiations
with the European Community to end the export subsidies on
industrial cheese coming here -- a step that ensures that surplus
dairy products will not be sold in the U.S. market at cut-rate
prices At the same time, we have worked out arrangements which
enable the Europeans to continue selling us high-quality table
cheese. This solution has enabled us to keep on mutually
agreeable trading terms with our best customers for American
farm exports.
We have also taken action to protect our cattle producers
against a potential flood of beef imports from abroad. The
Department of State is completing negotiations with 12 countries
limiting their 1975 exports of beef to this country. These
voluntary export restraint agreements are intended to keep
imports subject to the Meat Import Law to less than 1,182 million
pounds.
In contrast to the development of the Agriculture and Consumer
Protection Act of 1973 --- which was the result of considerable
thought and study -- H.R. 4296 was hastily conceived with
inadequate hearings and without sufficient opportunity for
consumers and taxpayers to have a voice in its preparation.
Most farmers have already made their plans and bought their
seed, Many are well into their planting season. These plans
have obviously been completed without any dependence on the
provisions of H.R. 4296.
4
In the long haul, this bill ultimately would lead to
constraints on production, resulting in loss of jobs in food-
related industries. It would induce farmers to grow more cotton --
already in surplus -- and less soybeans -- badly needed for
food. The bill would jeopardize the competitive position of our
cotton in world markets.
American farmers have responded magnificently during the
past several year to produce food and fiber for this Nation
and the world. This has made agriculture our leading source
of foreign exchange. This year, despite very trying circumstances,
most farmers are again going for all-out production. They have
my support for a vigorous export policy for their products. Our
farm products must have unfettered access to world markets.
The act, in short, is anti-consumer, anti-farmer, anti-taxpayer,
and even anti-humanitarian:
--It is anti-consumer because it would cause higher prices
and result in crops produced for Government storage instead of
for the demands of the marketplace.
--It is anti-farmer because it would price our farm commodities
out of world markets, and lead to cutbacks in production.
--It is anti-taxpayer because of the cost of subsidies for
export purposes, for crop loans, for storage of inventories of
Government-controlled farm commodities, and for not growing crops.
--It is anti-humanitarian because once our export markets
are cut and our farmers are denied the profits of full production,
then consumers in a world stalked by hunger would face higher
5
food costs caused by reduced world supplies.
I cannot, in good conscience, approve this act. I return
it herewith.
This section on page 2a needs a policy decision.)
To help relieve current financial difficulties for producers,
I am today directing the Secretary of Agriculture to take action
to increase price support loan rates for wheat, corn, and other
feed grains.
In addition, I realize that farmers face serious problems
in producing food ; and fibers that the rest of us depend upon. I
sincerely seek to solve these problems -- not aggravate them. That
is why I have taken the action earlier described to help the wheat
and feed grain farmers adjust to the severe increase in the cost of
production occurring since the 1973 farm bill was enacted.
I would like to be as responsive to cotton growers as well,
but unfortunately, the law is not as clear nor as flexible in the
case of cotton as in the case of grain. I therefore have directed
the Secretary of Agriculture to thoroughly reexamine existing cotton
legal authority both in regard to calculating and establishing loan
levels and in the exercise of authority to make open market purchases.
This we will do in an effort to help insure the confidence of cotton
producers that this Administration does indeed concern itself with
their vital interests.
(MORE)
THE WHITE HOUSE
WASHINGTON
April 29, 1975
JMC:
You may want to see
these before the
Farm Bill Meeting.
p
April 25, 1975
Dear Mr. Chairman:
This is to acknowledge and thank you for your
letter to the President urging that he approve
and sign into law H.R. 4296, the Emergency Farm
Bill
I have made sure that your letter was called to
the attention of the President, and he appreci-
ates and understands your concerns. However,
I believe his decision was already made.
with kind regards,
Sincerely,
William T. Kendall
Deputy Assistant
furelarm Bill
to the President
Eng
The Honorable John C. 2 Stennis
United States Senate
alook
Washington, D.C. 20510
bee w/inc to Max Friedersdorf - FYI
bec w/inc to Jim Cannon - FYI
WTK:EF:jk
I 1017 CHALD E. IORO
JOHN C. STENNIS, MISS., CHAIRMAN
STUART SYMINGTON, MO.
STROM THURMOND, S.C.
HENRY M. JACKSON, WASH.
JOHN TOWER, TEX.
HOWARD W. CANNON, NEV.
BARRY GOLDWATER, ARIZ.
THOMAS J. MC INTYRE, N.H.
WILLIAM L. SCOTT, VA.
HARRY F. BYRD. JR., VA.
ROBERT TAFT, JR., OHIO
SAM NUNN, GA.
DEWEY F. BARTLETT, OKLA.
JOHN c. CULVER, IOWA
United States Senate
GARY HART, COLO.
PATRICK J. LEAHY, VT.
COMMITTEE ON ARMED SERVICES
T. EDWARD BRASWELL, JR., CHIEF COUNSEL AND STAFF DIRECTOR
WASHINGTON, D.C. 20510
April 23, 1975
The President
The White House
16.00 Pennsylvania Avenue
Washington, D.C. 20500
{ne
Dear Mr. President:
I wish respectfully to urge very strongly that you give your
approval and signature to the Farm Bill.
The distinguished Secretary of Agriculture has been quoted
in the press to the effect that he intends to recommend to you that
you veto the bill. He has said in substance that the farmers are
doing reasonably well, and that the farm support programs should
be left alone, and the free market system be relied upon to work
the problems out.
Based upon extensive personal contacts with experienced
farmers, it is my considered judgement that the farmers are
in deep trouble this year, with constantly. rising costs for what
they must buy, decreasing prices for their crops, and eroded
credit after a bad year.
In the State of Mississippi there is general agreement within
the financial community that farmers are having to borrow more
money to produce their crops than ever before. In some areas
the loans are as much as 35 percent higher than last year. The
average increase around the State is 15 to 20 percent. Farmers
are having to use their equities in their land and equipment to
get sufficient credit. They have watched the prices of farm
commodities drop for the fifth straight month. Prices are 15
percent lower than they were a year ago, and costs are 10 per-
cent higher. Any business endeavor facing these conditions
must be acknowledged to be in difficulty.
The President
April 23, 1975
Page Two
The purpose of the Farm Bill is to lend stability to the prices
for farm commodities. It does so by providing a safety net under
the prices, in the form of target prices and loan rates. This is
for the good of both the consumers and the producers.
Mr. President, I believe the Senate tried to be cooperative
about this bill. We gave up much of what we voted for here on
the floor. We did so in an effort to meet the administration
at least half way.
I believe that it would be imprudent for the government to
stand by and let events run their course, in the face of current
circumstances in agriculture. I strongly urge that you give the
I
Farm Bill your approval and signature.
Respectfully yours,
John STENNIS C. Stennis
United States Senator
JCS:mls
Farm Bill
April 24, 1975
Dear Don:
Thank you for the April 22 letter to the
President in which you and 24 of your
colleagues urge that he sign into law
H.R. 4296.
I have made sure that it was called to
the attention of the President, and he
appreciates and understands your concerns.
made. However, I believe his decision was already
With kind regards,
Vernon
Deputy
to the
Sincerely, Assistant President C. Cend Candace Loen 70 FarmBill
The Honorable Don Young
House of Representatives
Washington, D.C. 20515
bec: w/incoming to Max Friedersdorf - FYI
w/incoming to Jim Cannon - FYI
VCL:EF:mlg
Identical letters to all signees.
FORD :- 078830
CHARLES THONE
COMMITTEES:
AGRICUL TURE
1ST DISTRICT, NEBRASKA
SUBCOMMITTEES:
1531 LONGWORTH HOUSE OFFICE BUILDING
LIVESTOCK AND GRAINS
FORESTS
HOUSE OF REPRESENTATIVES
DAIRY AND POULTRY
WASHINGTON, D.C. 20515
GOVERNMENT OPERATIONS
SUBCOMMIT
FOREIGN OPERATIONS AND
GOVERNMENT INFORMATION
April 22, 1975
SPECIAL STUDIES
The President
The White House
Washington, D. C.
Dear Mr. President:
It is requested that you support the farmers of our nation by
signing into law H. R. 4296.
This bill, as passed by the House and Senate, applies solely to
the 1975 crops. This legislation represents an earnest attempt to
find a solution to our farmer's problems with high production costs
and one that will not place an undue burden on our consumers. This
legislation will lend stability to the market for farm prices. Without
this stabilizing influence of realistic target prices and loan levels the
farmers face severe uncertainty because of higher production costs.
We, the undersigned, feel that this would be a serious threat to
not only agriculture but to our total economy, and urge your signing this
legislation into law.
Mores Sincerely, Thone
Albert H. Quie
Charles Thone
Mark Andrews, North Dakota Tom Tom Hazedorn Hagedorn, Minnesota
James Abdnor, abdm South
Bill Goodling
Dakota
Bill Goodling, Pennsylvania
W. Henson Moore, Louisiana
Bill Bill Wampler, Wample Virginia
THIS STATIONERY PRINTED ON PAPER MADE WITH RECYCLED FIBERS
The President
The White House
April 22, 1975
B Jer Thad Cophan
CharlesE Bill Gene Charles Steiger, Taylor, E. Jaylor Grassley, Missouri Grassley Iowa James Cary Thad James A. Cochran, Jeffords, Myers, Mississippi Vermont Pennsylvania
John Y. McCollister, J me Nebrask Collist Larry Larry Pressler Pressler South
Dakota
Keith G. Sebelius, Sebeline Kansas
Mam Saus Delbert L. Latta, Ohio
Garryle Dan Jan Larry Winn Jr., Kansas minh J Shuty Joe
Skubitz Miner Kansas
alaved Young, C. Alaska Treen
Robert McEuen, New York
Bud Hillis
David C. Treen, Louisiana
Bud Hillis, Indiana
Vizia Virginia Smith, Nebraska Smith
April 25, 1975
Dear Senator:
This is to acknowledge and thank you for your
letter to the President urging that he approve
and sign into law H.R. 4296, the Emergency Farm
0111.
I have made sure that your letter was called to
the attention of the President, and he appreci-
ates and understands your concerns. However,
I believe his decision was already made.
with kind regards,
Sincerely,
William T. Kendall
Puniled
Deputy Assistant
to the President
toon Urging sign 4arm
The Honorable James B. Allen
United States Senate
Washington, D.C. 20510
bee, w/inc to Max Friedersdorf - FYI
bee w/inc to Jim Cannon - FYI
WTK:EF:jk
FORD is STYLE LIDE
HERMAN E. TALMADGE, GA., CHAIRMAN
424
JAMES O. ASTLAND, MISS.
CARL T. CURTIS, NEBR.
GEORGE NC GOVERN, S. DAK.
GEORGE D. AIKEN, VT.
JAMES F/ ALLEN, ALA.
MILTON R. YOUNG, N. DAK.
HUBERT H. HUMPHREY, MINN.
ROBERT DOLE, KANS,
WALTER D. HUDDLESTON, KY.
HENRY BELLMON, OKLA.
DICK CLARK, IOWA
JESSE HELMS, N.C.
United States Sena
COTYS M. MOUSER, CHIEF CLERK
COMMITTEE ON
AGRICULTURE AND FORESTRY
43
Signab HR
WASHINGTON, D.C. 20510
HAND DELIVERED
April 24, 1975
The President
The White House
Washington, D.C.
Dear Mr. President:
I wish to urge you to sign into law H.R. 4296, the Emergency
me
Farm bill. This legislation is desperately needed to provide
Alabama and other farmers throughout our nation with the
most minimum of income protection.
Farm costs, since 1972, have risen by 35 percent. Alabama
farmers have been selling their cotton since the first of
this year for well below the cost of production. Many of
these same farmers have been suffering from extremely low
cattle prices these past several months and, more recently,
have seen prices drop precipitously for their soybeans,
corn or wheat.
Mr. President, American farmers are among the hardest
working, most productive people, in our nation. We must
also remember what it is that our American family farm
system produces, namely, food and fiber, the most basic
of products relating to human needs.
Considering these factors, Mr. resident, I ask you not
to turn your back on our nation's farm families. I urge
you instead to acknowledge the great contribution that
these good citizens continue to make to our nation's
health and well-being, and sign into law H.R. 4296. A
veto of this emergency legislation will have a deep and
demoralizing effect on our nation's farmers--and on those
who finance them!
Mr. President, Americans recently have been called upon,
once again, to provide tremendous additional funds to aid
the people of Vietnam. The generosity of the American people
The President
Page Two
April 24, 1975
in this regard over the years has been almost limitless.
Surely, they would not want their government to turn its
back now on its own farmers, especially when the probable
costs that might be involved are so modest.
Mr. President, on behalf of the farm families of Alabama
and myself, I urge you to sign into law H.R. 4296. By
doing so you will also greatly insure that both this nation
and much of the world can look forward to a return to food
and fiber abundance during this next year.
With best wishes.
Respectfully submitted,
Janes. James B. Allen allen
JBA/pf
April 25, 1975
Dear Senator:
This is to acknowledge and thank you for your
letter to the President urging that he approve
and sign into law B.R. 4296, the Emergency Farm
Bill.
I have made suro that your letter was called to
the attention of the President, and he appreci-
ates and understands your concerns. However,
I believe his decision was already made.
with kind regards,
Sincerely,
William T. Kendall
Deputy Assistant
to the President
farmbill
for
The Honorable Strom Thursend
United States Senate
Washington, D.C. 20510
bee w/ine to Max Priedersderf - FYI
bee w/ine to Jim Cannon - FYI
WTK:EF:jk
FORD is LIBRARY STUDIE
JAMES O. EASTLAND, MISS., CHAIRMAN
4. 24
JOHN L. MC CLELI AN, ARK.
ROMAN L. HRUSKA, NEBR.
PHILIP A. HART MICH.
HIRAM L. FONG, HAWAII
EDWARD M. KENNEDY, MASS.
HUGH SCOTT, PA.
:-
EARCH BAY IND.
STROM THURMOND, S.C.
QUENTIN N. BURDICK, N. DAK.
CHARLES MC C. MATHIAS, JR.. MD.
ROBERT C. BYRD, W. VA.
WILLIAM L. SCOTT, VA.
United States Senate
JOHN V. TUNNEY, CALIF.
JAMES ABOUREZK, S. DAK.
14R
PETER M. STOCKETT
COMMITTEE ON THE JUDICIARY
CHIEF COUNSEL AND STAFF DIRECTOR Nign
WASHINGTON, D.C. 20510
April 22, 1975
The President
The White House
Washington, D.C.
Dear Mr. President:
""
As you know, the Senate approved the Conference Report on
H.R. 4296, the Emergency Price Supports Farm Bill, on
April 17, 1975, and it is my understanding that the House
has today cleared that measure for your consideration.
It is my sincere hope that you will sign this bill. I
find the version finally approved by Congress to be most
reasonable for farmers and consumers alike. In fact, I am
disappointed that it does not go far enough to meet the
critical needs of Southeastern cotton farmers and does nothing
to address the worsening cost-price squeeze facing tobacco
producers. Nevertheless, the farm communities in my region
will welcome the modest relief afforded by this legislation.
On the other hand, they will be bitterly disappointed if you
decide to veto this bill.
Mr. President, I have previously emphasized to you (in my
letter of March 14, 1975) the necessity of your Administration
doing all it can to meet the legitimate needs of the Agricultural
community. I reiterate that deep concern to you now and urge,
in the strongest possible terms, that you approve this emergency
farm legislation.
With kindest regards and best wishes,
Respectfully,
strom Thurmond
Strom Thurmond
ST/ed
April 25, 1975
Dear Senator:
This is to acknowledge and thank you for your
letter to the President urging that he approve
and sign into law H.R. 4296, the Emergency Farm
Bill.
I have nade sure that your letter was called to
the attention of the President, and he appreci-
ates and understands your concerns. However,
I believe his decision was already made.
With kind regards,
Sincerely,
William T. Kendall
Deputy Assistant
to the President
Fortarm Beel
The lienorable Dewey F. Bartlett
United States Senate
Washington, D.C. 20510
bee.w/ine to Max Friedersdorf - FYI
bee w/ine to Jim Cannon - FYI
WTK:EP:jk
FORD is GIVENO LIBRARY
4-2-4
GAYLORD NELSON, WIS., CHAIRMAN
JOHN SPARKMAN, ALA.
JACOB K. JAVITS, N.Y.
THOMAS MCINTYRE, N.H.
J. GLENN BEALL, JR., MD.
SAM NUNA, GA.
WILLIAM V. ROTH, JR., DEL.
3. BENNETT JOHNSTON, LA.
BILL BROCK, TENN.
4296
WILLIAM D. HATHAWAY, MAINE
LOWELL P. WEICKER, JR. CONN.
JAMES ABOUREZK, S. DAK.
DEWEY F. BARTLETT, OKLA,
FLOYD K. HASKELL, COLO.
PAUL LAXALT, NEV.
DICK CLARK, IOWA
HR
United States Senate
WALTER F. MONDALE, MINN.
SELECT COMMITTEE ON SMALL BUSINESS
WILLIAM B. CHERKASKY, STAFF DIRECTOR
RAYMOND D. WATTS, GENERAL COUNSEL
(CREATED PURSUANT TO S. RES. 58, 81ST CONGRESS)
WASHINGTON, D.C. 20510
April 23, 1975
The Honorable Gerald R. Ford
President of the United States
The White House
Washington, D.C.
Dear Mr. President:
me
I respectfully urge you to reconsider your intention to veto the
Emergency Farm Bill, H.R. 4296. I recognize and support your efforts
to hold down inflationary spending, but I believe the present
economic uncertainties faced by agriculture pose a greater danger
than the budget increase that would accompany this measure.
As you may know, the cost of production for our farmers has increased
an alarming thirty-five percent in the last two years, resulting in
a major decline in farm income last year, and projections for further
decline this year. The consumer's cost of farm-produced foods has
increased, but higher prices certainly cannot be attributed to
farmers. This is evidenced by a fifteen percent increase in the
difference between prices paid to farmers, and prices paid by con-
sumers, from the fourth quarter of 1973 to the fourth quarter of 1974.
It should be obvious that American farmers have already made great
sacrifices due to inflation. I believe it would be unfair to ask
for the additional sacrifice implied by a veto of this legislation.
As America's largest and most important industry, agriculture will
play an increasingly vital role in the nation's progress toward
economic recovery. To guarantee full production, we must assure
farmers of a fair return on their investment. The emergency farm
bill offers this assurance, and again, I respectfully urge you to
give H.R. 4296 further consideration.
Sincerely,
Denry 7. Bartlett
Dewey F. Bartlett
U.S. Senate
OKLAHOMA
DFB/jaj
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
APR 2 y 1975
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 4296 - Farm commodity price
supports
Sponsor - Rep. Foley (D) Washington and 24 others
Last Day for Action
May 5, 1975 - Monday
Purpose
Increases target prices and loan and purchase levels on the
1975 crops of cotton, corn, wheat, and soybeans while
providing price support for milk at 80 percent of parity
with quarterly adjustments through March 31, 1976.
Agency Recommendations
Office of Management and Budget
Disapproval
Department of Agriculture
Disapproval (Veto
Message attached)
Department of State
Disapprova[(Informally
Department of the Treasury
Disapproval
Council of Economic Advisers
Disapproval
Council on Wage and Price Stability
Disapproval
Discussion
Under the current law, farm producers of wheat, feed grains
(primarily corn), and cotton are eligible for Federal support
in three ways:
-- Producers may borrow funds using these commodities
as collateral at the lowest current Treasury interest
rate (presently 6.125%). If they desire, they may
2
forfeit this collateral in lieu of repaying the loan.
The present loan levels (noted below) for wheat and
corn are statutory floors which can be raised
administratively, but cannot be lowered or eliminated.
However, present law requires that cotton loan levels
be set at 90% of the 3-year average world price. In
the case of soybeans, the Secretary has administrative
discretion to have a loan program and to establish the
level for such loans - - soybean loan programs have
been in effect for many years, but were terminated
for the 1975 crop.
-- If market prices over a specified period of time
average below the "target" price, producers receive
a payment equal to the difference. These target
prices are established in law as noted below.
-- If because of a natural disaster a producer is unable
to harvest a normal crop, he is eligible for a payment
equal to 1/3 of the target price.
In addition, the statutory floor for the support price of milk
is not less than 75 percent of the parity price, although on
January 3, 1975, the Administration announced that milk would
be supported at 80 percent of the December 1974 parity price
through March 31, 1976 ($7.24/cwt).
H.R. 4296 would increase loan and target prices for only the
1975 crop as follows:
LOAN LEVELS
TARGET PRICES
Present
H.R. 4296
Present
H.R. 4296
Wheat
$/bu.
$1.37
$2.50
$2.05
$3.10
Corn
$/bu.
$1.10
$1.87
$1.38
$2.25
Cotton
$/lb.
$0.34
$0.38
$0.38
$0.45
Soybeans $/bu.
$ -0-
$3.94
$ -0-
$ -0-
The enrolled bill would also provide price support for milk
at not less than 80 percent of parity with quarterly adjustments
to reflect changes in the index of prices paid by farmers for
production items, interest, taxes, and wage rates.
3
The Department of Agriculture estimates that H.R. 4296
would increase fiscal year 1976 outlays by approximately
$1.8 billion:
-- Of this amount $500 million would be in the form
of direct payments. Over $300 million would go
to cotton producers because cotton prices are
already below the current target price.
-- Loans to producers would increase by about $1.3 billion
largely because of the increase in the loan rate and
the attractive interest rate. Most of these loans
would eventually be repaid unless market prices fell
to these levels. (This could easily happen in the
case of cotton because the bill's new loan levels
give cotton a competitive advantage over soybeans
in terms of net profit per acre, and thus encourages
a shift from soybean to cotton production).
-- There would be some increase, about $30 million, in
dairy purchases.
In reporting to the Agriculture Committees in the House and
Senate, Agriculture vigorously opposed enactment of H.R. 4296
on the grounds that it would: (a) be far too costly;
(b) undesirably substitute government intervention for
marketplace incentives as a guide for farm production;
(c) inevitably price U.S. farm commodities out of world
markets; (d) lead to Federal production controls; and
(e) produce higher consumer prices. Agriculture further
advised the Congress that enactment would not be in accord
with the President's program.
However, in its report on H.R. 4296, the House Agriculture
Committee argued that:
"Because of the tremendous increase in the cost of
production of agricultural commodities, the legislation
enacted in 1973 no longer affords the protection to the
producer that is necessary to insure maximum production.
According to Department of Agriculture figures, farm
production expenses, at $74.8 billion for 1974 were up
$10 billion from 1973. Prices paid for production
items, interest, taxes, and wage rates jumped 15 percent
4
last year. A huge cost increase occurred for fertilizer
as prices averaged some 70 percent above 1973. Fuel
prices also zoomed upward, resulting in much higher
outlays by farmers. Seed prices, reflecting tight
supplies, were up one-third. This increase in production
expenses offset a gain in gross income and resulted in a
drop of $5 billion in realized net farm income from 1973.' "
H.R. 4296 originally passed in the House by 259-162 and a
more costly version passed in the Senate by 57-25. The
Conference report was approved in the House by 248-166 and by
voice vote in the Senate.
We strongly concur in Agriculture's analysis and veto
recommendation. In summary, the unacceptable features of
H.R. 4296 are:
-- It contradicts established Administration policy
of maximum use of the marketplace.
--- It threatens to add $1.8 billion to budget outlays
in 1976.
-- It is certain to be used as the point of departure
for longer term legislation which will undermine
market-oriented policy and further escalate farm
program expenditures in subsequent years.
- It could hold U.S. prices above world levels
and make the U.S. a residual supplier, thereby
reducing foreign exchange earnings.
- It will almost inevitably force the Government
once again to impose production controls.
- It will undoubtedly (because of production
controls) result in substantial increases in
food costs.
A draft Veto Message, representing a revision of the one
submitted by Agriculture, has been prepared by this Office
and forwarded separately for your consideration.
Ja Director L.Ly
Enclosures
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL ON WAGE AND PRICE STABILITY
WASHINGTON, D.C. 20506
April 24, 1975
Mr. J.F.C. Hyde, Jr.
Acting Assistant Director for
Legislative Reference
Office of Management and Budget
Washington, D.C. 20503
Dear Mr. Hyde:
This is in reply to your request for our views on H.R. 4296,
an enrolled bill to increase target prices and loan levels
on certain agricultural commodities. In our judgment, this
bill contains several highly objectionable provisions.
The most objectionable feature of the bill is the increase
in target prices and loan levels for cotton. The surplus
of cotton is already very large, while food stocks are at
low levels and need rebuilding to insure against future
inflationary price rises. Higher prices for cotton would
divert acreage from badly needed food crops, especially
soybeans, into cotton.
We also object to the mandatory 80 percent of parity support
price for milk. Although the support price is currently at
this level, large and potentially burdensome stocks of dairy
products are being accumulated. The Secretary of Agriculture
should be free to lower the support price to 75 percent as
permitted by existing law if stocks continue to accumulate.
The increased target prices and loan rates for grains and
the new loan rate for soybeans are unlikely to have much
impact in 1975, unless there is a very large crop and weak
export demand. However, they would set a very bad precedent
for 1976, since it is unlikely that Congress would permit
these levels to decrease. In the event of two successive
good crops, the impact on the Federal budget and on food
prices to consumers could be substantial. We would neverthe-
less favor some increase in the loan levels for grains based
on increases in production costs other than land costs.
Such increases in loan levels could serve to encourage
2
maximum production. In the event of two successive good
crop years, they might lead to some Government acquisition
of stocks, but such stocks might be useful in averting
sharp price rises in subsequent years.
We strongly recommend that the President veto H.R. 4296 on
the grounds that it would raise the price of food, curtail
food production, and contribute to inflation.
Sincerely yours,
Celbert Rees
Albert Rees
Director
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
April 24, 1975
Dear Mr. Frey:
This is in response to your request for the Council =
Economic Advisers' views on H.R. 4296, which adjusts target
prices, loan and purchase levels on the 1975 crops of certain
agricultural crops and contains additional provisions for the
price support of milk. The Council strongly recommends that
the President veto this bill. If signed into law it promises
to be the first step in a return to the discredited farm
programs of the past. It will raise the floor under farm
prices, with the potential of raising food prices to consumers
and pricing us out of the world market for some agricultural
commodities. Moreover, it is not in the best interest of U.S.
livestock producers, and will raise budget outlays by an
estimated $1.8 billion on the 1976 budget.
ART Alan Greenspan
Sincerely,
Mr. James Frey
Assistant Director for
Legislative Reference
Office of Management and Budget
Washington, D.C. 20503
LUTION
BICENTENNIAL
76-1976
STATE MITED DEPARTMENT ) / ANTITITY SENTITURE
DEPARTMENT OF AGRICULTURE
OFFICE OF THE SECRETARY
WASHINGTON, D. C. 20250
Honorable James T. Lynn
April 24, 1975
Director, Office of
Management and Budget
Dear Mr. Lynn:
This report is submitted on enrolled bill H.R. 4296, "To adjust target
prices, loan and purchase levels in the 1975 crops of upland cotton,
corn, wheat and soybeans, to provide price support for milk at
80 percentum of parity with quarterly adjustments for the period
ending March 31, 1976, and for other purposes".
The Department recommends that the President veto the bill.
This 1-year "emergency" farm bill will add $1.8 billion to government
outlays for the 1975 crop alone, besides forming the basis for much
greater costs in future years.
The bill, if approved, will create a greater financial hardship next
year--not only on the Federal budget, but also for taxpayers, farmers
and consumers through increased costs. The higher target prices
in H.R. 4296 will undoubtedly become the base in 1976 and 1977 for
the application of the target price escalator clause contained in
the Agriculture and Consumer Protection Act of 1973.
The loan and target prices in H.R. 4296 will encourage production
for an artificial market, i.e., the government, rather than for the
real market, thus reversing the policy direction embodied in the
agricultural price support legislation of 1970 and 1973.
A veto message is enclosed.
Sincerely,
Campbell
Under Secretary
Enclosure
To the House of Representatives:
There comes a time in the conduct of public affairs when special interest
and political advantage must give way to the common good.
There comes a time when a line must be drawn against fiscal excesses.
In my address to the Nation on March 29, I drew that line. I promised
all Americans that except where long-range national security interests are
involved, or for urgent humanitarian need, I would take action to hold our
fiscal 1976 deficit to no more than $60 billion.
New spending actions which the Congress is seriously considering could easily
raise the Federal deficit to a wholly unacceptable level of $100 billion.
The so-called Emergency Agricultural Act of 1975 (H. R. 4296) is one
of these spending actions. It could add an estimated $1. 8 billion to the
Federal deficit in its first year, and, if used as a point of departure for
longer-term legislation, as strongly indicated by recent congressional
action, it could sharply escalate farm program budget outlays in subsequent
years.
By signing this Act into law, I would not be holding the line on our fiscal
1976 deficit. My signature would undermine the successful market-oriented
farm policy adopted by this Administration and the Congress. It would
represent a step backward to the discredited and long since abandoned
policies of a decade ago.
Therefore, I am returning H.R. 4296 without my approval.
Farm production costs have been pushed upward by the same inflationary
pressures that have affected other industries. At the same time, demand
for certain farm products has slackened due to recession. The index of
prices paid by farmers has increased 10 percent above year-ago levels.
In contrast, the index of prices received by farmers has declined for the
past five months, and is now 15 percent below year-earlier levels.
Cotton and livestock producers, in particular, have been hard hit.
- 2 -
To help relieve these economic difficulties, I am today directing the
Secretary of Agriculture to take action to increase price support loan
rates for wheat, corn and other feed grains.
This action follows a number of positive steps by this Administration
to assist farmers. The 1976 wheat acreage allotment was recently increased
to 61.6 million acres, up 8 million acres from the 1975 allotment. This
provides additional target price and disaster protection for wheat producers.
As provided for by current legislation, we have increased the 1975-crop
cotton price support loan rate by 9 cents per pound.
We recently announced an increase in the price support level for milk,
which, combined with more favorable feed prices, should improve the
income situation for dairy producers.
Within the past several days we have completed arrangements with the
European Community under which they agreed to cease exporting industrial
cheese into the U.S. market with the aid of export subsidies. We have
impressed upon the Europeans that they cannot expect to dump their sur-
plus dairy products into the U.S. market at cut-rate prices. At the same
time we have worked out a way which enables the Europeans to continue
selling us high quality table cheese. This was a satisfactory solution
to a difficult problem. It has enabled us to keep on satisfactory trading
terms with our best export customer for American farm products.
We have taken action to protect our cattle producers against a potential
flood of beef imports from abroad. The Department of State is about to
complete negotiations with 12 countries limiting their exports of beef to
this country in 1975. These voluntary export restraint agreements are
intended to keep imports subject to the Meat Import Law within 1, 182
million pounds.
We have moved aggressively in the past several months to implement
food assistance programs under the Agricultural Trade Development and
Assistance Act (P.L. 480). The volume exported under this program is
- 3 --
expected to reach nearly 5.5 million tons of food in this fiscal year,
including 4 million tons of wheat. This will be 70 percent higher than a
a year ago. Wheat shipments will be more than double last year's level.
Further liberalization of world agricultural trade is one of our prime
objectives at the multilateral trade negotiations which have just begun in
Geneva.
In addition to these actions, producers deserve all possible help through
existing Government programs for the extension of credit and other forms
of financial assistance. But, primarily, the answer to their difficulties
lies in prompt, responsible actions by this Government in dealing with
recession and inflation.
In contrast to the development of current legislation--the Agriculture and
Consumer Protection Act of 1973--which was the result of considerable
thought and study, H.R. 4296 was hastily conceived with a minimum of
hearings and without sufficient opportunity for consumers and taxpayers
to have a voice in its preparation. As the name of the bill implies, it
was prepared in an attempt to redress an "emergency" situation in the
farm sector by means of excessive and inconsistent increases in the price
support levels for wheat, feed grain, cotton and soybeans. Many farmers
oppose this bill. Its passage is not supported by two of the nation's largest
farm organizations--The American Farm Bureau Federation and The
National Farmers Union.
Farmers have made their plans, bought their seed and many are well into
their planting season. These plans have obviously been completed without
any dependence on the "quick fix" envisioned by the authors of H.R. 4296.
The direct effect on consumer prices in the next year would be small.
However, the long-range effect of this bill would tend to push both consumer
prices and federal budget outlays higher, making our fight against inflation
more difficult.
This bill would ultimately lead to paying farmers not to grow crops,
- 4 -
resulting in loss of jobs in food-related industries because of cutbacks
in farm production. It would induce farmers to grow more cotton, which
is already in surplus, and less soybeans, which are needed for food. The
bill would jeopardize the competitive position of U.S. cotton in world markets,
and would create a price umbrella for farmers in other nations who compete
with U.S. farmers, leading to deterioration of our international trade position.
Our farmers have responded magnificently during the past several years
in the production of food and fiber. This has made agriculture our number
one earner of foreign exchange. Most farmers are again going for all-out
production this year. They are responding well under very trying cir-
cumstances. They deserve and will receive my support for a vigorous
export policy for their products. Last year we unfortunately had to ask one
of our new customers to curtail its purchases of American grains. For
a short time we also operated a voluntary prior approval system for export
sales of grains and soybeans. We do not intend to resort to either of
these measures again. Our farmers deserve and will receive unfettered
access to world export markets.
Current farm legislation is working successfully. In spite of the financial
difficulties many farmers are experiencing, farm exports, farm operators'
net income - in total - and total farm cash receipts are at near-record
levels. The government is out of the farming business, and should stay
out, leaving the farmer free to earn his income from the marketplace,
not from the Federal Treasury.
The Act that I am vetoing is anti-consumer, anti-farmer, anti-taxpayer
and anti-humanitarian:
--It is anti-consumer because it will result in unwanted crops, produced
for Government storage instead of for the demands of the marketplace.
--It is anti-farmer because it will inevitably price U.S. farm commodities
out of world markets and lead to production cutbacks, which, in turn,
- 5 -
will make our farms less efficient by spreading fixed costs over fewer
producing acres.
--It is anti-taxpayer because the potential price-tag would run into billions
of dollars a year for deficiency payments to farmers, for paying farmers
not to grow crops, for export subsidies, for crop loans, and for the
storage of huge inventories of government-owned or government-controlled
farm commodities.
--It is anti-humanitarian because once our export markets are lost and
our farmers are denied the profits of full production, then world
consumers will face higher food costs brought about by reduced world
supplies.
By signing this Act into law, I would take economic independence away
from farmers on the one hand, and, on the other, burden taxpayers with
massive, accelerating Federal expenditures.
THE WHITE HOUSE
WASHINGTON
April 29, 1975
MEMORANDUM FOR
WARREN HENDRIKS
FROM:
JUDY JOHNSTON
SUBJECT:
Ag Veto Message
Bob Hormats requested that two more changes be made to
the message.
-- p.3 2nd paragraph, 2nd line. "with the European
Community to remove (rather than "end" ) the export
-- p.4 2nd paragraph, 6th line, after sentence ending
products. Add "It is our policy to do everything
possible to avoid the use of export restraints in the
future."
THE WHITE HOUSE
WASHINGTON
April 28, 1975
MEMORANDUM FOR THE STAFF SECRETARY
FROM:
MAX L. FRIEDERSDORF m.b.
SUBJECT:
Veto Message - H.R.4296 the Emergency Agricultural
Act of 1975.
I recommend the substance of 2A be retained.
Although I believe a veto can probably be sustained without
raising the loan rates, failure to do so will erode our strength
to a dangerous level.
A whip check of hardcore support late today without raising the
loan rates, shows us with 153 votes, only 8 above our 145 needed
to sustain.
Seventy votes against the bill were Democrats, and many will be
susceptible to switching against us if the vote is close.
It is my understanding that the loan rate increases recommended
by Secretary Butz would be well below the market structure, and
not affect outlays.
I believe the loan rate increase would insure a large Presidential
victory on the veto and should be included in the message.
TI
[4/29/75]
#
We came up with a solution
the
that recognizes
the farmers problem but makes no commitment
to the expenditure of other Federal Funds
Your message might include the following
language:
THE WHITE HOUSE
WASHINGTON
April 29, 1975
MEETING ON FARM VETO MESSAGE
Tuesday, April 29, 1975
The Cabinet Room
5:00 p.m.
From: Jim Cannon
I.
PURPOSE
To review and obtain your concurrence on a
response to a new development related to your
Farm Veto Message.
II.
BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background
You recently reviewed Bill Seidman's option
paper of April 24 on Farm Bill Alternatives (Tab A)
and decided to veto the bill and not do anything
about the loan levels.
Unfortunately yesterday we learned that there
is a misconception on the Hill that you are
going to couple your veto with some kind of
action on loan levels.
Max Friedersdorf and Secretary Butz report that
there would be a serious risk that a veto would
be overriding if a veto message makes no mention
of loan levels. Max's latest vote count to
sustain a veto shows:
52 Democrats
103
Republicans
155 Total
We might pick up as many as 18 votes that are
now uncommitted; but we could lose a substantial
number of the Democrats if the caucus makes a
strong effort to override.
-2-
In view of this new development, Max Friedersdorf,
Earl Butz, Bill Seidman, Jack Marsh, Jim Lynn and
I met this morning to discuss this problem. We
came up with a solution that recognizes the farmers
problem but makes no commitment to the expenditure
of other Federal Funds
Your message might include the following
language:
To guard against any possible adverse
economic effects from further price
deterioration, I am directing the Secretary
of Agriculture to be prepared to make de-
sirable adjustments in price support loan
rates for wheat, corn, and other feed
grains.
Max and Earl Butz are reasonably certain that a
veto can be sustained if this language is
included.
III
PARTICIPANTS
The Vice President
Paul O'Neill
Secretary Butz
Jim Cannon
Counsellor Hartmann
Bill Seidman
Counsellor Marsh
Don Rumsfeld
Max Friedersdorf
Alan Greenspan
Jim Lynn
IV
PRESS PLAN
To be announced
April 29, 1975
To the House of Representatives:
I am returning without my approval H.R. 4296, referred
to as the Emergency Agricultural Act of 1975. Although the
COSTLY 4 TO
aim of this bill is laudable, its results would be counter
the
CONSUMERS
AND
DAMAGING
TD
productive for farwers, other taxpayers, and for America's
economic recovery and world market position.
The bill would remove a considerable amount of economic
independence from farmers while burdening consumers with
higher prices and boosting the already overly-inflated
Federal deficit
Approval of this bill would, therefore, not be in the
public interest.
In the conduct of the Government's fiscal affairs, a line
must be drawn against excesses. I drew that line in my address
to the Nation on March 29. I promised all Americans that,
except where long-range national security interests, energy
matters, or urgent humanitarian needs were involved, I would
take action to hold our fiscal year 1976 deficit to no more
than $60 billion.
New spending programs which the Congress is considering
could easily raise the Federal deficit to an intolerable level
of $100 billion. This must not happen.
- 2 -
Increased
H.R. 4296 is an example of spending
WHIN
is
NOT
issential
program. In fiscal year 1976, it could add an estimated $1.8
billion to the Federal deficit. If used as a point of departure
for longer-term legislation -- as was strongly indicated during
its consideration --- it could lead to an escalation of farm
program subsidies in succeeding years.
Approval of this bill would undermine the successful
market-oriented farm policy adopted by this Administration
and the Congress. It is a step backward toward totally
discredited policies.
Prospects for farmers, it is true, are not as bright
this year as in the recent past. Farm production costs have
been pushed upward by the same inflationary pressures that
have affected other industries. At the same time, demand for
certain farm products has slackened because of the recession.
This Administration recognizes farmers have financial
difficulties due to this cost-price squeeze and has taken a
number of positive steps to assist farmers. The 1976 wheat
acreage allotment was recently increased by 8 million acres
to 61.6 million acres. This action provides wheat producers
with additional target price and disaster protection. We
have also increased the 1975 crop cotton price support loan
rate by 9 cents a pound. And we recently announced an
increase in the price support level for milk, which, combined
with easing feed prices, should assist dairy producers.
- 3 -
Within the past several days, we have completed negotiations
with the European Community to remove the export subsidies on
industrial cheese coming here -- a step that ensures that surplus
dairy products will not be sold in the U.S. market at cut-rate
prices. At the same time, we have worked out arrangements
which enable the Europeans to continue selling us high-quality
table cheese. This solution has enabled us to keep on mutually
agreeable trading terms with out best customers for American
farm exports.
We have also taken action to protect our cattle producers
against a potential flood of beef imports from abroad. The
Department of State is completing negotiations with 12 countries
limiting their 1975 exports of beef to this country. These
voluntary export restraint agreements are intended to keep
imports subject to the Meat Import Law to less than 1, 182
million pounds.
If any unforeseen price deterioration calls for such
action, I am directing the Secretary of Agriculture
be
provided to make desirable adjustments in price support loan
rates for wheat, corn, feed grains. It is our
suy bed other
expectation, however, that market prices for grains will
remain well above loan rates and target prices in the coming
year.
- 4 -
In contrast to the development of the Agriculture and
Consumer Protection Act of 1973 -- which was the result of
considerable thought and study -- H.R. 4296 was hastily con-
ceived with inadequate hearings and without sufficient oppor-
tunity for consumers and baxpayers to have a voice in its
preparation.
Most farmers have already made their plans and bought
their seed. Many are well into their planting season. These
plans have obviously been completed without any dependence
on the provisions of H.R. 4296.
In the long haul, this bill ultimately would lead to
constraints on production, resulting in loss of jobs in
food-related industries. It would induce farmers to grow
more cotton --- already in surplus -- and less soybeans ---
needed for food. The bill would jeopardize the competitive
position of our cotton in world markets.
American farms have responded magnificently during the
past several years to produce food and fiber for this Nation
and the world. This has made agriculture our leading source
of foreign exchange. This year, despite very trying circum-
stances, most farmers are again going for all-out production.
They have my support for a vigorous export policy for their
products. recognize that agricultural exports have been
We have are deinvoid all
- 5 - restruction an exports and И
restrained twice in the past two years. nw are determined
not to have chem again.
to de everything possible to avoid resorting to such restraints
in the future. Our farm products must have unfettered access
to world markets.
The act, in short, is anti-consumer, anti-farmer, anti-
taxpayer, and even anti-humanitarian:
-It is anti-consumer because it would cause higher
prices and result in crops produced for Government storage
instead of for the demands of the marketplace.
--It is anti-farmer because it would price our farm
commodities out of world markets, and lead to cutbacks in
production.
--It is anti-taxpayer because of the potential cost of
subsidies for export purposes, for crop loans, for storage
of inventories of Government-controlled farm commodities,
and for not growing crops.
--It is anti-humanitarian because once our export
markets are cut and our farmers are denied the profits of
full production, then consumers in a world stalked by hunger
would face higher food costs caused by reduced world supplies.
I cannot in good conscience, approve this act.
I return it herewith.
this Administration will act to insure
the of armer his of in shar IT will
not act to aislort his married we
must hold the hudget line of we a
are properous, stable, non flationary
all to enjoy the benefit of
April 29, 1975
To the House of Representatives:
I am returning without my approval H.R. 4296, referred
to as the Emergency Agricultural Act of 1975. Although the
COSTL 10
aim of this bill is laudable, its results would be counter
#
CONSUMERS
AND
DAMAGING TO
productive for farmers, other taxpayers, and for America's
economic recovery and world market position.
The bill would remove a considerable amount of economic
independence from farmers while burdening consumers with
higher prices and boosting the already overly-inflated
Federal deficit.
Approval of this bill would, therefore, not be in the
public interest.
In the conduct of the Government's fiscal affairs, a line
must be drawn against excesses. I drew that line in my address
to the Nation on March 29. I promised all Americans that,
except where long-range national security interests, energy
matters, or urgent humanitarian needs were involved, I would
take action to hold our fiscal year 1976 deficit to no more
than $60 billion.
New spending programs which the Congress is considering
could easily raise the Federal deficit to an intolerable level
of $100 billion. This must not happen.
- 2 -
Increased
H.R. 4296 is an example of
spending
WHICH
is
essential
program. In fiscal year 1976, it could add an estimated $1.8
billion to the Federal deficit. If used as a point of departure
for longer-term legislation -- as was strongly indicated during
its consideration -- it could lead to an escalation of farm
program subsidies in succeeding years.
Approval of this bill would undermine the successful
market-oriented farm policy adopted by this Administration
and the Congress. It is a step backward toward totally
discredited policies.
Prospects for farmers, it is true, are not as bright
this year as in the recent past. Farm production costs have
been pushed upward by the same inflationary pressures that
have affected other industries. At the same time, demand for
certain farm products has slackened because of the recession.
This Administration recognizes farmers have financial
difficulties due to this cost-price squeeze and has taken a
number of positive steps to assist farmers. The 1976 wheat
acreage allotment was recently increased by 8 million acres
to 61.6 million acres. This action provides wheat producers
with additional target price and disaster protection. We
have also increased the 1975 crop cotton price support loan
rate by 9 cents a pound. And we recently announced an
increase in the price support level for milk, which, combined
with easing feed prices, should assist dairy producers.
- 3 -
Within the past several days, we have completed negotiations
with the European Community to remove the export subsidies on
industrial cheese coming here --- a step that ensures that surplus
dairy products will not be sold in the U.S. market at cut-rate
prices. At the same time, we have worked out arrangements
which enable the Europeans to continue selling us high-quality
table cheese. This solution has enabled us to keep on mutually
agreeable trading terms with out best customers for American
farm exports.
We have also taken action to protect our cattle producers
against a potential flood of beef imports from abroad. The
Department of State is completing negotiations with 12 countries
limiting their 1975 exports of beef to this country. These
voluntary export restraint agreements are intended to keep
imports subject to the Meat Import Law to less than 1,182
million pounds.
If any unforeseen price deterioration calls for such
action, I am directing the Secretary of Agriculture to be
prepared to make desirable adjustments in price support loan
rates for wheat, corn, and other feed grains. It is our
expectation, however, that market prices for grains will
remain well above loan rates and target prices in the coming
year.
- 4 -
In contrast to the development of the Agriculture and
Consumer Protection Act of 1973 -- which was the result of
considerable thought and study -- H.R. 4256 was hastily con-
ceived with inadequate hearings and without sufficient oppor-
"tunity for consumers and taxpayers to have a voice in its
preparation.
Most farmers have already made their plans and bought
their seed. Many are well into their planting season. These
plans have obviously been completed without any dependence
on the provisions of H.R. 4296.
In the long haul, this bill ultimately would lead to
constraints on production, resulting in loss of jobs in
food-related industries. It would induce farmers to grow
more cotton -- already in surplus -- and less soybeans --
needed for food. The bill would jeopardize the competitive
position of our cotton in world markets.
American farms have responded magnificently during the
past several years to produce food and fiber for this Nation
and the world. This has made agriculture our leading source
of foreign exchange. This year, despite very trying circum-
stances, most farmers are again going for all-out production.
They have my support for a vigorous export policy for their
products. I recognize that agricultural exports have been
- 5 -
restrained twice in the past two years. We are determined
to do everything possible to avoid resorting to such restraints
in the future. Our farm products must have unfettered access
to world markets.
The act, in short, is anti-consumer, anti-farmer, anti-
taxpayer, and even anti-humanitarian:
-It is anti-consumer because it would cause higher
prices and result in crops produced for Government storage
instead of for the demands of the marketplace.
--It is anti-farmer because it would price our farm
commodities out of world markets, and lead to cutbacks in
production.
--It is anti-taxpayer because of the potential cost of
subsidies for export purposes, for crop loans, for storage
of inventories of Government-controlled farm commodities,
and for not growing crops.
--It is anti-humanitarian because once our export
markets are cut and our farmers are denied the profits of
full production, then consumers in a world stalked by hunger
would face higher food costs caused by reduced world supplies.
I cannot in good conscience, approve this act.
I return it herewith.
this Administration will act to insure
not act to astort his marries we
the of armer his fair shaw 11 will
must hold the handget line of we a
are all to the be fit of
properous, stabled nm flationary
economy.
April 29, 1975
6:00 p.m. DRAFT
To the House of Representatives:
I am returning without my approval H.R. 4296, referred
to as the Emergency Agricultural Act of 1975. Although the
aim of this bill is laudable, its results would be costly
to consumers and taxpayers, and damaging to America's economic
recovery and world market position.
Approval of this bill would, therefore, not be in the
public interest.
In the conduct of the Government's fiscal affairs, a
line must be drawn against excesses. I drew that line in
my address to the Nation on March 29. I promised all Americans
that, except where long-range national security interests,
energy matters, or urgent humanitarian needs were involved,
I would take action to hold our fiscal year 1976 deficit to
no more than $60 billion.
New spending programs which the Congress is considering
could easily raise the Federal deficit to an intolerable level
of $100 billion. This must not happen.
H.R. 4296 is an example of increased spending which is
not essential. In fiscal year 1976, it could add an estimated
$1.8 billion to the Federal deficit. If used as a point of
departure for longer-term legislation -- as was strongly
- 2 -
indicated during its consideration -- it could lead to an es-
calation of farm program subisdies in succeeding years.
Approval of this bill would undermine the successful
market-oriented farm policy adopted by this Administration
and the Congress. It is a step backward toward totally
discredited policies.
Prospects for farmers, it is true, are not as bright
this year as in the recent past. Farm production costs have
been pushed upward by the same inflationary pressures that
have affected other industries. At the same time, demand for
certain farm products has slackened because of the recession.
This Administration recognizes farmers have financial
difficulties due to this cost-price squeeze and has taken a
number of positive steps to assist farmers. The 1976 wheat
acreage allotment was recently increased by 8 million acres
to 61.6 million acres. This action provides wheat producers
with additional target price and disaster protection. We
have also increased the 1975 crop cotton price support loan
rate by 9 cents a pound. And we recently announced an
increase in the price support level for milk, which, combined
with easing feed prices, should assist dairy producers.
- 3 -
Within the past several days, we have completed
negotiations with the European Community to remove the export
subsidies on industrial cheese coming here -- a step that
ensures that surplus dairy products will not be sold in the
U.S. market at cut-rate prices. At the same time, we have
worked out arrangements which enable the Europeans to continue
selling us high-quality table cheese. This solution has
enabled us to keep on mutually agreeable trading terms with
our best customers for American farm exports.
We have also taken action to protect our cattle producers
against a potential flood of beef imports from abroad. The
Department of State is completing negotiations with 12 countries
limiting their 1975 exports of beef to this country. These
voluntary export restraint agreements are intended to keep
imports subject to the Meat Import Law to less than 1,182
million pounds.
If any unforeseen price deterioration calls for such
action, I am directing the Secretary of Agriculture to
to make desirable adjustments in price support loan
rates for wheat, corn, and other feed grains. It is our
expectation, however, that market prices for grains will
remain well above loan rates and target prices in the coming
year.
- 4 -
Most farmers have already made their plans and bought
their seed. Many are well into their planting season. These
plans have obviously been completed without any dependence
on the provisions of H.R. 4296.
In the long haul, this bill ultimately would lead to
constraints on production, resulting in loss of jobs in
food-related industries. It would induce farmers to grow
more cotton -- already in surplus -- and less soybeans --
needed for food. The bill would jeopardize the competitive
position of our cotton in world markets.
American farms have responded magnificently during the
past several years to produce food and fiber for this Nation
and the world. This has made agriculture our leading source
of foreign exchange. This year, despite very trying circum-
stances, most farmers are again going for all-out production.
They have my support for a vigorous export policy for their
products. I recognize that agricultural exports have been
restrained twice in the past two years. We are determined
to do everything possible to avoid resorting to such restraints
in the future. Our farm products must have unfettered access
to world markets.
This Administration will act to ensure the farmer his
fair share. It will not act to distort his market. We must
hold the budget line if we are all to enjoy the benefit of a
prosperous, stable, non-inflationary economy.
I cannot approve this act. I return it herewith.
THE WHITE HOUSE
WASHINGTON
April 29, 1975
MEETING ON FARM VETO MESSAGE
Tuesday, April 29, 1975
The Cabinet Room
5:00 p.m.
From:
Jim Cannon
I.
PURPOSE
To review and obtain your concurrence on a
response to a new development related to your
Farm Veto Message.
II.
BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background
You recently reviewed Bill Seidman's option
paper of April 24 on Farm Bill Alternatives (Tab A)
and decided to veto the bill and not do anything
about the loan levels.
Unfortunately yesterday we learned that there
is a misconception on the Hill that you are
going to couple your veto with some kind of
action on loan levels.
Max Friedersdorf and Secretary Butz report that
there would be a serious risk that a veto would
be overridden if a veto message makes no mention
of loan levels. Max's latest vote count to
sustain a veto shows:
52 Democrats
103
Republicans
155 Total
We might pick up as many as 18 votes that are
now uncommitted; but we could lose a substantial
number of the Democrats if the caucus makes a
strong effort to override.
-2-
In view of this new development, Max Friedersdorf,
Earl Butz, Bill Seidman, Jack Marsh, Jim Lynn and
I met this morning to discuss this problem. We
came up with an approach that can help but makes
no commitment to the expenditure of further Federal
Funds.
Your message might include the following language:
If any unforeseen price deterioration
calls for such action, I am directing
the Secretary of Agriculture to be pre-
DE
to make desirable adjustments in
price support loan rates for wheat,
corn, and other feed grains 1 and Soybeaus.
Max and Earl Butz are reasonably certain that a
veto can be sustained if this language is
included.
B. Participants
The Vice President
Alan Greenspan
Secretary Butz
Jim Lynn
Counsellor Hartmann
Paul O'Neill
Counsellor Marsh
Jim Cannon
Max Friedersdorf
Bill Seidman
Don Rumsfeld
C. Press Plan
To be announced.
THE WHITE HOUSE
WASHINGTON
April 24, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
L. WILLIAM SEIDMAN
SUBJECT:
FARM BILL ALTERNATIVES
Background
Early in. 1973 the Nixon Administration proposed to the Congress
that Federal programs relating to wheat, feed grains, and
cotton be limited to providing loans at rates ($ per unit of
production) well below current and anticipated market prices.
This would have allowed the market to operate with minimum
Government interference and yet preclude exceptionally low
prices. The proposed programs were to replace older programs
under which producers were paid to restrict production.
During the period of consideration, market prices moved up
quickly and the outlook was one of continued high demand
for food. The Congress rejected that approach and substituted
a program-embodying loans and target prices. The loan levels
were to perform essentially the same function as proposed by
the Executive Branch. All of the producer's production would
be eligible for loans. The target prices were designed to
provide incentives to producers to meet the projected increased
demand for food. Only those producers with an acreage allot-
ment (based upon planting history) would receive such payments
and only to the extent of the normal production on their allot-
ment.
The Executive Branch originally resisted this approach since
it meant continued Federal involvement. Objections centered
on the high target prices over the life of the bill and the
"escalator" provision which would have increased target
prices each year in line with increases in the index of prices
paid by farmers for production items including interest,
taxes, and wages.
The target price concept eventually was accepted by the
Executive Branch and a bill agreed upon in the summer of 1973.
The "escalator" was modified to provide adjustments for
increased yields to apply only to 1976 and subsequent crops
2
(not the 1975 crop) and the target prices were lowered.
Meanwhile, domestic prices rose well above projected
target prices largely because of a worldwide economic boom,
a fall off in world agricultural production, and increased
U.S. exports (partly due to devaluation of the dollar)
The impact of these events on producers was initially favorable.
Government surpluses overhanging the market were eliminated.
Export demand surged. Farm product prices rose dramatically.
Spiraling agricultural prices focused attention on the value
of grain reserves as a cushion against supply shortages.
This was a major issue at the World Food Conference in Rome.
The U.S. Government is in the process of developing a policy
with respect to the appropriate level of food security and
how the burden should be shared. Currently, importers, facing
favorable supply prospects, have shown little interest in
accumulating grain stocks. An increase in Federal support
through price guarantees would increase the risk of the
Federal Government acquiring stocks and thus reduce the
interest of other nations in sharing the burden of carrying
rèserves.
The supply/demand situation today is vastly changed from a
year ago. Farm prices are retreating from their former high
levels, with some prices (wheat, soybeans, cattle) having
fallen precipitiously.
Meanwhile, production costs are at record levels since current
target prices and loan rates were established in 1973. Pro-
duction costs, as measured by the index of prices, an "average"
of farm costs paid for production items, has increased 16
percent since 1973. This index, the escalator defined in
the 1973 Act, will be applied to the 1976 and 1977 crops.
However, costs of producing grain have risen much more
steeply than "average" farm costs since large quantities of
fuel and fertilizer are required relative to other inputs.
Details for a couple of grain producing areas are shown
in the table below:
Increase
Wheat, Kansas, E. Central
Unit
1973
1975
$
=
Variable costs
$/bu.
0.57
1.05
0.48
84
Total costs:
excluding land
$/bu.
0.95
1.54
0.59
62
including land
$/bu.
1.59
2.50
0.91
57
3
Increase
Corn, N. Indiana
Unit
1973
1975
$
do
Variable costs
$/bu.
0.48
0.81
0.33
69
Total costs:
excluding land
$/bu.
0.72
1.12
0.40
56
including land
$/bu.
1.15
1.79
0.64
56
Producers, particularly livestock, in 1975 are facing a cut in
income for the second year in a row.
Production
Realized
Year
Gross Farm Income
Expenses
Net Income
(Billions of $)
1970
58.6
44.6
14.0
1971
60.6
47.6
13.0
1972
69.9
52.4
17.5
1973
97.0
64.7
32.2
1974
102.0
74.8
27.2
a 1975 est. 94-98
75-77
19-21
The enrolled Farm Bill, H.R. 4296, is the congressional
answer to the current situation. It would increase prices
as follows:
Target Price
Loan Rate
Unit
Current Law
H.R. 4296
Current Law
H.R. 4296
Wheat
$/bu.
2.05
3.10
1.37
2.50
Corn
$/bu.
1.38
2.25
1.10
1.87
Cotton
$/bu.
.38
.45
.34
.38
Soybeans
$/bu.
--
--
--
3.94
The following is the vote tabulation on the bill:
House
Senate
For
Against
For
Against
Original bill
229
162
57
25
Conference bill
248
166
Voice approval
The House vote on the Conference bill was 28 votes short of
the number needed to override a veto.
4
Issue: What, if anything, should the Administration do, if
H.R. 4296 is vetoed.
Since it is unlikely that any action would have a
significant impact on this year's production, alterna-
tive actions should be viewed largely in terms of
their impact on (1) the votes to override a veto;
(2) 1976 outlays; (3) future years' production,
prices and budget outlays; (4) the likelihood that
Congress, in an election year, will attempt to
raise supports even higher.
Option 1: Do nothing beyond vetoing the bill.
This would leave the loan levels at the minimum specified
by the 1973 Act. Target prices would be unchanged with the
escalator applied to the 1976 and 1977 crops.
Pros
"1". Additional incentives to increase production are not
needed (at least in 1975). The acreage farmers intend
to plant will, given normal weather, exceed market
demands and add to stocks. A very large winter wheat
crop already seems assured.
2. Any increase in loan levels will add to 1976 budget out-
lays.
3. An increase in Federal support through price guarantees
would increase the risk of the Federal Government
acquiring stocks and thus lessen the interest of other
nations in sharing the burden of carrying reserves.
4. Farmers could protect themselves by using the futures
market.
Cons
1. The Administration could appear insensitive to the cost/
price squeeze faced by farmers, especially since the
Government has asked for all-out production.
2. Could lead to further legislative efforts, to pass a
farm bill for 1975, or, although unlikely, to a veto
override.
5
3. Loan rates could be raised moderately without significant
economic consequences, since prices are expected to average
higher than any loan levels that would be selected, and
since, under such circumstances, the loans would be
repaid.
Option 2: Increase loan levels to a point unlikely to result
in the CCC accumulating quantities of wheat and
feed grains.
The wheat loan rate would be raised from $1.37 to
$1.75 ($2.50 in the bill), and corn from $1.10 to
$1.50 ($1.87 in the bill).
Pros
1. Would cover most producer's total costs of production,
excluding land, by a wide margin.
2. Could offset pressures to override a Presidential veto.
3. Narrows spread between wheat and corn prices and makes
wheat more competitive in feed markets during times of
large surplus.
Cons
1. Would. increase 1976 budget outlays by about $75 million.
2. Continues a pattern of the Administration acting when
Congress passes unacceptable bills.
3. Adds to degree of indexation in the economy making
control of inflation more difficult.
Option 3: Raise the loan rates to levels the Secretary of
Agriculture believes are the minimum acceptable
to congressional representatives of wheat and
feed grain producers.
This would raise the wheat loan from $1.37 to
$2.00 (compared to $2.50 in the bill and $1.75
in Option 2) and corn from $1.10 to $1.50 (com-
pared to $1.87 in the bill but same as Option 2).
6
Pros
1. Would give wheat producers substantial protection since
the levels would significantly exceed production costs,
excluding land.
2. Could offset pressures to override a Presidential veto.
Cons
1. Would increase 1976 budget outlays by about $90 million.
2. Increases risk of expanded use of loan program and higher
budget outlays, especially if export demand weakens.
3. Widens spread between wheat and corn prices, and makes
wheat uncompetitive in feed market during time of large
surplus.
Option 4: Propose legislation applying the escalator to the
1975 crop target prices for wheat and feed grains.
Wheat would be increased from $2.05 to $2.51
($3.10 in bill). Corn would be increased from
$1.38 to $1.68 ($2.25 in bill). Cotton would
not be increased since targets are already above
market prices.
Pros
1. Would be in harmony with the spirit of the 1973 Act
since it would capture most of the bulge in production
costs as measured by the production cost index.
2. The target prices for grains would be well below the
market price anticipate if exports continue at a high
level.
Cons
1. Would appear to discriminate against cotton producers.
2. Conflicts with past Administration policy not to negotiate
higher target prices.
7
3. Increases the risk of target prices exceeding future
market prices.
4. Will reopen the issue to legislative logrolling.
5. Would add $40 million to outlays for disaster payments
(tied to the target price).
Option 5: Propose legislation increasing target prices to
the level of market prices anticipated for 1975
crops, assuming low exports.
Wheat would be increased from $2.05 to $2.50
($3.10 in bill). Corn would be increased from
$1.33 to $2.00 ($2.25 in bill). Cotton would
not change.
Pros
1 With target prices tied to minimum market expectations,
the likelihood of deficiency payments for wheat would
be reduced.
2. Producers would be protected to the low end of Government
price expectations.
Cons
1. Would increase 1976 budget outlays by about $60 million.
2. Budget exposure would be further increased for 1977 and
1978 when market prices are expected to fall.
3. Would appear to discriminate against cotton producers.
Decision
Option 1
DO nothing beyond vetoing the bill.
Supported by Treasury, CEA, OMB, CIEP, Marsh
Option 2
Increase loan levels 1:0 a point unlikely
to result in the CCC accumulating quanti-
ties of wheat and feed grains.
8
Option 3
Raise the loan rates to levels the
Secretary of Agriculture believes are
the minimum acceptable to congressional
representatives of wheat and feed grain
producers.
Supported by USDA, Domestic Council
Option 1
Propose legislation applying the escalator
to the 1975 crop target prices for wheat
and feed grains.
Option 5
Propose legislation increasing target
prices to the level of makret prices
anticipated for 1975 crops, assuming
low exports.
CIEP recommends a veto on the farm bill and leaving the
loan rates unchanged on economic grounds but making clear
in a veto message our commitment to a strong export
oriented, open market policy.
OMB wishes to qualify their vote for Option 1 with the follow-
ing statement. On the single economic merits, OMB recommends
the bill be vetoed and that no changes be proposed in target
prices or loan rates. However, in coming to a decision as to
what course to follow, assuming a veto, OMB believes careful
thought should be given to the following considerations:
Assuming that the Farm Bill is vetoed, and that the veto
is sustained, the followup question must be: What action
is the Congress then likely to take? If, as we suspect,
the Congress chooses to try again, then we need to assess
the likelihood of the Congress being able to pass a new
bill that is "vetc-proof" because its sponsors lower the
target price increases sufficiently to shift the necessary
votes to their side.
If the Administration shows no movement in connection with
successfully sustaining a veto on the first bill we could
be putting ourselves in a position of opposition to any
increases; a position which we probably cannot sustain.
This line of reasoning suggests that we may want to at
least consider the possibility of advocating an increase
in target prices and loan rates; say to levels consistent
with the change in production costs since the current
law was enacted in 1973. If this kind of approach could be
coupled with an agreement from the Committees to enact
these changes as part of a three year bill, we would
be protected against even greater increases in 1976.
THE WHITE HOUSE
WASHINGTON
April 29, 1975
MEETING ON FARM VETO MESSAGE
Tuesday, April 29, 1975
The Cabinet Room
5:00 p.m.
From:
Jim Cannon
I.
PURPOSE
To review and obtain your concurrence on a
response to a new development related to your
Farm Veto Message.
II.
BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background
You recently reviewed Bill Seidman's option
paper of April 24 on Farm Bill Alternatives (Tab A)
and decided to veto the bill and not do anything
about the loan levels.
esterday we learned that there
is a misconception on the Hill that you are
going to couple your veto with some kind of
action on loan levels.
Max Friedersdorf and Secretary Butz report that
there would be a serious risk that a veto would
be overridden if a veto message makes no mention
of loan levels. Max's latest vote count to
sustain a veto shows:
52 Democrats
103
Republicans
155 Total
We might pick up as many as 18 votes that are
now uncommitted; but we could lose a substantial
number of the Democrats if the caucus makes a
strong effort to override.
-2-
In view of this new development, Max Friedersdorf,
Earl Butz, Bill Seidman, Jack Marsh, Jim Lynn and
I met this morning to discuss this problem. We
came up with an approach that can help but makes
no commitment to the expenditure of further Federal
Funds.
Your message might include the following language:
If any unforeseen price deterioration
calls for such action, I am directing
the Secretary of Agriculture to be pre-
pared to make desirable adjustments in
price support loan rates for wheat,
corn, and other feed grains.
Max and Earl Butz are reasonably certain that a
veto can be sustained if this language is
included.
B. Participants
The Vice President
Alan Greenspan
Secretary Butz
Jim Lynn
Counsellor Hartmann
Paul- O'Neill
Counsellor Marsh
Jim Cannon
Max Friedersdorf
Bill Seidman
Don Rumsfeld
C. Press Plan
To be announced.
THE WHITE HOUSE
WASHINGTON
April 24, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
L. WILLIAM SEIDMAN
SUBJECT:
FARM BILL ALTERNATIVES
Background
Early in 1973 the Nixon Administration proposed to the Congress
that Federal programs relating to wheat, feed grains, and
cotton be limited to providing loans at rates ($ per unit of
production) well below current and anticipated market prices.
This would have allowed the market to operate with minimum
Government interference and yet preclude exceptionally low
prices. The proposed programs were to replace older programs
under which producers were paid to restrict production.
During the period of consideration, market prices moved up
quickly and the outlook was one of continued high demand
for food. The Congress rejected that approach and substituted
a program.embodying loans and target prices. The loan levels
were to perform essentially the same function as proposed by
the Executive Branch. All of the producer's production would
be eligible for loans. The target prices were designed to
provide incentives to producers to meet the projected increased
demand for food. Only those producers with an acreage allot-
ment (based upon planting history) would receive such payments
and only to the extent of the normal production on their allot-
ment.
The Executive Branch originally resisted this approach since
it meant continued Federal involvement. Objections centered
on the high target prices over the life of the bill and the
"escalator" provision which would have increased target
prices each year in line with increases in the index of prices
paid by farmers for production items including interest,
taxes, and wages.
The target price concept eventually was accepted by the
Executive Branch and a bill agreed upon in the summer of 1973.
The "escalator" was modified to provide adjustments for
increased yields to apply only to 1976 and subsequent crops
2
(not the 1975 crop) and the target prices were lowered.
Meanwhile, domestic prices rose well above projected
target prices largely because of a worldwide economic boom,
a fall off in world agricultural production, and increased
U.S. exports (partly due to devaluation of the dollar)
The impact of these events on producers was initially favorable.
Government surpluses overhanging the market were eliminated.
Export demand surged. Farm product prices rose dramatically.
Spiraling agricultural prices focused attention on the value
of grain reserves as a cushion against supply shortages.
This was a major issue at the World Food Conference in Rome.
The U.S. Government is in the process of developing a policy
with respect to the appropriate level of food security and
how the burden should be shared. Currently, importers, facing
favorable supply prospects, have shown little interest in
accumulating grain stocks. An increase in Federal support
through price guarantees would increase the risk of the
Federal Government acquiring stocks and thus reduce the
interest of other nations in sharing the burden of carrying
reserves.
The supply/demand situation today is vastly changed from a
year ago. Farm prices are retreating from their former high
levels, with some prices (wheat, soybeans, cattle) having
fallen precipitiously.
Meanwhile, production costs are at record levels since current
target prices and loan rates were established in 1973. Pro-
duction costs, as measured by the index of prices, an "average"
of farm costs paid for production items, has increased 16
percent since 1973. This index, the escalator defined in
the 1973 Act, will be applied to the 1976 and 1977 crops.
However, costs of producing grain have risen much more
steeply than "average" farm costs since large quantities of
fuel and fertilizer are required relative to other inputs.
Details for a couple of grain producing areas are shown
in the table below:
Increase
Wheat, Kansas, E. Central
Unit
1973
1975
$
as
Variable costs
$/bu.
0.57
1.05
0.48
84
Total costs:
excluding land
$/bu.
0.95
1.54
0.59
62
including Land
$/bu.
1.59
2.50
0.91
57
3
Increase
Corn, N. Indiana
Unit
1973
1975
$
es
Variable costs
$/bu.
0.48
0.81
0.33
69
Total costs:
excluding land
$/bu.
0.72
1.12
0.40
56
including land
$/bu.
1.15
1.79
0.64
56
Producers, particularly livestock, in 1975 are facing a cut in
income for the second year in a row.
Production
Realized
Year
Gross Farm Income
Expenses
Net Income
(Billions of $)
1970
58.6
44.6
14.0
1971
60.6
47.6
13.0
1972
69.9
52.4
17.5
1973
97.0
64.7
32.2
1974
102.0
74.8
27.2
or 1975 est.
94-98
75-77
19-21
The enrolled Farm Bill, H.R. 4296, is the congressional
answer to the current situation. It would increase prices
as follows:
Target Price
Loan Rate
Unit
Current Law
H.R. 4296
Current Law
H.R. 4296
Wheat
$/bu.
2.05
3.10
1.37
2.50
Corn
$/bu.
1.38
2.25
1.10
1.87
Cotton
$/bu.
.38
.45
.34
.38
Soybeans
$/bu.
--
--
--
3.94
The following is the vote tabulation on the bill:
House
Senate
For
Against
For
Against
Original bill
229
162
57
25
Conference bill
248
166
Voice approval
The House vote on the Conference bill was 28 votes short of
the number needed to override a veto.
1
Issue: What, if anything, should the Administration do, if
H.R. 4296 is vetoed.
Since it is unlikely that any action would have a
significant impact on this year's production, alterna-
tive actions should bc viewed largely in terms of
their impact on (1) the votes to override a veto;
(2) 1976 outlays; (3) future years' production,
prices and budget outlays; (4) the likelihood that
Congress, in an election year, will attempt to
raise supports even higher.
Option 1: Do nothing beyond vetoing the bill.
This would leave the loan levels at the minimum specified
by the 1973 Act. Target prices would be unchanged with the
escalator applied to the 1976 and 1977 crops.
Pros
1: Additional incentives to increase production are not
needed (at least in 1975). The acreage farmers intend
to plant will, given normal weather, exceed market
demands and add to stocks. A very large winter wheat
crop already seems assured.
2. Any increase in loan levels will add to 1976 budget out-
lays.
3. An increase in Federal support through price guarantees
would increase the risk of the Federal Government
acquiring stocks and thus lessen the interest of other
nations in sharing the burden of carrying reserves.
4. Farmers could protect themselves by using the futures
market.
Cons
1. The Administration could appear insensitive to the cost/
price squeeze faced by farmers, especially since the
Government has asked for all-out production.
2. Could lead to further legislative efforts, to pass a
farm bill for 1975, or, although unlikely, to a veto
override.
5
3. Loan rates could be raised moderately without significant
economic consequences, since prices are expected to average
higher than any loan levels that would be selected, and
since, under such circumstances, the loans would be
repaid.
Option 2: Increase loan levels to a point unlikely to result
in the CCC accumulating quantities of wheat and
feed grains.
The wheat loan rate would be raised from $1.37 to
$1.75 ($2.50 in the bill), and corn from $1.10 to
$1.50 ($1.87 in the bill).
Pros
1. Would cover most producer's total costs of production,
excluding land, by a wide margin.
2. Could offset pressures to override a Presidential veto.
3. Narrows spread between wheat and corn prices and makes
wheat more competitive in feed markets during times of
large surplus.
Cons
1. Would. increase 1976 budget outlays by about $75 million.
2. Continues a pattern of the Administration acting when
Congress passes unacceptable bills.
3. Adds to degree of indexation in the economy making
control of inflation more difficult.
Option 3: Raise the loan rates to levels the Secretary of
Agriculture believes are the minimum acceptable
to congressional representatives of wheat and
feed grain producers.
This would raise the wheat loan from $1.37 to
$2.00 (compared to $2.50 in the bill and $1.75
in Option 2) and corn from $1.10 to $1.50 (com-
pared to $1.87 in the bill but same as Option 2).
6
Pros
1. Would give wheat producers substantial protection since
the levels would significantly exceed production costs,
excluding land.
2. Could offset pressures to override a Presidential veto.
Cons
1. Would increase 1976 budget outlays by about $90 million.
2. Increases risk of expanded use of loan program and higher
budget outlays, especially if export demand weakens.
3. Widens spread between wheat and corn prices, and makes
wheat uncompetitive in feed market during time of large
surplus.
Option 4: Propose legislation applying the escalator to the
1975 crop target prices for wheat and feed grains.
Wheat would be increased from $2.05 to $2.51
($3.10 in bill). Corn would be increased from
$1.38 to $1.68 ($2.25 in bill). Cotton would
not be increased since targets are already above
market prices.
Pros
1. Would be in harmony with the spirit of the 1973 Act
since it would capture most of the bulge in production
costs as measured by the production cost index.
2. The target prices for grains would be well below the
market price anticipate if exports continue at a high
level.
Cons
1. Would appear to discriminate against cotton producers.
2. Conflicts with past Administration policy not to negotiate
higher target prices.
7
3. Increases the risk of target prices exceeding future
market prices.
4. Will reopen the issue to legislative logrolling.
5. Would add $40 million to outlays for disaster payments
(tied to the target price).
Option 5: Propose legislation increasing target prices to
the level of market prices anticipated for 1975
crops, assuming low exports.
Wheat would be increased from $2.05 to $2.50
($3.10 in bill). Corn would be increased from
$1.33 to $2.00 ($2.25 in bill). Cotton would
not change.
Pros
1s. With target prices tied to minimum market expectations,
the likelihood of deficiency payments for wheat would
be reduced.
2. Producers would be protected to the low end of Government
price expectations.
Cons
1. Would increase 1976 budget outlays by about $60 million.
2. Budget exposure would be further increased for 1977 and
1978 when market prices are expected to fall.
3. Would appear to discriminate against cotton producers.
Decision
Option 1
DO nothing beyond vetoing the bill.
Supported by Treasury, CEA, OMB, CIEP, Marsh
Option 2
Increase loan levels to a point unlikely
to result in the CCC accumulating quanti-
ties of wheat and feed grains.
8
Option 3
Raise the loan rates to levels the
Secretary of Agriculture believes are
the minimum acceptable to congressional
representatives of wheat and feed grain
producers.
Supported by USDA, Domestic Council
Option 1
Propose legislation applying the escalator
to the 1975 crop target prices for wheat
and feed grains.
Option 5
Propose legislation increasing target
prices to the level of makret prices
anticipated for 1975 crops, assuming
low exports.
CIEP recommends a veto on the farm bill and leaving the
loan rates unchanged on economic grounds but making clear
in a veto message our commitment to a strong export
oriented, open market policy.
OMB wishes to qualify their vote for Option 1 with the follow-
ing statement. On the single economic merits, OMB recommends
the bill be vetood and that no changes be proposed in target
prices or loan rates. However, in coming to a decision as to
what course to follow, assuming a veto, OMB believes careful
thought should be given to the following considerations:
Assuming that the Farm Bill is vetoed, and that the veto
is sustained, the followup question must be: What action
is the Congress then likely to take? If, as we suspect,
the Congress chooses to try again, then we need to assess
the likelihood of the Congress being able to pass a new
bill that is "vetc-proof" because its sponsors lower the
target price increases sufficiently to shift the necessary
votes to their side.
If the Administration showsno movement in connection with
successfully sustaining a veto on the first bill we could
be putting ourselves in a position of opposition to any
increases; a position which we probably cannot sustain.
This line of reasoning suggests that we may want to at
least consider the possibility of advocating an increase
in target prices and loan rates; say to levels consistent
with the change in production costs since the current
law was enacted in 1973. If this kind of approach could be
coupled with an agreement from the Committees to enact
these changes as part of a three year bill, we would
be protected against even greater increases in 1976.
MEETING ON FARM VETO
MESSAGE
Tuesday, April 29, 1975
The Cabinet Room
5:00 p.m.