Excerpt from message accompanying President Coolidge’s veto of Senate bill 3555, also know as the Surplus Control Act | May 23, 1928
Full veto message available here.
To the Senate:
Senate bill 3555, called the surplus control act, is in some respects an improvement over Senate bill 4808 of the last Congress. It includes several provisions, which, if unencumbered by objectionable features, would form a basis for a measure that should do much to develop stronger business organizations in agriculture. But the present bill contains not only the so-called equalization fee and other features of the old measure prejudicial, in my opinion, to sound public policy and to agriculture, but also new and highly objectionable provisions. In its entirety it is little less undesirable than the earlier measure. The bill still is unconstitutional. This position is supported by the opinion of the Attorney General, which is hereto attached.
In its essentials the objectionable plan proposed here is the stimulation of the price of agricultural commodities and products thereof by artificially controlling the surpluses so that there will be an apparent scarcity on the market. This is to be done by means of a board having supposedly adequate powers and adequate funds to accomplish such purpose through various agencies, governmental and private. The surpluses of the different selected commodities so accumulated by the board are then to be sold by export and otherwise directly or through such agencies at whatever loss is necessary in making the disposition. The fund to pay the losses and other costs while at first furnished by the Government is ultimately to be replaced and thereafter replenished from time to time by means of a tax or fee charged against the product. The theory is that the enhanced price of the commodity would enable the producer to pay the equalization fee and still reap a profit.
The recurring problem of surpluses in farm products has long been a subject of deep concern to the entire Nation, and any economically sound, workable solution of it would command not only the approval but the profound gratitude of our people. The present measure, however, falls far short of that most desirable objective; indeed, although it purports to provide farm relief by lessening the cares of our greatest industry, it not only fails to accomplish that purpose but actually heaps even higher its burdens of political control, of distribution costs, and of foreign competition. It embodies a formidable array of perils for agriculture which are all the more menacing because of their being obscured in a maze of ponderously futile bureaucratic paraphernalia. In fact, in spite of the inclusion in this measure of some constructive steps proposed by the administration, it renews most of the more vicious devices which appeared in the bill that was vetoed last year. This document is much altered from its previous form but its substance, particularly as to its evident ultimate effect of tending to delude the farmer with a fantastic promise of unworkable governmental price regulation, is still as repugnant as ever to the spirit of our institutions, both political and commercial.
A detailed analysis of all of the objections to the measure would involve a document of truly formidable proportions. However, its major weaknesses and perils may be summarized under six headings:
- Its attempted price-fixing fallacy.
- The tax characteristics of the equalization fee.
- The widespread bureaucracy which it would set up.
- Its encouragement to profiteering and wasteful distribution by middlemen.
- Its stimulation of overproduction.
- Its aid to our foreign agricultural competitors.
These topics by no means exhaust the list of fallacious and indeed dangerous aspects of the bill, but they afford ample ground for its emphatic rejection.
1. Price fixing.—This measure is as cruelly deceptive in its disguise as governmental price-fixing legislation and involves quite as unmistakably the impossible scheme of attempted governmental control of buying and selling of agricultural products through political agencies as any of the other so-called surplus control bills. In fact, in certain respects it is much broader and more flagrant in its scope. The heights to which price lifting might be promised are freed from the limitations fixed in previous measures. The bill carefully avoids any direct allusion to such price-fixing functions, but there can be no doubt about its intentions and authorizations to the Federal farm board in this respect. There is apparently no change in the import of the bill in the resolution to impose upon the farmer and upon the consumers of farm produce a régime of futile, delusive experiments with price fixing, with indirect governmental buying and selling, and with a nation-wide system of regulatory policing, intolerable espionage, and tax collection on a vast scale.
These provisions would disappoint the farmer by naïvely implying that the law of supply and demand can thus be legislatively distorted in his favor. Economic history is filled with the evidences of the ghastly futility of such attempts. Fiat prices match the folly of fiat money.
The board would be compelled to arrive in some way at the premium on the domestic price which would be demanded from the consumer, and this figure would have to be fixed in the contracts which it would make with the millers, packers, canners, spinners, and other processors. Such prices and other terms fixed in the contracts would; used by the board to calculate the losses upon which it will base the size of the equalization fee. This procedure is the very essence of price fixing no matter how cumbersome and crudely camouflaged it may be. By throwing the very large resources of the Government into this operation the present bill gives the widest latitude for the most vicious temptations adherent in autocratic authority in complete command of vast industries and trades.
In previous bills definite yardsticks have been determined by which prices were to be established by the Government. They are omitted from this bill, which thereby leaves almost no restraint whatever upon the discretion of the board in this respect. The present measure, therefore, has even less merit than its predecessors in this regard since it carries no limitation as to the extent of price inflation which it can undertake. […]
3. Widespread bureaucracy.—A bureaucratic tyranny of unprecedented proportions would be let down upon the backs of the farm industry and its distributors throughout the Nation in connection with the enforcement of this measure. Thousands of contracts involving scores of different grades, quantities, and varieties of products would have to be signed by the board with the 4,400 millers, the 1,200 meat-packing plants, the 3,000 or more cotton and woolen mills, and the 2,700 canners. If this bill had been in operation in 1925 it would have involved collections upon an aggregate of over 16,000,000,000 units of wheat, corn, and cotton.
The bill undertakes to provide insurance against loss, but presumably only against reasonable and unavoidable loss. Just what this might be would involve judgment on the part of Government employees upon tens of thousands of transactions running into billions of dollars. This is bureaucracy gone mad. Cooperative associations, flour mills, packing plants, and grain elevators will cease to be private and become public agencies. If there is any conclusion that we can announce as final with regard to governmental business operations, particularly after the bitter and excessively costly war-time experiences with such enterprises, it is that we can not maintain a bureaucracy of such vast proportions engaged in buying and selling without constant danger of corruption, mismanagement, and prodigious tax burdens. No private agency of so gigantic and complex a character attempting to juggle with profound economic principles in such fashion could survive under such circumstances, and the chances for a governmental trading organization would be even less.
Swarms of inspectors, auditors, disbursers, accountants, and regulatory officers would be let loose throughout the land to enforce the terms of these contracts and to curb the inevitable attempts at evasion of the equalization fee. This plague of petty officialdom would set up an intolerable tyranny over the daily lives and operations of farmers and of every individual and firm engaged in the distribution of farm products, intruding into every detail of their affairs, setting up thousands of prohibitory restrictions and obnoxious inspections.
Such autocratic domination over our major industry, its dependent trades, and the every-day activities of hundreds of thousands of our citizens would indeed be profoundly repugnant to every instinct of our institutions. It would undermine individual initiative, place a premium upon evasion and dishonesty, and poison the very well springs of our national spirit of providing abundant rewards for thrift and for open competitive effort.
The arbitrary powers in the hands of the 12 members of the board are almost incredible. But even more extraordinary would be the veto power over the board which this measure places in the hands of the commodity advisory councils.
Acting with the board, these men could throw the entire machinery of the Government into an attempt to raise or lower domestic prices at will. Even though such efforts would ultimately be doomed to certain failure, these men would meanwhile, during the course of costly experiment, hold in their hands the fate of vast industries using farm products employing millions of persons and of great cooperatives with thousands of farmer members. They could disrupt the settled channels of trade and commerce; they could alter at will the cost of living, influence wage levels in all lines of industry, and affect conditions of business in every part of the country. The mere enumeration of such powers is the complete answer to the proposal that they be granted. […]
While agriculture has been distressed in many countries since the World War, the severity of the agricultural depression in the United States must not be underestimated. It is true there has been an increase in prices and purchasing power of agricultural products. Many important farm products have increased rapidly in price in recent months. Nor should we overlook the fact that our farmers have made noteworthy progress since 1921 both in the purchasing power of their products and in the output per worker in agriculture. The latter is the result of improved methods and equipment, and is in keeping with the fundamental cause of American prosperity—high productivity per worker. Moreover, we should avoid the error of seeking in laws the cause of the ills of agriculture. This mistake leads away from a permanent solution, and serves only to make political issues out of fundamental economic problems that can not be solved by political action.
In conclusion, if the measure is enacted one would be led to wonder how long it would be before producers in other lines would clamor for similar “equalizing” subsidies from the public coffers. The lobbies of Congress would be filled with emissaries from every momentarily distressed industry demanding similar relief of a burdensome surplus at the expense of the Treasury. Once we plunged into the futile sophistries of such a system of wholesale commercial doles for special groups of middlemen and distributors at the expense of farmers and other producers, it is difficult to see what the end might be.
I have believed at all times that the only sound basis for further Federal Government action in behalf of agriculture would be to encourage its adequate organization to assist in building up marketing agencies and facilities in the control of the farmers themselves. I want to see them undertake, under their own management, the marketing of their products under such conditions as will enable them to bring about greater stability in prices and less waste in marketing, but entirely within unalterable economic laws. Such a program, supported by a strong protective tariff on farm products, is the best method of effecting a permanent cure of existing agricultural ills. Such a program is in accordance with the American tradition and the American ideal of reliance on and maintenance of private initiative and individual responsibility, and the duty of the Government is discharged when it has provided conditions under which the individual can achieve success.
I am still hopeful that legislation along the lines suggested in my last annual message, with which many of the provisions of this bill are in harmony, may be enacted, but this bill embodies substantially all of the objectionable features which I said, in that message to the Congress, I could not indorse. I am therefore obliged to return Senate bill 3555, entitled “An act to establish a Federal farm board to aid in the orderly marketing and in the control and disposition of the surplus of agricultural commodities in interstate and foreign commerce” without my approval.