Franklin D. Roosevelt

Veto of a Parity Computation Bill.

April 02, 1943

To the Senate:

I am returning S. 660, generally known as the Bankhead bill, unsigned. It is a bill to exclude in the determination of parity price any deduction for any subsidy payment, parity payment, incentive payment, or other payments made with respect to any agricultural commodity.

I am compelled to this action by the deep conviction that this measure is inflationary in character. It breaks down the barriers we have erected and which we must maintain in order to avoid all the disasters of inflation. It is wholly inconsistent with our stabilization program and, therefore, dangerous alike to our constructive farm policy and to our whole war effort.

In my Message of September 7, 1942, I advised the Congress that "our entire effort to hold the cost of living at its present level is now being sapped and undermined by further increases in farm prices and in wages, and by an ever-continuing pressure on prices resulting from the rising purchasing power of our people." I requested the Congress "to pass legislation under which the President would be specifically authorized to stabilize the cost of living, including the price of all farm commodities."

I further stated: "The purpose should be to hold farm prices at parity, or at levels of a recent date, whichever is higher ....And in determining whether a commodity has reached parity, we should include all the benefits received by the farmer from his Government under the A.A.A. program, allocable to the particular commodity. For it is unfair to give the farmer a parity price and in addition give him far more than parity."

To this view I still hold.

My suggestion regarding the calculation of parity was not novel. It had received the previous approval of the Congress. Under an amendment to the Agricultural Adjustment Act of 1938 (Public Law No. 74, 77th Congress) the Commodity Credit Corporation was directed to make loans on certain 1941 crops at the rate of 85 percent of the parity price for the commodity as of the beginning of the marketing year. In approving that Act on May 26, 1941, I stated: "I have taken up the construction of the law with certain legislative leaders chiefly responsible for it and have received from them letters stating that for the 1941 crop the broad intention is that parity payments should, if necessary, be so curtailed as to avoid a price above parity if added to the loan and the soil conservation payments. I am, therefore, confident that in the pending appropriation bill this clear interpretation and intent will be carried out." That interpretation and intent were expressly embodied in the then pending agricultural appropriation act (87 Cong. Rec. p. 5903).

When the Congress had under consideration the bill making appropriations for the Department of Agriculture for this fiscal year, the Senate approved an amendment providing that in computing parity payments, deductions should be made for the payments made to producers by the Government during this fiscal year under the Soil Conservation and Domestic Allotment Act. There was considerable disagreement between the House and Senate with-respect to the amendment, but the Senate amendment was finally incorporated in the appropriation bill (Public Law 74, 77th Congress). Therefore, under the law enacted by the Congress last. July in computing parity, benefits must be included.

Under the original Emergency Price Control Act the Administrator was forbidden to establish maximum prices which would reflect less than 110 percent of parity to producers. Under the Stabilization Act of October 2, 1942, the Congress authorized the Administrator to establish prices which will reflect to producers of agricultural commodities the parity price for such commodity or the highest price received by such producers for such commodity between January 1, 1942, and September 15, 1942, whichever is the higher. "Parity," one would assume, bears the same meaning in both acts.

The meaning of "parity" under the original Emergency Price Control Act had been established by administrative interpretation. Furthermore, the Price Administrator's construction had been upheld by the Attorney General prior to the introduction of the Act of October 2, 1942. This administrative ruling authorized the Price Administrator to include parity, allotment, and soil conservation payments received by the producers of agricultural products in determining whether prices reflected 110 percent of parity to the producers. The Congress was advised of this interpretation before it passed the Act of October 2, 1942 (see P. 37, Hearings before Senate Banking and Currency Committee, S. J. Res. 161, 77th Congress, 2d Session).

When the Act of October 2, 1942, was under consideration in the House of Representatives, an amendment was offered similar to the bill which is now submitted to me which would have excluded any deduction for parity or soil conservation payments in computing parity. This amendment was rejected (88 Cong. Rec. p. 7622).

It cannot, therefore, be fairly said that I ignored either the law or the legislative intent of the Congress when I directed, in my Executive Order No. 9250 of October 3, 1942, that appropriate deductions for Government payments should be made in computing parity prices.

I have referred to the legislative history only because of some of the criticisms of my action. I know that some members of the Congress differ with my interpretation of the law. I credit them with sincerity. I ask that they credit me with equal sincerity.

Let us consider the merits of the proposal.

The Act of October 2, 1942, directs the President to issue a general order stabilizing prices, wages, and salaries, which affect the cost of living; and, except as otherwise provided in this Act, this stabilization shall be on the basis of the levels which existed on September 15, 1942. It is impossible to control the cost of living unless all of its vital elements are stabilized.

The time has come when all of us—farmers, workers, managers, and investors—must realize that we cannot improve our living standards in a period of total war. On the contrary, we must all cut our standards of living for the duration. We must adopt simple wartime standards. If we do, none of us need want for the real necessities of life. We can all have enough if we do not try to get too much. We can only make sure that the present balance does not change materially for the worse; and that those on the lower rungs of the economic ladder are not ground down below the margin of existence. Further we cannot go during the war. After the war our objective will be not only to restore, but to raise our standards of living.

In the past no one has fought harder than I to help the farmers get parity prices for their crops. With pride I recall that the parity idea was first put into law during my Administration. And by the Act of October 2, 1942, the farmers were guaranteed 90 percent of parity prices for all basic crops, not only during the war, but for at least two years from the first day of January following the declaration of the termination of the war.

But it must be recognized that parity prices are only means to get parity income for the farmers. That income goal has been attained for the cooperating producers of all basic crops. This bill would go beyond the goal of parity income and give to these producers an unwarranted bonus at the expense of the consumer.

A few crops have not reached parity price in the open market, but farm prices generally are above parity. Between August, 1939, and January, 1943, the prices that farmers received for the crops they sold rose nearly 107 percent, while the prices that farmers paid for the things they bought increased only 26 percent.

Farm prices which were 30 percent below parity at the beginning of the war in August, 1939, rose to 15 percent above parity in January, 1943. Farm prices, which at the beginning of World War I were only 1 percent below parity, soared 111 percent between 1914 and 1919, but the prices the farmers paid also soared 96 percent, so that the farmers never got more than 107 percent of parity for their crops during the last war contrasted with the 115 percent of parity they are now receiving.

Thus the farmer, far from being worse off than he was in the last war, is substantially better off. But he will not remain better off if we set loose an inflationary tornado.

The American farmer, I am convinced, does not want inflation. He knows that deflation inevitably follows inflation. The farmer wants neither; he prefers stabilization. He recalls all too bitterly the deflation in the value of his land, the debts, the anxieties, the foreclosures, the evictions, and the heartaches which followed in the wake of the inflation after the last World War.

Parity price is only part of the picture. Other factors have contributed to bring about a striking increase in farm income. Between 1939 and 1942 farm production increased 20 percent, and during this period unit costs rose only one-fourth as much as unit prices. As a result farm income in terms of purchasing power is higher than in 1919, higher than 1919, higher than it has ever been in our history. Stabilization will protect that purchasing power. Inflation will destroy it.

Farm income has risen faster than non-farm income, though both have risen substantially. Since 1939, the average income of the farmer has risen approximately 45 percent more than the average income of the non-farm population. This is particularly significant in view of the very substantial increases which have occurred in the income and purchasing power of the non-farm groups during the same period. The dollar income, the purchasing power, and the parity income of the farmer are all far higher than they were at their peak during the last war. Let us protect the farmer's present favorable position, rather than to commence tampering with it.

I realize, of course, that during much of the last two decades farm prices and farm incomes were inequitably low. No one should begrudge the farmer the progress which the figures I have cited reveal. Nor do these figures prove that every farm and every acre is free of price problems. But, as in the case of substandard industrial wages or industrial production involving abnormally high costs, we must deal with these situations specially on their merits and not imperil our stabilization program by general price or wage increases. The figures I have cited do reflect a favorable situation extending to every farm region and virtually every crop.

It is true that farmers generally are encountering increasing difficulty in securing necessary farm labor, farm equipment, and fertilizer. Higher prices cannot, when steel is scarce, create new machinery; higher prices cannot, when manpower is short, create additional workers. In fact, higher prices for crops like wheat and corn might actually divert labor and machinery away from the production of other essential crops, such as soybeans, flax, grain sorghum, beans, and potatoes.

Furthermore, the present prices for wheat and corn are satisfactory from a production standpoint. Our farmers have already indicated their patriotic intention to plant a substantially increased acreage to these crops. The Government is determined to do everything within its power to see that the farmers have the labor and machinery necessary to harvest those crops.

The present relatively favorable position of the farmers can be held only if our general stabilization program succeeds. The general stabilization program can succeed only if all groups except those on the very margin of subsistence are willing to recognize that for the duration they not only cannot expect to improve their living standards, but must indeed be willing to bear their fair share of the cost of stabilization. There has been an increase in the cost of living since May, 1942. This increase is due mainly to our failure to bring food costs under control. But the War Labor Board is resolutely adhering to the Little Steel formula which compensates labor, in its wage rates, for the increase in the cost of living which occurred between January 1, 1941, and May 1, 1942.

The Board believes that if the formula is broken now it will start an inevitable inflationary spiral that would ultimately cancel out whatever gains labor has made, and place an intolerable burden on widows and old folks with fixed incomes, and on teachers and unorganized workers in low-paid occupations.

It will become impossible to hold this line if the cost of living is still further increased-not from imperative war needs, but by the action of the Congress in departing from its declared policy to stabilize all prices and wages.

The Bankhead bill departs from the declared policy of the Act of October 2, 1942. It departs from the only practical basis on which any sound stabilization program can proceed. That basis is faithful adherence to the present balanced relationships between wages and prices. To change the present delicately balanced price relationships would not merely change, but would jeopardize the entire stabilization program.

It is difficult to forecast the actual price increase which would result under the Bankhead bill, and the estimates I have received differ widely. They all agree, however, that they will be substantial, although there is some difference of opinion as to the time when they will occur. It cannot be denied, however, that the Bankhead bill takes from the Government the power to prevent very substantial increases in food prices. That is its only purpose.

Under the Bankhead bill the price of sugar could rise a cent and a half a pound, the price of bread might go up a cent a loaf and the price of flour proportionately. The price of corn could rise almost 10 percent, which might not necessitate, but would certainly call forth a demand for higher prices for hogs, and livestock, poultry, eggs, milk, and other dairy products. That demand would be particularly insistent in the case of poultry, eggs, milk, and other dairy products where customary feed cost ratios would be substantially reduced.

The Bankhead bill would certainly deprive the Government of the power to prevent these price increases- increases which might swell the cost of living more than 5 percent, add more than a billion dollars to the consumers' food budget, and several hundred million dollars to the cost of feeding the armed forces and of supplying our allies.

If by this bill you force an increase in the cost of the basic foodstuffs, and as a result the National War Labor Board increases wages, no one can tell where increases will stop or what those increased wages will ultimately cost the farmers and all people of the Nation. If the price of food goes up, if wages rise, it will necessarily result in increasing the cost of our armaments, ships, and planes. We should have to borrow even greater sums to meet the increased cost of the war, and after the war an excessive burden of debt would have to be borne by all the people, including those now in uniform.

We are only beginning to feel the cruel effects of total war. Men happy with their families must give up good and well-paid jobs to become soldiers for $600 a year with only modest allowances for their dependent wives and their children. We who remain in civilian life to produce the food and supplies for them,'and an irreducible minimum for ourselves, must not quarrel among ourselves in a vain effort to better or even hold our position at the expense of the other fellow. We must adhere loyally to our stabilization program and sanction no exceptions save in the case of genuine hardship and distress.

I appeal to the considered judgment of the Congress to reject the Bankhead bill which I am returning unsigned. It will not help the farmer with his immediate war difficulties. It will make it infinitely harder for the farmer to protect himself from wartime inflation and postwar chaos. It will add to the burdens of those most heavily burdened. It will make the winning of the war more difficult and gravely imperil our chances of winning the peace.

Franklin D. Roosevelt, Veto of a Parity Computation Bill. Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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