The MacNeil/Lehrer Report; Farm Depression

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ROBERT MacNEIL [voice-over]: Fifty years ago, drought and the Depression drove many American Farmers off the land. Today, for different reasons, that history is being repeated.

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MacNEIL: Good evening. Emergency legislation was introduced in Congress today to provide financial help to the nation's 2.4 million farmers. Squeezed by high interest rates, falling income and the recession, American agriculture is suffering one of its worst years since the Great Depression. Today's legislation is intended to prop up sagging farm prices, and ease the credit problems that are forcing thousands of farm families off the land. The bill was introduced by a coalition of farm-state congressmen calling themselves the "farm crisis group." Originally a group of farm-state Democrats, sharply critical of Reagan farm policies, the group was joined in the last two days by a number of Republicans, giving the legislation a bipartisan complexion. Yesterday, the administration moved to help one group of farmers by imposing import quotas to stem the flow of cheap foreign sugar into the United States, but today the administration backed off another expected move to lower the government price supports for milk. Today, with the Secretary of Agriculture and others, what will ease the crisis many are calling "the depression in farming"? Jim?

JIM LEHRER: Robin, in the last year, the market price for corn has dropped 26 percent, for wheat, 12 percent; in fact prices for just about everything agricultural except tomatoes, dairy products and a few others are down. That is great news for all of us who eat, as recent drops in the overall inflation rate bear out, but for the farmer the drop is in income. Nationally, the net farm income in this country was a record $32.7 billion three years ago. With the Carter administration grain embargo, it fell to $19.9 billion in 1980, and projections say it's going to fall to below $15 billion this year. Farm prices and income are down partly because last year was one of the most productive crop years in U.S. farm history, which created a bigger supply than there was demand. As a result, farmers have gone to the bank and other financial institutions for stopgap help, and the result of that is a huge jump in farm indebtedness, up nationally from $136 billion in 1979 to an expected $200 billion by the end of this year. For some farmers, high interest rates on those loans and the other problems have proved to be too much, and they're quitting. And foreclosures are up. Also, the Farmers Home Administration, the federal government's lender of last resort for farmers, reports 58 percent of its loans -- some $14 billion worth -- are now delinquent, three times what the rate was three years ago. Some members of Congress believe all of this adds up to an emergency; thus today's legislation, one of its principal sponsors being Congressman Tom Daschle, Democrat of South Dakota, member of the House Agriculture Committee and the so-called farm crisis group in the House. Congressman, a lot of people are hurting right now -- why do farmers deserve special emergency help?

Rep. THOMAS DASCHLE: Well, Jim, I think we're finding a depression in agriculture unlike just about any other industry. It's not a downswing, it's not a recession -- it's a downright depression. And really, we wouldn't have to do anything at all, because the administration has the authority, under the current farm legislation, to take care of that, to take what necessary remedial action is necessary. But that isn't being done. The attitude seems to be "wait and it'll get better, wait it out, and things will improve." Well, this legislation recognizes that we are in a depression, that this is a crisis, and we are calling for a national referendum. We believe it's time to let the farmers decide, and we're absolutely convinced that the vast majority of those farmers -- those producers -- would be willing to take 15 percent of their land out of production, if we can enhance price through supply management, and at the same time put that land into a conservation program. In addition to that, we direct much of the emergency loan program to those farmers. That isn't being done today, so we mandate emergency loan money. And then finally, we take into account the need for additional exports, and we set up an export program that we think will handle some of the surplus.

LEHRER: Well, starting at your third line and working back, an export program that would finance foreign sales of U.S. products, is that right?

Rep. DASCHLE: That's correct. We would like to see $1 billion put into the export revolving fund, at least in part to offset the drop in income that we are finding this year for the first time in 13 years in farm exports. We also would set up a new bartering arrangement, whereby those countries that couldn't pay directly for the loan -- or for the crops, would be in a position for the first time to barter with us, and we're doing a little bit of that now.

LEHRER: Now, the emergency loan program -- that money is, what, $600 million that's available?

Rep. DASCHLE: $600 million.

LEHRER: And what you're saying is that the administration won't use it, and you want to make 'em do it. Is that it?

Rep. DASCHLE: That's exactly right. We have 58 percent of those operating loans out right now that are delinquent; 30 percent of all the Farmers Home borrowers are delinquent right now. We're feeling that it's absolutely essential that unless we get that loan money out there, unless they can use that loan availability at the very earliest possible date, it's going to be too late for many of them.

LEHRER: All right. Now, on your national referendum, that has to do with what they call "set asides," right? In other words, you essentially pay a farmer not to grow his products or his crop on a certain percentage of his land, is that right?

Rep. DASCHLE: That's correct.

LEHRER: All right, now, how much will all of this cost the taxpayer, Tom?

Rep. DASCHLE: That's the nice thing about our bill. The Congressional Budget Office, Jim, has just reported to us today that we will save close to $1 billion if we implement this program over the next four years.

LEHRER: How in the world can you save $1 billion by spending what figures up here to about $2 billion?

Rep. DASCHLE: It's through participation. The problem right now is that we are going to be paying out deficiency payments, we are going to be paying out program loan funds, we are going to paying out to farmers throughout the land simply because we have not enticed them to participate in the program. And because of that we are going to have an oversupply. By tightening the supply, we are not going to be able to -- are not going to be forced to pay out as we are expected to be paying out this year, and in so doing not paying out the huge amount of money through the commodity programs that we have today.

LEHRER: Now, I have a simple mind, Congressman, let me make sure I understand what you're saying. If you reduce -- if you pay farmers not to grow as much as they're growing, then that means there will be a smaller supply, and that will automatically raise the prices, right?

Rep. DASCHLE: We hope it will. Let me emphasize, Jim, here, that we're not just paying farmers to set aside. We have a tremendous conservation and erosion problem in our country today. We are losing 16,000 acres of land every day for various reasons to nonfarm purposes. We're losing tons and tons of soil per acre -- the average now is around eight tons per acre. So we have to have a very intensive conservation program, and this will allow us not only to deal with the oversupply, but also to deal with the major conservation problem that we have in the country today.

LEHRER: Congressman, in a word, if your bill is enacted into law, will it in fact end the depression, to use your term, among American farmers?

Rep. DASCHLE: We believe it will, Jim. We believe that this is probably the finest piece of farm legislation that we can mold. It has brought together the liberals and conservatives, the Democrats and Republicans, and we're calling it the Farm Crisis Act. We believe that if it passes, we can finally bring some economic recovery to the farm sector.

LEHRER: Thank you. Robin?

MacNEIL: Now a response from the Reagan administration. It comes from the Secretary of Agriculture himself, John Block.When he is not on the nation's business, Secretary Block operates his own 3,000-acre hog farm in Galesburg, Illinois. Mr. Secretary, Congressman Daschle says there is a downright depression on the farm, and emergency measures are necessary. What do you think of the measures he proposes, and how strong is the need for them?

Sec. JOHN BLOCK: Well, I certainly agree we have some problems in agriculture today, but I don't feel that the situation warrants some of the steps that the Congressman is suggesting. We have seen the hog prices turn up 25 percent since January 1; cattle prices are substantially in the black today; dairy is coming along pretty well; grain prices, I feel, have bottomed out and turned the corner. And we're looking at a year where inflation on the farm is practically stopped dead in its tracks, and that's going to help agriculture.

MacNEIL: Excuse me for interrupting, is that why you instructed your department to stop publishing farm price figures awhile ago, because you figured that by the middle of the year, they're going to look a lot better than they do now, is that it?

Sec. BLOCK: Yes, in fact I'm convinced -- a month or so ago, when I was being questioned on why I had not published these figures, there was a lot of talk about $13-billion net income. I noticed now, recently, one of the leading farm organizations is now predicting $20 billion. It just shows that it's almost impossible to predict what we will see, and I just feel that a program as suggested by the Congressman, which does involve spending substantial amounts of government money --

MacNEIL: You don't agree there would be a net saving?

Sec. BLOCK: No, I would have to be convinced, and I'm certainly not convinced at this point in time, that you can spend that kind of money and come out with a savings. I don't believe we can buy prosperity for agriculture.

MacNEIL: Mr. Secretary, if the situation in your view isn't as bad as he says it is, what about those people he said for whom it will be too late, who are delinquent in their loans now, and unless they get some emergency loan relief will presumably be forced into bankruptcy or foreclosure?

Sec. BLOCK: There will be some that will be forced out of business. There are always some casualties in agriculture when you have a down cycle, and we have a very severe down cycle right now. But the way to get out of it is not as suggested here. We already have all the money that borrowers can qualify for in Farmers Home Administration without looking to the $600 million fund. The fund really doesn't mean a thing, because the money is already there. We have put out this year to agriculture, through the commodity loan programs and other lending programs, about $600 billion more than last year -- that's a lot of money.

MacNEIL: What about his proposal to spend a billion dollars to stimulate exports of American surplus food?

Sec. BLOCK: I believe that that is one of our opportunities, to expand exports. The only question has to be, and we all have to weigh it -- Congress has to weigh it, the administration has to weigh it -- if we're willing to spend that kind of money, and if it'll give us that kind of return. Keep in mind that our exports are about $45 billion, so to say that a fund of a billion is going to make a huge difference I think might be stretching it a little bit, but I would say that it would help some.

MacNEIL: Why did your department and the administration feel it was necessary yesterday to help one group of farmers, the sugar farmers? Why was it necessary to impose import quotas for the first time since 1974 at a cost, I saw estimated today, of about $1 1/2 billion a year to the American consumer?

Sec. BLOCK: Well, the big problem happened there when we passed a sugar program that required that we support prices at a certain level, and we really don't have any choice. We were trying to protect our shores with duties and fees. With this higher support level we weren't able to do it with the declining world price of sugar. And the only way to keep from being flooded with sugar from all over the world with our higher support level is to have some kind of restrictions on those imports. We hope we can lift those restrictions; the action taken today only carries through 'til October, and if the world price can come up, we'll be able to lift them.

MacNEIL: It was also widely reported and expected that today you were going to announce that you would lower the federal price supports for milk, instead of which, you've asked for authority to do that, but you've deferred a decision until January. Why was that -- you just figured that with the farmers so unhappy, you couldn't take the political heat now, or what was the reason?

Sec. BLOCK: Well, I don't have the authority. The administration does not have the authority to lower dairy supports. We're asking for the Congress to pass legislation that would give the secretary of agriculture discretion to adjust those supports, and January 1 is our target date. We feel the legislation will be passed sometime by late fall, and then we can adjust them downward if we have to. But the fact that we are suggesting that they could be moved downward may send a signal -- and indeed I think it will -- to the dairy farmers to reduce their production. And that's what we've needed. We've had a dairy program here that has sent the wrong signal to the dairy farmers, and it's really -- it's been government's fault.

MacNEIL: Well, thank you. Jim?

LEHRER: Congressman, the Secretary says you can't buy prosperity for American agriculture, which is what you're proposing to do.

Rep. DASCHLE: No, we're not proposing that at all, Jim. As a matter of fact, our porgram is going to cost a billion dollars less, according to -- not my figures, but the Congressional Budget Office figures -- over the next four years.

LEHRER: The Secretary is not convinced -- convince him.

Rep. DASCHLE: Well, we're going to convince him by bringing people into the program to control their own supply. He isn't doing that today; the problem we're having today is that no one is signing up for this program who is going to participate later on. The projections for participation in the Secretary's program this year are now expected to be somewhere below 25 percent. That means 75 percent of the people out there aren't going to participate.

LEHRER: You mean, by planting less than --

Rep. DASCHLE: Yes, they'll be planting fence row to fence row, and that is what's going to cost the government a ton of money.

LEHRER: Mr. Secretary?

Sec. BLOCK: Well, Jim, I'm convinced that we are going to have a reasonably good participation. The signup has been far beyond anyone's dreams, with in excess of 80 percent signup, and I think we'll have good participation. It's a good program, and the farmers appreciate that it can --

LEHRER: The program is basically voluntary now, is that right?

Sec. BLOCK: That's right, it's a voluntary program and it's not going to cost the kind of money that the Congressman is suggesting that we spend.I just don't feel that it -- you know, the whole concern in this country is to bring the cost of government down, to bring inflation down, to reduce the deficit. And making the move that's suggested here, I feel will increase the deficit, increase the cost of government, and ultimately it will raise inflation, and it will raise the interest rates -- and those are the very problems that are hurting agriculture.

Rep. DASCHLE: Jim, the theory that the Secretary has just enunciated is in effect, and I have a scrapbook right here that indicates that just in the last 45 days, there have been 320 auctions in the state of South Dakota alone. That comes out to 6.8 a day. It's not working. We are bearing the brunt in agriculture for the economic reform package that simply has failed. And I think in that failure we're bringing the nation's largest industry to its knees. And that is why we need this emergency legislation.

LEHRER: Mr. Secretary, the farmer's sharing an unfair burden of the economic plan?

Sec. BLOCK: No, I don't feel that they are. I know that there are problems in agriculture, but we have problems throughout the economy right now, and what we're really doing is bearing the brunt of some government policies that have been over three or four decades, that have spent us into a situation now that has created inflation and created high interest rates. Furthermore we're living in the aftermath of a grain embargo imposed here by the past administration, and we've gotten that off. But it's still not over with, because we still have problems in getting the percent of the market that we once had.

LEHRER: You just don't see the farmers as a special case, right, that requiures a special package, right now, to help them?

Sec. BLOCK: They're a special case from my vantage point, but you have to look at the whole economy. And to open the floodgate for some kinds of legislation such as is suggested here is not going to solve the problem, it's going to increase the cost of government. Then everyone needs a bailout -- the thrift industry, the auto industry, the home builders -- the list is -- it just goes on and on, and we're going to have to tough it out, and agriculture can do that.

Rep. DASCHLE: Jim, we're not asking for a bailout at all, and I think that's really important that we demonstrate that. The Secretary this year is offering a loan rate on wheat alone that's close to $2 below a farmer's cost of production. There isn't anyone in any part of any business that can survive when they're only getting two-thirds their cost of production. We don't even want a government handout, we want the ability to control our own destiny, to control the supply that we're producing, but we have to have a price, and we have to have the mechanism in agriculture policy to get that price, and that's what we don't have today in the Secretary's program.

LEHRER: Thank you. Robin?

MacNEIL: Now let's hear how a working farmer responds to all this talk in Washington. Tom Nichols owns a 420-acre farm in northeast Montana, on which he raises hogs, hay and grain. His farm has been in the family since the 1940s. He joins us tonight in the studios of the Nebraska ETV Network in Lincoln, Nebraska. Mr. Nichols, thank you for going to Lincoln, Nebraska.

TOM NICHOLS: Thank you.

MacNEIL: First of all, how are things going for you personally? You've heard all the talk about the picture in general, how are they going for you personally?

Mr. NICHOLS: Well, we agree with a lot with Mr. Daschle's bill. The problem in agriculture is a depression, and until we address the problem of raw materials entering the economy at a profitable level, we're not going to solve anything. If these farm products were being sold by the farmer at a profitable level, the money would be earned into the economy, and you wouldn't have the surpluses. The money would be available to buy them.

MacNEIL: You've heard the administration's position. The Secretary says, well, there is a voluntary program, with government incentives, to take a certain amount of land out of production, and therefore reduce the amount of food going into the market and hopefully to keep prices up. What do you think of the voluntary program that's in force now?

Mr. NICHOLS: Well, it gets back -- this country has been following a policy for 30 years, underpay the raw material producer and labor so business could make a profit. And the consequence of that is a trillion-dollar national debt, and a $6-trillion public and private debt. Rather than monetize our raw materials, we've chosen to let money determine the value of our labor and our production. You're not going to solve the problem with trying to control production. Our -- the wealth of this country is our production -- the natural resources. And we're allowing money dominate --

MacNEIL: How do you control the problem, then, do you think, from your perspective?

Mr. NICHOLS: It would take -- we've had several periods in history where we've had prosperity, the economy in balance. The World War II period for instance, when we had the Steagall amendment. The government by law mandated that raw materials and basic agriculture couldn't be traded for less than 90 percent of parity. And this is the only way that you're going to answer any of these problems. You can't just go on injecting debt to make up the difference that you're not paying agriculture.

MacNEIL: So you don't, then, agree with Congressman Daschle's plan to have a national referendum, to get more farmers to agree to hold land out of production. You don't think that's a good idea?

Mr. NICHOLS: Well, a short-term problem -- it's a short-term solution, until we attack the cause of the problem we've got today. We're working on a -- trying to solve the effects of this problem, and until we sit down and attack it from the root, we're going to have disparity all through the economy.

MacNEIL: Excuse me interrupting. How bad is the problem around the farmers you know in your neighborhood and in your state? For instance, how many are close to, or have gone bankrupt?

Mr. NICHOLS: Most all of them. We're sitting here now --

MacNEIL: Most all of them?

Mr. NICHOLS: One more year -- this 1982 disastrous farm bill that was passed here this spring is going to lay the seeds to destroy everybody. The ones that don't go out this year are sitting on the wings for the next year.

MacNEIL: How close are you to bankruptcy yourself?

Mr. NICHOLS: Oh, we are. We're being foreclosed on by the Farmers Home Administration, and we've chose to fight the foreclosure.

MacNEIL: Why are they foreclosing?

Mr. NICHOLS: Lack of repayment ability.

MacNEIL: You're behind in you payments on your FmHA loan, is that it?

Mr. NICHOLS: Yes. I might add that we're behind due to no problems of our own -- we were forced into a situation to borrow money from the Farmers Home Administration and we have attorneys working now on a counterclaim against the Farmers Home Administration, to rectify the problems that we've been forced into.

MacNEIL: I see.Well, thank you. Jim?

LEHRER: Mr. Secretary, is your Farmers Home -- the FmHA, is it doing a lot of foreclosing right now? Are you going after people like Mr. Nichols?

Sec. BLOCK: Well, I can't speak to Mr. Nichols' case specifically. We're considering each of our borrowers on a case-by-case basis, and we're working with the private lending institutions. Our objective is to keep operators in business. We're not going to be irresponsible; there are some that will have to come out of business, and I don't know his case. I do know, though, that of the total borrowers in Farmers Home Administration, less than one -- about one-half of one percent in this fiscal year are all that have been foreclosed upon, and one-half of one percent is not very many. But I don't pretend to say that there aren't some problems in agriculture -- I know there are, but I think that we're compassionate in our approach to the problem.

LEHRER: Do you see the FmHA as compassionate, Mr. Nichols?

Mr. NICHOLS: No, definitely not. It may just be out of control, is what it is. When you take a farm home foreclosure, even a decision to foreclose, you -- a farmer doesn't have a chance to appeal that to an impartial hearing officer administratively within FHA. You appeal it to the decision-maker's boss, and to his boss, up the line, until you get to the national office, where they can either reverse it or stop it.

LEHRER: Congressman Daschle, what is your assessment of how the FmHA is conducting itself during this bad time?

Rep. DASCHLE: Jim, I think it's a disaster. Foreclosures are only one of the adverse actions that the Farmers Home Administration can take. They take a number of others, and more than 23,600 adverse action letters have gone out across the country, telling farmers to sell their land, telling farmers they're going to have to renegotiate their loans, telling farmers that they have no business in agriculture, telling farmers in a lot of different ways to get out. More than just foreclosures -- we're dealing with a lot of different kinds of adverse actions. Just yesterday the committee asked for a deferral on a case-by-case basis, and the Farmers Home Administration fought us on this.Fortunately, in the committee we won, but we're facing that kind of thing on a day-to-day basis.

LEHRER: Are you suggesting that Secretary Block as a matter of policy is urging farmers to get out of the business?

Rep. DASCHLE: Absolutely. That's exactly what I mean.

LEHRER: Mr. Secretary, is that what you're doing?

Sec. BLOCK: As a matter of policy, our loan officers, just like a bank, any bank, counsel with their borrowers, and send them letters suggesting that if they've got problems, how they deal with them. And that's what the Congressman is talking about. It's good business. There are borrowers that need counsel, in fact, probably most of them need some counsel, and occasionally the counsel would be that someone might be better off to sell out, take what he has before he loses it all, if he's on a bad roll.

LEHRER: Congressman Daschle, what would you say to Mr. Nichols about his point that what you're suggesting -- that what everybody's suggesting -- in effect is a short-term, bandaid approach, and that until -- that to restrict production is not the answer, production is what makes this country what it is today? Tell him what you think of his idea.

Rep. DASCHLE: Well, I think that he makes a good point, but we have to take into account the real world here. Everyone would like to mandate a higher price, but the problem is that we are dealing with a supply situation here that's causing a major deficit within our federal budget. We have to be concerned about that or we're never going to get anything passed legislatively. So accepting reality, I would like to be able to pass a wand and give him 90 percent of parity, but unfortunately the facts, political and real and legislative, don't allow us to do that. So we're trying the next best thing.

LEHRER: Do you hear that, Mr. Nichols?

Mr. NICHOLS: Yes, I did. I'd rather respond to Mr. Block's statement. You slay that some of these farmers need counseling. That's probably true -- what about the bad counseling that your employees are giving borrowers? Who's going to be responsible for the mistakes that were caused, and the breach of contracts that these employees are infesting upon the farmers of America?Who's going to take the blame for that? We've got 1,800 pages of FHA regulation where they protect the FHA from the problems.

LEHRER: Let's give the Secretary a chance to respond.Mr. Secretary?

Sec. BLOCK: Well, I don't believe that we have counselors and loan officers that are doing an unfair job. Now, I'm sure there are specific cases where it isn't perfect; we all know that. But we're dealing with farmers, they're human bings, and we have professional people dealing with them. And it's really not that much different from any lending institution, and I certainly would suspect that Tom is not suggesting that we be irresponsible, and go ahead and make loans when we know -- if we should know that the money would be lost and the taxpayers will have to pick up the tab.

LEHRER: We have to leave it there. Robin?

MacNEIL: Yes. Tom Nichols in Lincoln, Nebraska, thank you very much for joining us. Congressman Daschle and Secretary Block, thank you. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: That's all for tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.