"McNary-Haugen Veto Message, May 23, 1928"
By: Calvin Coolidge
Date: May 23, 1928
Source: Coolidge, Calvin. "McNary-Haugen Veto Message, May 23, 1928." Congressional Record, 70th Congress, First session, 1928, vol. 69, 9524–9526. Reprinted in Romero, Francine Sanders, ed. Presidents from Theodore Roosevelt through Coolidge: Debating the Issues in Pro and Con Primary Documents. Westport, Conn.: Greenwood Press, 2000, 221–223.
About the Author: Born in Vermont to a farming family, Calvin Coolidge (1872–1933) nonetheless spent most of his life in politics. A conservative Republican, he rose through the ranks from city councilor to Massachusetts governor in the span of two decades. Coolidge gained national recognition during his intervention in a Boston police strike in 1919. The following year he was nominated by his party to run as vice president on Warren Harding's ticket. When Harding died in 1923, Coolidge became the nation's thirtieth president. Easily reelected in 1924, Coolidge presided over an era of economic prosperity assisted by pro-business policies.
"Reflections on Farm Relief,
By: Rexford G. Tugwell
Source: Tugwell, Rexford G. "Reflections on Farm Relief, December 1928." Political Science Quarterly 43, 1929, 481–97. Reprinted in Romero, Francine Sanders, ed. Presidents from Theodore Roosevelt through Coolidge: Debating the Issues in Pro and Con Primary Documents. Westport, Conn.: Greenwood Press, 2000, 224–225.
About the Author: Rexford Guy Tugwell (1891–1979) was born in upstate New York. After receiving his doctorate from the Wharton School of Finance and Commerce, he taught economics at several institutions, serving on the faculty of Columbia University during the 1920s. President Franklin D. Roosevelt pulled Tugwell into his "Brain Trust" in 1933. An advocate of national economic planning, he worked on relief measures in the Agriculture Department and the Resettlement Administration until his resignation in 1937. Tugwell served in a variety of other governmental and corporate roles until 1946, when he returned full time to teaching, research, and writing.
The 1920s were a prosperous times for many Americans, but the farming community did not share in the nation's abundance. American farmers had enjoyed a golden age of agriculture in the years before and during World War I (1914–1918), when prices were high and markets ample. But by the 1920s, they faced the problem of chronic overproduction. Farmers had consistently relied on European markets to soak up surplus production, but after the war, new competitors in Europe, Africa, and Asia cut deeply into American foreign trade. American domestic consumption also declined during these years as immigration restrictions and tendencies toward smaller families slowed population increase. These trends were compounded by higher agricultural productivity due to the increased use of tractors and the consolidation of smaller farms—;which further enlarged the nation's agricultural surplus.
As a result, farm prices dropped precipitously during the economic depression of 1920–1921, and farm relief became an increasingly significant political issue over the course of the decade. Even though urban dwellers outnumbered rural folk by 1920, farmers carried more political heft than their numbers would indicate. Farmers were a key constituent of the dominant Republican party, and they drew on a longstanding tradition of American agrarianism. Their pleas for assistance were difficult to ignore, and by 1924 Secretary of Commerce Herbert Hoover organized an agricultural conference to establish farm policy for the Coolidge administration. A longtime proponent of associative governance, Hoover supported loans to farming cooperatives and encouraged agricultural diversification. But this thinking ignored the fact that voluntary farming programs had typically been dismal failures, incapable of overcoming economic individualism.
George N. Peek, an official at Moline Plow Company, made his living selling agricultural implements to farmers. Since Peek could not sell to farmers without cash, he took it on himself to devise a plan that would offer them a decent return on their labor. Peek envisioned a system in which farm prices would be pegged to prewar levels, and then kept in "parity" by adjusting farm prices to the general price index. In order to support these inflated prices, Peek proposed that a government corporation purchase surplus produce and sell it at lower world prices in foreign markets. The loss could then be charged to farmers in the form of an equalizing fee, but farmers would still receive higher returns than if they had sold all of their produce at world prices.
Peek won converts in Secretary of Agriculture Henry A. Wallace and in Congress, where Oregon Senator Charles McNary and Iowa Representative Gilbert Haugen introduced a bill that followed Peek's plan. Peek was evangelical in his campaign for the bill, and he soon rallied American farmers to his cause. Drawing on a general sense of agrarian discontent with a government that appeared to be in the service of industrialists, agriculturalists were ripe to support any plan that might improve their relative economic position. Progressive economists such as Rexford Tugwell also endorsed the plan, which offered an escape from chronic agricultural depression.
Despite the growth of a farming bloc in support of McNary-Haugenism, its proponents had great difficulty securing its passage. Businessmen decried it as inimical to the American spirit of free enterprise, and laborers worried about the effect on their grocery bills. When cotton prices plummeted in 1925, bringing Southern cotton growers into the McNary-Haugen fold, internal divisions within the agricultural community led to further disagreements, this time about the details of the price support program and its administration.
Under these conditions, the bill failed in 1924, and again, in a modified version, in 1925. New bills were introduced in 1927 and 1928, but they were vetoed by President Calvin Coolidge in increasingly caustic language that reflected the growing conservatism of the time.
The broad array of opposition (which Coolidge helped cultivate) made the veto politically palatable. Moreover, Coolidge had deep reservations about the logic of the system. He agreed with economists who argued that inflated prices would likely prompt farmers to rotate marginal acreage into production and further increase surpluses. He believed that agricultural diversity would make the program an administrative impossibility. And he thought that artificially high farm prices would increase the cost of living while subsidizing foreign consumers who could purchase produce below cost.
The Hoover administration eventually passed the Agricultural Marketing Act in 1929. It provided government money to support prices and encourage farming cooperatives, but carried no provision for exporting surpluses overseas. When the Great Depression drove farm prices down even further, this program lost hundreds of millions of dollars. Not until economist Rexford Tugwell and Secretary Wallace drafted the Agricultural Adjustment Act of 1933, which paid farmers to reduce their acreage, did farm policy begin to directly address the problem of overproduction.
Primary Source: "McNary-Haugen Veto Message, May 23, 1928" [excerpt]
SYNOPSIS: In this excerpt, President Calvin Coolidge explains why the McNary-Haugen measure fails to address the problem of overproduction and serves only to increase government bureaucracy.
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.…
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:
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.
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.…
2. The equalization fee, which is the kernel of this legislation, is a sales tax upon the entire community. It is in no sense a mere contribution to be made by the producers themselves, as has been represented by supporters of the measure. It can be assessed upon the commodities in transit to the consumer and its burdens can often unmistakably be passed on to him.
Incidentally, this taxation or fee would not be for purposes of revenue in the accepted sense but would simply yield a subsidy for the special benefit of particular groups of processors and exporters. It would be a consumption or sales tax on the vital necessities of life, regulated not by the ability of the people to pay but only by the requirements and export losses of various trading intermediaries. It would be difficult indeed to conceive of a more flagrant case of the employment of all of the coercive powers of the government for the profit of a small number of specially privileged groups.…
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 billion units of wheat, corn, and cotton.
4. Encouragement to profiteering and wasteful distribution by middlemen. As was pointed out in the veto last year, it seems almost incredible that the farmers of this country are being offered this scheme of legislative relief in which the only persons who are guaranteed to benefit are the exporters, packers, millers, canners, spinners, and other processors. Their profits are definitely assured. They have, in other words, no particular incentive toward careful operation, since each of them holding a contract, no matter how unscrupulous, wasteful, or inefficient his operations may have been, would be fully reimbursed for all of his losses.
5. Stimulation of overproduction. The bill runs counter to an economic law as well settled as the
6. Aid to our foreign agricultural competitors. This measure continues, as did its predecessor, to give substantial aid to the foreign competitors of American agriculture and industry. It continues the amazing proposal to supply foreign workers with cheaper food than those of the United States, and this at the expense of the American farm industry, thereby encouraging both the foreign peasant, whose produce is not burdened with the costs of any equalization fees, and also affording through reduced food prices the means of cutting the wage rates paid by foreign manufacturers.…
This is indeed an extraordinary process of economic reasoning, if such it could be called. Certainly it is a flagrant case of direct, insidious attack upon our whole agricultural and industrial strength.
By the inevitable stimulation of production the bill can only mean an increase of exportable surplus to be dumped in the world market. This in turn will bring about a constantly decreasing world price, which will soon reach so low a figure that a wholesale curtailment of production in this country with its attendant demoralization and heavy losses would be certain. Where is the advantage of dragging our farmers into such folly?
Furthermore, as the board undertakes to dump the steadily mounting surplus into foreign countries at the low-cost figures, it will come into direct conflict with the dumping and similar trade laws of many foreign lands which are interested in the maintenance of their own agricultural industries. We might, therefore, expect immediately a series of drastic, retaliatory discriminations on the part of these consumer countries. This will drive our surplus into narrower market channels and force even further price reductions, with consequent increases in the burdens of the equalization tax.
Primary Source: "Reflections on Farm Relief, December 1928" [excerpt]
SYNOPSIS: In this excerpt from an article in the Political Science Quarterly, economist Rexford Guy Tugwell reviews the problems of American farming and praises the McNary-Haugen bill as a fine piece of social legislation.
Eight years of gradually liquidating depression have incalculably injured the nation's agricultural plant. Fertility has been depleted, equipment has run down, man-power has deteriorated. Not only farmers themselves, but all thoughtful social observers are seriously concerned that some ingenuity and some public action should be enlisted and at once. At best farming suffers needless handicaps. Back to 1913 is not good enough. For, strictly speaking, what happened between 1920 and 1928 is nothing new in our history. Indeed a more or less organized agrarian revolt is nothing new. If we were to look backward we should see that each of those phenomena we call the business cycle and which, in Europe, they call the economic rhythm, has had similar consequences for rural folks.…
… The disadvantage of farmers is measured roughly by the fact that they lose more in depression than they gain in prosperity, and that this continues to be true, with a periodical exploitation of those engaged in this activity for the benefit of those engaged in other pursuits.
The McNary-Haugen idea was that this price disparity, recurrently so disastrous, might be traced to the economic rule that small surpluses have disproportionate effects on prices and that this situation might be relieved by the segregation of this small percentage which has such great consequences. It might then be disposed of safely in either of two ways: storage or export. Coöperative storage, assisted by government financing, might enable farmers to wait for favorable markets. At least marketing could be spread throughout the year. Dumping abroad, with proper management of import duties, could be done at any price, provided the elimination of the surplus was complete; for then domestic prices could be kept at a level which would yield a profit on the whole of any crop. This device, it was argued, would at least admit farmers to the American protective system on an equality with other industries.
All this was objected to by Mr. Coolidge as unconstitutional and as administratively impossible. There is doubt as to constitutionality, but it is only doubt; and that decision belongs to the courts. As to the complexity of administration, this is a charge which might be brought against almost any governmental device. Simplicity is desirable, but lack of it ought not to prevent the adoption of a desirable policy. Besides, the scheme, if complex, was necessarily so. It may be better to do something difficult than to do nothing at all. His real objection was a stubborn determination to do nothing. New England minds revolt against any economic proposal which is more socially oriented than Vermont shopkeeping. But the veto stood.
The scheme seemed workable enough, and administratively possible, provided only that foreign governments made no retaliatory moves to protect their own farmers, and that the surpluses in question did not grow so big, with profit insurance, as to prove unwieldy. But obviously it applied mostly to exportable (or easily stored) products; and, quite as obviously it depended upon a huge coöperative organization among farmers of which only the barest beginnings were to be discerned.
Mr. Coolidge inherited the puzzle of farmers penalized for productivity. But puzzles do not worry him. Besides he held it certain that prosperity would recur in his time to justify inaction. The obstinate persistence of the farm leaders in pointing out the remarkable duration of the depression and the certainty of its recurrence has annoyed him, but not unbearably. His last McNary-Haugen veto lacked something of aplomb; it was even sharp. But it may be doubted whether it satisfied everyone that the economics of New England shop-keeping is adequate to the solution of the difficulty.
… Indeed the more I study the Bill of 1928 the deeper my admiration becomes. As a piece of social legislation it surpasses anything an American Congress ever framed. The remaining troublesome consideration is its dependence on a non-existent coöperative structure. Perhaps, however, ways around this difficulty may be found.
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Saloutos, Theodore, and John D. Hicks. Agricultural Discontent in the Middle West: 1900–1939. Madison: University of Wisconsin Press, 1951.
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Hoffman, Elizabeth, and Gary D. Libecap. "Institutional Choice and the Development of U.S. Agricultural Policies in the 1920s." Journal of Economic History 51, June 1991, 397–411.
"Calvin Coolidge Papers. McNary-Haugen Bill, 1923–28." In Prosperity and Thrift: The Coolidge Era and the Consumer Economy, 1921–1929. American Memory digital primary source collection, Library of Congress. Available online at http://memory.loc.gov/ammem/coolhtml/coolhome.html; website home page: http://memory.loc.gov (accessed May 12, 2003).