Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-04-22
py the Associated Pres.

BY the Associated Press.
President Hoover,s letter to Senator
McNary disappearing the export de-
benture plan as measure Of farm re-
lief is as follows:
The White House.
Washington, April 20, 1929.
The Honorable Charles L. McNary,
United States Senate.
My Dear Senator:
On April IL I received a call from
yourself and Senators Capper, Hefiin,
Norbeck and Ransdell, acting as snb-
committee of the Senate committee on
agriculture, requesting my opinion on
the export debenture plan" for agricul-
tural relief. since it is q complete de-
parture from the principles already de-
the committee that would request an
analysis of the plan by the Departments
and would transmit them to the COM
mittee, together with my conclusions
after investigation. The departments
have given It earnest consideration and
/ have Just received and studied these
reports, which transmit to you here
with.
The principle of this plan as set out
in the draft bill of your committee.
which is before me, Is to issue Gov
eminent debenture to merchants export
ing agricultural products in amount of
one-half of the tariff on such products
such debentureS to be redeemed by pres
entation for payment of import duties.
The assumption is that by creating a
scarcity through stimulating exports the
domestic price will rise above world
prices to the amount of the debenture-
that is, If the debenture on wheat ex-
ports is 81 cents a buShel, the price of
wheat will be 81 cents higher in the
domestic market than In the world
market.
means Disaster for Farmer"
am aware of the arguments put for
ward in favor of the plan by some of
our agricultural organizations, and the
arguments Of other farm organizations
in opposition to it. The proposers adj
vance it in the utmost good faith and
earnest desire to assist In solution of
great problem and I regret deeply
that cannot agree that this provision
would bring the results expected. On
the contrary, I am convinced that it
would bring disaster to the American
farmer.
The weaknesses of the plan as set forth
In the Senate bill may be summarized
as follows:
/. The issue of debentures to export
merchants and their redemption in pay
ment of import duties amounts to a
direct subsidy from the United States
Treasury. If the plan proposed be gen.
orally applied 1t would cost in excess
of 5000, 000, 900 a year, as 1t would de-
crease the Treasury receipts by such
an amount.
2. The first result of the plan, If put
into operation, would be gigantic gift
from the Government and the public to
the dealers and manufacturers and
spectators in these commodities. For
instance, in the principal export COM
modities the value of the present vol
ume of stocks in possession OF these
trades would, If the plan worked, rise
by from 5000 ,000, 900 to $500, 900 900, &C
cording to different calculations, with
out cent return to the farmer or con-
sumner. Evey Spectator for a rise in
our public markets would receive enor-
nous profits. Conversely. If after this
elevation Of prices the plan were at any
time for any reason withdrawn the
trades would suffer like loss and a
long line of bankruptcies must enSue.
But in the meantime the trades. out OF
fear of withdrawal or Of reduction in
the subsidy. will not engage in normal
purchase and distribution. Either ex-
orbitant margins would be required or
alternatively the farmer would be COM
PEELED to himself hold the Nation S
stocks until there was q demand for
actual consumption.
OyerprOductiOn Is Possibility.
3. II the increased price did reflect
to the farmer, the plan would stimulate
overproduction and thereby increase
world supply. which would in turn de-
preciate world prices and consequently
decrease the price which the farmer
would receive, and thereby defeat the
plan.
Stimulation of production has been
the outstanding experience abroad
where export subsidy has been applied.
Overproduction will defeat the plan. and
then, upon its withdrawal, agriculture
would be plunged into catastrophe Of
deflation from overexpanded produce
ton. The farmers difficulties today are
in some part due to this process after
the war.
4. The stimulation Of production Of
certain commodities would disturb the
whole basis of diversitication in Ameri-
can agriculture. particularly in the cot
ton and wheat sections, where great
progress Is now being made toward a
more stable basis of agriculture.
S. Although 1t Is proposed that the
plan should only be installed at the