Of critical importance to the farmer - particularly during a time of declining income - is his ability to obtain credit. Yet it is when his income is most severely reduced that his credit is most impaired. He has the greatest difficulty getting a loan just when he needs it most.
The technological revolution has made the American farm the most productive unit in the world. But this has taken and still takes a lot of capital. It has made the farmer a major borrower. It has also made the farmer a major victim of the high interest rate, tight money policy. He now uses a total of over $20 billion in borrowed money to finance his activities.
Tight money has little effect upon the large industrial corporation. It can always get the money it needs or, if necessary, finance itself through its earnings. These companies can both applaud the Puritan virtues of tight money and enjoy a free-spending life. But the family farm, like the small business, does not have these resources. When the banks start rationing loans the family farmer finds himself in a battle for survival. When the interest rate climbs and loans become harder to get the productive machine must grind to a halt. During the past two years the combination of reduced income and tight money has forced 50,000 Wisconsin farmers - one out of thirteen - to look elsewhere for a livelihood. Unless the trend is reversed, additional hundreds face the same dismal prospect.
Franklin Delano Roosevelt recognized this problem - and did something about it. Twenty-three years ago - when we were suffering from another farm depression - he recommended - and the Congress established - a federal agency to provide the credit the farmer needed. It permitted the farmer to participate in and promote the economic growth of our nation.
It was always possible - under the Democratic Administration - to get a loan from the Farm Security Administration or its successor - the Farmers Home Administration - at a reasonable interest rate when all others turned you down. And the interest rate on direct loans was set at 3%. The faith of the nation was justified by the extraordinarily low proportion of loans that failed - less than 3%. And if we exclude loans made to farmers suffering from droughts, floods and other national disasters the rate of failure drops to only 1%.
The need today is as great as it was in 1937. The proven record still shows it is sound business. The challenge of future technological advances requires more than ever an expanded loan program. But the response from the Benson Department of Agriculture has been completely inadequate.
The Benson program for farm credit contains three features:
First, increased interest rates. The 3% rate has already been raised to 5%. And a further increase is recommended. The more the farmer has to pay to borrow money the more his costs, which have already squeezed profits down to their lowest point in eighteen years, will have increased still further.
Secondly, Mr. Benson is asking for reduced lending authority. Last year Mr. Benson requested $185 million. This was obviously insufficient. Congress responded by adding an additional $81 million. Yet even this addition has proved inadequate. The Farmers Home Administration has already exhausted its authorization - at a time when the need is especially critical for farmers who need to put in their Spring crops.
Every state in the Union used up its allotment for soil and water loans before the end of November. Most of the states used up their allotments for home loans by the end of December. And there are thirteen states which are already without funds for feed and seed.
Here in Wisconsin a study has shown you need at least $2 million more for farm ownership loans. Already the backlog is four times the amount of the annual allotment to the state. In spite of this clear proof of desperate need, Mr. Benson is not asking for an increase in next year's loan appropriation - he is actually asking for a reduction of $44 million.
The third point in the Benson Program calls for tightened eligibility requirements. As a result, instead of helping those who need it most, only one out of three applicants is even accepted. And ironically enough, one of the grounds for rejection is reduced farm income - due to Mr. Benson's own programs.
In place of this cruel and negative farm credit policy, permit me to suggest four points:
First, we should maintain a ceiling on interest rates under this program which will keep them below their present levels. Higher interest rates would only add one more repressive measure to the long list of Benson efforts to stifle farm growth.
Secondly, we should expand, not contract Farmers Home Administration loan authority until it accomplishes its purpose.
Third, the lending program should be placed on a revolving fund basis. This would not only permit long-range planning - it would reduce this annual pressure for trimming the program in order to manufacture a budget surplus.
Fourth, the $20 million reserve fund appropriated by Congress last year should be freed from Budget Bureau control. That control prevents its use. I cannot subscribe to the belief that to keep this fund intact is more important than a healthy farm economy - or more important than a farmer who needs capital now to plant his spring crop.
If we can get men in government who understand the farmer's problems - who recognize his need for inexpensive credit - who know he's a good credit risk - who treat him as a first class citizen, not a pauper looking for a hand-out - then our farm economy can grow and flourish. And the whole country will grow and flourish with it.
Source: Papers of John F. Kennedy. Pre-Presidential Papers. Senate Files, Box 907, "'The Importance of Farm Credit,' Stevens Point, Wisconsin, 10 March 1960." John F. Kennedy Presidential Library.