March 22, 1982
Jack, [Secretary of Agriculture John R. Block] thank you very much. And thank all of you very much, and welcome to the White House. It isn't really, technically that -- I know there's a street in between -- but this is part of that same shop over there, too. We're delighted to have you for these briefings, and I've been looking forward to meeting you personally.
Now I can say I've met the one group that hears as many complaints as I do. I think it was Thomas Jefferson who said that farmers are God's chosen people, but nowadays they must be asking, chosen for what? I've always thought that when we Americans get up in the morning and see bacon and eggs and toast and milk on the table, we should give thanks that American farmers are survivors. They're the real miracle workers of the modern world. They're keepers of an incredible system based on faith, freedom, and hard work that feeds us and sustains millions of the world's hungry as well.
I'm told that in 1820 a farmworker produced enough food products for himself and 3 other people. By 1920 he produced enough for 8 people, and now the number that he feeds has risen to 77. Agriculture has also become one of our biggest employers -- the mealticket for millions of workers from farm suppliers, bankers, hired hands, all the way through the system to supermarket clerks.
In 1981 the $28 billion agricultural trade surplus offset almost half of our petroleum deficit. In fact, our agricultural exports account for about 40 percent of the world's total agricultural trade and one-fifth of America's merchandise export earnings. This bounty from our nation's farms has been a little too easy for us to take for granted. We've never really had nationwide food shortages. Our share of income spent for food is among the lowest of any nation, and our farmers keep on increasing their productivity.
I believe that our administration is lucky to have an Illinois farmer named Jack Block, who never lets me or any member of our Cabinet forget our farmers. Through your group, I'd like to thank the farmers of America for so strongly supporting our economic recovery program. You know, our plan is a little like farming: You prepare the ground, you plant the seeds, you tend the field and weed it, and then you hope the harvest will bring a bumper crop -- in this case, for the American economy.
As a part-time rancher myself, I share an appreciation for this system -- a chance to own your own land, to work it by the sweat of your brow, and take risks for profits. So often we forget the risks they are taking. A drought or a terrible storm is usually little more than a temporary inconvenience for city dwellers. For farmers it can mean a whole year's work and investment wiped out.
Maybe some of you know this story, but I remember when Ezra Taft Benson was Secretary of Agriculture under Eisenhower. He was making a tour of a farm area, and in one he was assailed by one particular farmer who just wouldn't stop complaining. He had all sorts of things that were wrong, and the Secretary kind of turned to an aide and looked at some papers and then turned back to him, and he said, ``Well, now wait a minute. You didn't have it so bad last year. You got 29 inches of rain this last year.'' And the farmer says, ``I know. I remember the night it happened.'' [Laughter]
But right now many of our farmers must be wondering if the sky hasn't fallen. I know this is an extremely difficult period for them. The U.S. agriculture is in the third straight year -- the third year of an economic recession. A vicious cost-price squeeze, high interest rates, and uncertain markets have combined to erode many farmers' confidence and hopes for prosperity.
I have to personalize and tell you, that cost-price squeeze, I learned a little bit about that one day. I bought a tractor secondhand many, many years ago, in 1953, for $1,200. And then -- it now and then needs a little help along the way, but it's still there and working. But I was tempted, and so up came a fellow who said he'd make a good deal, and he did. He offered me $4,000 trade-in on that tractor -- and this was just recently -- and all I'd have had to do is give him $13,000 more, and I would have had a new tractor. [Laughter] I know about the cost-price squeeze.
But the tragedy of what is going on right now is that much of this misery didn't have to happen. I believe the first bodyblow to agriculture fell in January 1980, when contracts for the sale of our farm products to the Soviet Union were blocked in retaliation for its invasion of Afghanistan. The impact was immediate and severe. Farm prices declined, and our entire agricultural marketing system -- elevators, barge lines, railways, millers, exporters -- was disrupted.
According to both private and government estimates, billions of dollars in output and services were lost. Thousands of jobs were lost. And taxpayers immediately had to shell out more than $2 billion to help soften the blow. Other countries didn't hesitate to increase their production and displace U.S. sales. No one knows for sure what the ultimate impact of that ill-advised embargo will be, because such actions affect trade patterns for years.
Now, it's also worth noting that the Soviets are still in Afghanistan suppressing an innocent people, who yearn to be free. And while the Soviets experienced some economic problems, that predicted cutback in their meat production never materialized as a result of our action. By increasing grain imports from other sources, by seeking out meat imports from other countries, and by expanding the use of substitute feeds, the Soviets were able to maintain their meat inventories.
Now, don't get me wrong. There may come a day when our national security is threatened and the issue of an embargo is raised again. In that case, I would not hesitate to declare such an embargo -- --
Thank you. I never usually do that. But I don't know what's in there right now. [The President was experiencing difficulty speaking, and Secretary Block gave him a glass of water.]
-- -- but only if it were part of a complete boycott and if we could have the cooperation of other nations so that we wouldn't end up hurting ourselves, with no harm done to those we were trying to influence.
[Drinking the water] I should have waited for a laugh line to do that. [Laughter] I don't know whether I got any more in here though. [Laughter]
The bottom line is the Soviet embargo was bad for our farmers, bad for our economy, but not that bad for the aggressors we were supposedly going to punish.
On top of the Soviet embargo, farmers were hard hit by the policies of the late seventies that led to sharing [soaring] inflation and interest rates. Inflation went from 4.8 percent in 1976 to 12.4 percent in 1980. And during that period, interest rates shot all the way up from 6.5 percent to 21.5 percent. The farmer, like any other small businessman lives or dies on his ability to sustain an adequate cash flow. And when that cash flow is reduced to a trickle by high inflation and interest rates, the farmer sometimes has no option but to shut down his operation. And to all this, the recent bumper crops, we understand why the cost-price squeeze is so bad and threatens to strangle the vitality of American agriculture.
Prices received by farmers have gone up 5 percent since 1979. Prices paid by farmers have gone up by 25 percent -- or 20 percent, I should say -- 4 times as much in this period.
One other problem I didn't mention is that excellent weather overseas has created a large, worldwide surplus. The one exception, of course, is the Soviet Union. You know, I can hardly remember a year when Soviet harvests were not victimized by bad weather. And I've seen a lot of harvest seasons, as I'm constantly being reminded.
And I'm determined to do everything that I can to help our farmers get out of their terrible bind. I've listened, asked questions, and probed for answers. I think we know what needs to be done to get agriculture back on track. And one of the first things is to make the Federal Government get its own house in order so we can reduce its claim on our national resources and end its interference with the marketplace. That's what our economic recovery program is all about. And let me say again how grateful we've been to receive the strong support of the farm community.
In our first 12 months, we've cut nearly in half the growth in Federal spending. The inflation rate has dropped to 8.9 percent, and since October 1st, it's running about 4.1 percent. Last year's drop in inflation means that an American family of four earning the median income of $24,000 had $754 more in purchasing power than if inflation had not come down.
Prime interest rates were 21.5 percent, as I said, at the end of 1980. We've got them down by 5 percentage points. They're still much too high, but if everyone stiffens their spine and does what still needs to be done on spending, we'll bring those interest rates down more.
The growth in regulations has been cut by a third. My goodness, I can remember that nest of regulations -- some years ago, a fellow running an oil station on the chosen route in the East here down to Florida and right around the Mason-Dixon line. And he had a little patch of -- triangle of ground between the -- where the driveways and the sidewalk and the street met. So, he planted a few cotton bushes in there, and then when he'd see a license plate coming in from up north, he'd give them a cotton boll off one of those bushes as a souvenir of their crossing the Mason-Dixon line. He was hailed in by the government, because he was planting cotton without an allotment. [Laughter]
Personal and business taxes have been reduced to stimulate savings, investment, work effort, and productivity. The provisions for accelerated depreciation will benefit many small enterprises in agriculture. The 25-percent personal rate reduction helps the small firms that pay their taxes by personal rates, not corporate rates. And this is another reason why that personal tax cut must be protected.
One of the features of our tax program that I'm most proud of addresses a special problem for farmers and family-owned businesses. It's not right that widows and children must lose just to pay Uncle Sam what generations of love and toil created. So, the estate tax exemption will increase to $600,000 by 1987, and of even greater help, there will be no estate tax for a surviving spouse, the widow or widower.
We know that the Federal Government also has an important role to play as partner to the farm community. I think the gist of that role is to help the farmer do what he can't do on his own -- promote basic research, seek out new markets, counter any unfair trade practices of our trading partners, provide a measure of protection from erratic weather and natural disasters, and create the proper environment so the forces of supply and demand can more efficiently allocate resources. We're fully committed to do this.
We have increased the fiscal year '83 budget for agricultural research by nearly 3 percent above the inflation rate. We've expanded the Federal crop insurance program. We proposed a $4 million increase in the Department of Agriculture's market development program and recommended that the level of agricultural export credit guarantees be maintained at the highest level in history -- $2.5 billion. We ended the previous administration's Soviet embargo and withstood pressures to impose agricultural trade sanctions during the Polish crisis.
We have also set out a blueprint to challenge unfair agricultural trade practices by Japan and the European Economic Community. We're challenging in the GATT the European Community's open-ended use of export subsidies on certain agricultural products where we feel they've gained an inequitable share of world trade as a result of those subsidies.
We're pressing the Japanese to remove nontariff trade barriers that prevent us from fully benefiting from our comparative advantage in agricultural production. A U.S.-Japan working party will meet in Washington the week of April 12th to discuss the GATT consistency of Japan's agricultural quotas with a view toward liberalizing those restrictions.
In the past 8 years, our stop-and-go export actions have weakened our reputation as a reputable supplier. If we're to take full advantage of our agricultural resources, we must establish a clear policy for the benefit of our farmers, those who market our crops, and those who buy our commodities at home and abroad. And for this reason, I am presenting today our long-term policy on farm exports.
The agriculture export policy of the United States will ensure three essential priorities. First, no restrictions will be imposed on the exportation of farm products because of rising domestic prices. Farm prices go up, and farm prices go down. High prices signal market-oriented farmers to produce more, and they will if we allow them to compete freely in export markets. This is best for everyone from farmer to consumer.
Second, farm exports -- as I've already indicated -- will not be used as an instrument of foreign policy except in extreme situations and as part of a broader embargo. Agricultural commodities are fungible; that is, they're easily interchanged for the same commodity from other nations. For this reason the embargo of 1980 was almost totally ineffective, and yet it caused great economic hardship to U.S. agriculture. And we won't repeat such an action.
Third, world markets must be freed of trade barriers and unfair trade practices. We must continue to pursue this objective aggressively. World economic health will be improved and strengthened by freer agricultural trade. Our great agricultural system must be turned loose to benefit not only Americans but people throughout the entire world.
Now, I announce this policy with a great sense of pride -- the pride in the accomplishments of U.S. farm families. Adherence to this policy will bring them deserved credits and add to the prosperity of all Americans and enhance the cause of peace throughout the world.
During the first year of our administration, I think we've turned an historic corner. We're ending the destructive inflation and financial disorders of the seventies. We're restoring incentives for personal enterprise. And we've begun to dismantle the regulatory straitjacket and reverse the dangerous erosion of our military strength.
Our recovery program was passed too late to avert the present painful slump brought about by past pump-priming and those 21\1/2\-percent interest rates. There's no quick fix for the economy or for our farmers. Weather will still be a major factor in determining when prices make a recovery. Some farmers will not make it through this difficult period of readjustment. But I think the vast majority will. And they're going to discover a better environment to conduct their business and realize a meaningful profit.
I am not going to turn my back on the farmers of America and undo all the good that we've begun to put in place. If we stay on course and shun retreat, we'll bring prosperity back to our farmers and to the nation's economy.
Now, I again thank you very much for coming today, and I understand that I'm getting run out of here now for another meeting. But Jack Block is going to stay with you. You might have some questions that you'd like to ask, and Jack will take care of that while I move on.
Again, thank you for being here.
Note: The President spoke at 3:18 p.m. in Room 450 of the Old Executive Office Building.