"For the life of me, I can't figure out why the taxpayers have the responsibility to go in and refinance bad debt willingly incurred by consenting adults who went out and bought farm land when prices were going up and thought they could get rich."
That was David A. Stockman, director of the Office of Management and Budget, in an outburst of characteristically cutting candor this week before the Joint Economic Committee, speaking about the debt crisis confronting Midwestern farmers.
The corn and soybean belt appears about to harvest the financial calamity that has been growing since the end of the 1970s. Between 10 to 25 percent of Midwestern farmers are in serious trouble, squeezed by heavy debts and low farm prices, the American Farm Bureau says.
In many communities, 5 percent or more of them may be turned down when they ask their bankers for the cash to pay for spring planting, according to some estimates. There is fear of a wave of farm bankruptcies, foreclosures and bank failures not seen since the 1930s Depression.
Typically, the first two question raised here are, "Whose fault is it?" and "What's the government going to do about it?"
In Stockman's view, most of the farmers who are now facing failure dug the hole and climbed into it in the mid- to late-1970s. The prices of farm products and farm land were soaring then, helping feed the nation's inflationary epidemic, and the Soviets, Chinese and other foreign customers were buying.
In response, American farmers planted hedgerow to hedgerow. Stockman says they were trying to get rich. They say it was a normal reaction, to add land and spread their fixed costs of labor and machinery over a larger base.
"We had a lot of grassland around here and we hunted pheasants," said E. H.(Bud) Newman, president of the First National Bank of Newman Grove, Neb. Then the export markets suddenly opened up. "So they tore up everything they could get their hands on and planted it."
Farmers' equity in their farms rose 116 percent between 1975 and 1981, feeding the sense of growing prosperity. But after accounting for inflation, the increase was 39 percent. Since then, farm equity has declined 27 percent as land prices and farm inventory values have dropped sharply. The farmers who borrowed to buy land are in desperate shape.
"I don't know who's to blame for that," said Newman. The expansion wasn't a case of greed, he said. "It was a son buying a father's estate, or buying out his brothers and sisters, and a guy getting into farming when he shouldn't have. I don't know of anyone in this part of the farm belt who was 'trying to get rich.' "
Some pin the blame on the farmer. Others are pinning at least part of it on the federal government.
"There's probably some truth in what Stockman said," says A. G. Moffett, an American Farm Bureau official. "But remember, a few years ago when we had good prices on soybeans and corn, the FHA [Farmers Home Administration] was offering 5 percent money and saying, 'Come and get it.' "
Now, says Moffett, American grain farmers grow more than the U.S. market needs. To prop up their income, the government subdizes their crops, but that pushes U.S. farm prices so high that American farm exports lose out to foreign competition.
Rep. David R. Obey, (D-Wis.), chairman of the Congressional Joint Economic Committee, said this week that the blame must by shared by the administration and Congress, whose budget policies helped push up interest rates, precipitating the farm credit crisis, he says.
In that sense, there is an endless list of victims -- Detroit's jobless auto workers, steelworkers in Pittsburgh's Mon Valley and Youngstown, Ohio, and North Carolina textile workers. Thousands of bankrupt shopkeepers and millions of unemployed or underemployed people are on the list, not to mention Brazil, Mexico and the rest of the debt-ridden Third World.
All were caught off guard by vast changes in the international economy that they weren't warned of and didn't see coming. All were tripped and sent stumbling by a determined deflationary war led by the United States.
But to focus just on victims and compensation will not pull the farmers out of the hole, any more than that kind of policy would solve the competitive challenges facing industry.
As William A. Niskanen Jr. of the Council of Economic Advisers told the Joint Economic Committee, there is no way U.S. farmers can be competitive in world markets unless the value of their farm land -- so badly inflated during the past decade -- is lowered. And that means that farmers who overextended themselves face the same pain that the auto industry and other casualties of the 1980s have gone through.
President Reagan, who hasn't done very well in facing up to the nation's economic problems, raised the plight of the farmers in his State of the Union message last night.
"Our farm program costs have quadruped in recent years. Yet I know from visiting farmers, many in great financial distress, that we can help farmers best, not by expanding federal payments, but by making fundamental reforms, keeping interest rates heading down, and knocking down foreign trade barriers to American farm exports," he said.
That is the unpleasant truth. And we will need alot more candor from the administration about how it proposes to respond to this and the other threats to the economy.