Bobby and Lois Stephenson operate a family farm. He tends their 60 acres of tobacco. She takes care of the books. They live on the edge of anxiety.
Like tobacco farmers throughout the Southeast, the Stephensons worry that Congress will abolish the federal program that ensures that they can make a living from their crop. The government regulates tobacco farming by restricting how much can be grown and by guaranteeing farmers a base price for the leaf.
If the tobacco program would end, said Mrs. Stephenson, "We'd stop farming. That's our only security, and that's very little." Her husband, sounding less certain that they would quit farming, asserted, "We'd be at the mercy of the tobacco companies."
Should Congress worry about the Stephensons, who, after all, grow a weed to which the government attributes more than 300,000 deaths annually? Or, to put the question as it usually is posed in Congress, isn't it a contradiction for the federal government to aid tobacco farmers while simultaneously warning of the dangers of smoking cigarettes?
The question is a hardy perennial of Washington politics, as hardy as the pale green tobacco plants that are shooting out of the gray sandy soil of eastern North Carolina. In fact, the House agriculture committee is scheduled to consider two tobacco price support bills this week. But the answer that appears self- evident from afar does not seem quite so clear up close.
Even Joseph A. Califano Jr., the former secretary of Health, Education and Welfare, came to understand that it is not unreasonable for the federal government both to encourage people to avoid smoking and to subsidize tobacco farmers.
Califano called cigareete smoking "public health enemy number one." But in his book, "Governing America," he wrote: "As I reflected on the cigarette habit, I realized that not one person would quit or not start smoking if price supports didn't exist. The subsidy had nothing to do with any individual decision to smoke; if anything, it made cigarette smoking more expensive."
And yet, on the ground that the government shouldn't give support to a poison, members of Congress prepare legislation to do away with the program, which is under great strain of its own, due in part to the high price of American tobacco. The debate has been joined again as Rep. Charlie Rose (D- N.C.) and Sen. Jesse Helms (R-N.C.) have agreed to seek legislation to cure the program's ills. Sen. Jake Garn (R-Utah), sponsor of legislation to abolish tobacco subsidies, has called the government's dual policy an "offensive paradox."
But if it is a paradox, is it necessarily unacceptable? To answer that question requires posing another question: Is the United States prepared to make the growing of tobacco and the manufacturing and smoking of cigarettes illegal? No one is Congress has proposed such a ban. The country has no stomach for another Prohibition.
Tobacco, therefore, assuredly will remain a legal commodity. Its growing will continue. So long as it is legal, the cigarette manufacturers doubtless will obtain tobacco, one way or another. In deciding the future of the tobacco program, then, the issue before Congress is not stopping smoking, but whether to set in motion a change in the system for growing tobacco.
The system under which tobacco farmers like the Stephensons operate originated in the Depression as part of the New Deal's Agricultural Adjustment Acts. Until then, farmers had difficulty adjusting supply to demand, regularly overproducing, and prices dropped precipitously from 1928 to 1932. Buying of tobacco was dominated at that time by three American cigarette makers and two foreign companies, the dearth of competition also working to the farmer's disadvantage.
Bobby Stephenson's father, Wade Hampton Stephenson -- named for the Confederate cavalry commander under whom his grandfather fought -- recalled that in the 1930s farmers were losing their land and "all of a sudden were becoming tenant farmers." The Stephensons, father and son, own farm land near Smithfield in Johnston County, about 25 miles southeast of Raleigh.
"We were living with no plumbing in the house, no electricity, no roads, no automobile," said the elder Stephenson. He marks the creation of the tobacco program and the Rural Electrification Authority as the start of his personal turnaround. "We began to have a little money left to buy a refrigerator and a washing machine," he said. "The lights began to come on."
As a consequence of the stability and the protection afforded by the tobacco program, said Wade Stephenson, he built a modern house and his four children all went to college. "We couldn't maintain our church and our community without it," he said.
Although the pride of tobacco farmers wouldn't allow them to put it in these terms, federal price supports have in effect served as a social program. It has preserved a rural way of life, being a source of stability not only for farmers but also for the bankers and merchants with whom they deal. The tobacco program has at least slowed the decline of family farms.
It is impossible to say that any single tobacco farmer is "typical." Tobacco is produced on 203,000 farms, whose operators range across the spectrum in age, income and education. Nevertheless, Bobby and Lois Stephenson exemplify the modern tobacco farmer.
They own a 123-acre farm, on which they live in a restored 1910-vintage farmhouse. Two of their four children, all daughters, have already gone off to college. They grow corn, soybean and wheat, mostly to justify their investment in land and equipment and to provide some crop rotation. But the Stephensons clearly consider themselves dependent on growing tobacco.
Last year, for example, they got a yield of 100 bushels per acre of corn, which sold at $2.10 a bushel, for a gross income of $210 per acre. They got 2,300 pounds of tobacco per acre, which sold at an average of $1.80 per pound, for a gross income of $4,100 per acre.
Stephenson holds a 10-acre allotment, which is the government-granted license to grow tobacco. It is through allotments that the tobacco program controls production. The law, however, permits the leasing of allotments. Through such leases from other allotment-holders, Stephenson acquires the right to grow an additional 50 acres. Stephenson grows more tobacco than the average farmer, but his operation illustrates two significant developments.
One is the trend, spurred by mechanization, toward larger farm units. The average flue-cured tobacco farm was 5 acres in 1964, but had grown to 13.8 acres by 1979.
The other development is the dramatic increase in the incidence and cost of leasing. The federal government has issued 545,000 allotments or quotas, but substantially less than half of allotment-holders actually grow tobacco themselves. Rather, they earn money by leasing their allotments to farmers.
Through land sales over the last 50 years, allotments have come to be held by such non- farming entities as banks, Duke University, Carolina Power and Light Company and some local governments. Allotments are also held by elderly farmers and widows, who consider earnings from leases part of their retirement income.
Stephenson paid $50,000 last year for the 50 acres of allotments he rented. Among the eight farms from which he rented allotments, four are owned by, as he calls them, "widow women."
After Stephenson and other farmers harvest their tobacco, they take it to a warehouse where it is auctioned to buyers for domestic cigarette manufacturers and exporters. If no buyer bids more than a penny per pound above the federal support price, the tobacco is bought by a farmers cooperative -- in North Carolina, it's the Flue-Cured Tobacco Cooperative Stabilization Corp. -- with money borrowed from the federal government. Stabilization, then, attemptsy to resell the tobacco and pays the government back when it does so.
Since the inception of the tobacco program, the U.S. Commodity Credit Corp., has made $5 billion in loans to tobacco farmer cooperatives. The U.S. Department of Agriculture reported in 1982 that the CCC had losses of $57 million in unpaid principal and $152.8 million in unpaid interest. Except for annual operating expenses, these loses form the bulk of the federal subsidy. Coming over five decades, the average loss of $4 million a year by the government has been relatively modest in an age of multibillion-dollar budgets.
However, the tobacco program is showing its age. It could collapse unless reformed.
The federal price support has been indexed to inflation and risen steadily so that it now averages about $1.75 per pound. American tobacco is being priced out of the world market. Hugh C. Kiger, executive vice president of the Leaf Tobacco Exporters Association, says that the U.S. share of world exports of flue- cured tobacco fell from 60 percent in 1966 to 28 percent in 1981. Now, 31 percent of the tobacco in American-made cigarettes was grown overseas, whereas it was only 14 percent 10 years ago.
Not only has competition with foreign- grown tobacco stiffened, but the domestic sales of cigarettes has flattened. Sales dropped from 640 billion cigarettes in 1981 to 634 billion in 1982. In response to depressed demand, the U.S. Department of Agriculture has steadily decreased quotas in recent years.
Despite reductions in marketing quotas, the Stabilization Corp. has a glut of unsold tobacco. Last year, nearly one-fourth of the flue-cured tobacco grown was not bought by companies, and the cooperative took in 260 million pounds under government loan. Now, Stabilization holds 660 million pounds of unsold tobacco.
In an effort at reform last hear, Rose and Helms won enactment of legislation that required farmers to pay a fee so that the price support system would be operated at "no net cost" to the taxpayer. The legislation also required nonfarming corporations to sell their allotments to farmers.
In a second effort to coax the program back to sound financial health, Rose and Helms have reached a general consensus on new legislation to impose a freeze on tobacco price supports and to place restraints on leasing of allotments.
Some congressmen, such as Rep. Thomas Petri (R-Wis.), point to such developments as the widespread leasing of allotments at high rates as reasons to abolish it. And, indeed, some tobacco farmers, disenchanted over the high lease rates, have urged a return to a free- market system. But the fundamental question remains, should Congress worry about the Stephensons?
Charles R. Pugh, agriculture extension economist at North Carolina State University, has done extensive analysis of the consequences of eliminating the federal tobacco program. His findings are that:
* The price of tobacco would drop.
* Production of tobacco would increase.
* Land whose value has been enhanced by a tobacco allotment would drop in value.
* A consolidation of farm ownership would ensue.
* There would be some farm foreclosures.
* American tobacco exports would go up.
* Some geographical shifts in the location of tobacco program would occur.
* And because tobacco is a relatively small part of the price of a cigarette, consumer prices "would not be greatly affected."
Without the program, says Frank Bordeaux, economist for the North Carolina Department of Agriculture, "The farmer would be re-exposed to the very conditions he's been trying to get away from all these years. . . . Many of these people aren't as autonomous as they think they are if they didn't have the program."
The major cigarette companies, of course, have supported the program. It gives them a reliable supply of high-quality domestic tobacco. And by supporting farmers, the cigarette companies preserve a broad political base for their campaign against antismoking efforts.
Although the tobacco lobby is often viewed as a unified juggernaut, the farmers and the companies do not share equal financial power. Farmers still must sell to a relatively small number of buyers. The major cigarette manufacturers could cope much better with an elimination of the federal tobacco program than could the average farmer.
After all, American tobacco companies have diversified and several of them exist in the realm of multinational conglomerates. R. J. Reynolds, for example, also owns Del Monte Corp., Kentucky Fried Chicken and Hueblein Inc., a liquor distributor. Philip Morris Inc. not only makes money from tobacco but also from Miller Brewing Co. and Seven-Up Co. Further, American companies have assisted foreign tobacco growers. R. J. Reynolds has 90 paid agricultural extension agents in Brazil, where it also employs 5,000 Brazilians to farm tobacco.
If the tobacco program were eliminated, the current system for selling on the warehouse floor could be maintained without government involvement, but this is not what agricultural interests in tobacco-growing territory think would happen. Mostly, farmers believe the companies would opt for a contract system -- an arrangement under which the company would pay a certain amount to a farmer for growing a certain quantity and quality of tobacco.
"You'd be a tenant on your own farm and can't move," said Bobby Stephenson.
Another possibility would be for cigarette manufacturers to become tobacco-farm owners, assign farm managers and grow their own. An agricultural extension agent in eastern North Carolina reported being approached for assistance recently by a consultant for a cigarette company seeking to study what it would take to run a 1,000-acre tobacco farm. The cigarette manufacturers have experience from their operations in foreign countries to draw upon.
An abrupt end to the federal program would inevitably mean considerable economic dislocation in the tobacco-growing counties in North Carolina, Kentucky and elsewhere in the southeast. But are there other ways for farmers, as well as farm suppliers, to make a living?
In fact, some agricultural diversification has already taken place. Tobacco now represents only about one-third of the farm receipts in North Carolina, down from 47 percent in 1955. Also, state government aggressively has sought to recruit new industry.
It is going to take more time, however, for North Carolina and other states to achieve the economic diversification to ensure a sound living for farmers and other rural residents. Rep. Henry Reuss (D-Wis.) has proposed that the federal government provide financial assistance for weaning tobacco farmers away from their crop in much the same way the United States has sought to cut overseas production of heroin.
Although Reuss' proposal hasn't been received favorably in tobaccoland, economic diversification remains one of the chief challenges facing North Carolina and other Southeastern states. And retaining the tobacco program would give these states the time needed to develop economic alternatives to prepare for the potential decline in tobacco consumption. Simply to abolish the tobacco program would be to ask Southeastern states to go through a cold-turkey withdrawal from their economic, cultural and historic addiction to tobacco.
However contradictory the government's policies toward tobacco may seem, a case can be made for the duality. Surely a government with a mandate to protect Americans' health cannot ignore the compelling evidence that cigarette smoking contributes to severe lung and heart disease. But to eliminate government assistance to farmers who grow tobacco would hurt the Bobby and Lois Stephensons of the Southeast economically without necessarily improving anyone's health.
Ferrel Gillory is chief editorial writer of the Raleigh News and Observer.