mistake that we made in 1929. We have permitted the value of our farm production as compared to the level of wages and interest to fall off over 50 percent. As a result of that we have had a terrific loss in national income and covered it up by adding $1,000 billion to the gross debt, Federal, State, public and private, since the end of 1950. In the year 1965 we had an operating loss of over $200 billion and we used $104 billion of debt expansion to cover it up.

Now, in 1965 I published and copyrighted a balance sheet covering specifically the 12 Central Midwestern States. In 1966 and 1967 the departments of government changed their method of computing national income. They transferred part of the interest component of the national income over to corporate profits and to rental income. So in February, taking the 1967 report, I set up a balance sheet using

1948-50 as 100.

Now, I am starting in on my prepared statement.

On the basis of a balance sheet of the economic record of the United States as a whole, Carl H. Wilken, economic analyst, pointed out today that the United States during the past 16 years has been operating at a terrific loss of income as compared to wages and interest as cost factors.

He pointed out further that in spite of the fact that the United States has compiled and published the most complete economic record from 1929 to 1966 of any nation in world history, we have not prepared a balance sheet and are operating in a state of complete economic confusion.

In our confusion an increase of $1,000 billion in the gross debt, Federal, State, local, and private in 1950-66 to offset the operating loss has been hailed as prosperity.

Theoretically, the huge expansion in the debt should have created the income to balance Federal, State, and private budgets. Instead it has brought about the greatest dislocation between the income of private enterprise, wages, and capital costs in history.

In the past 15 years, 1951-65, as a result of theories we have underpaid agriculture the source of newly earned income for 70 million people living in rural areas a relative total of $370.5 billion. We lost approximately seven times this amount in the natural turnover of this new income into national income.

To offset this loss we injected $884 billion of gross debt, of which approximately $451 billion was excessive debt as compared to actual profits and savings.

This debt expansion failed to restore the lost markets in rural areas with the result that in the 15-year period we lacked $627 billion of national income to balance with the increases in wages and capital

costs.

Of this, $597 billion was absorbed by private enterprise; the working mechanism for production and distribution, in terms of shortages of income for agriculture, small business and corporate profit after taxes. The shortages for the 15-year period were as follows: Shortage of net farm income totaled $222 billion. Shortage of income for small business totaled $162 billion and in terms of corporate profits after taxes $213 billion.

The proof that corporations did not earn the income for expansion is revealed in the corporate debt expansion of $365 billion (gross debt) in the 15 years 1951-65.

To illustrate the exploitation of agriculture through theories rather than the use of facts, the record reveals that in 1946 the net farm income was $15 billion out of a national income of $182 billion while in 1966, hailed as a year of great prosperity, it was $16.3 billion out of a national income of $609.7 billion. In other words, after 20 years in which the record reveals an increase of $427.7 billion, farm operators were receiving only $1.3 billion of the increase that has taken place. At the present time we are involved in a great guessing game of what is going to happen in 1967. Now, this was written in February. With hogs and cattle selling about $5 per hundred weight below last year's level there is every indication that farm income will be reduced. In 1966 we added approximately $115 billion to the gross debt to offset the underpayment to agriculture. Unless we can equal that in 1967, we will not be able to sell enough to offset the loss of markets in rural areas to earn the income to balance with further increases in wages and capital costs.

The $64 question is why doesn't Congress demand that a balance sheet be prepared and used as a guide for Congress in enacting sound legislation for a solvent economy? Without a balance sheet we will continue to embezzle the profits of future generations.

That is exactly what this debt means. This $1,000 billion is the spending of $1,000 billion of future profits that future generations will have to service and pay back or will have to repudiate.

One of the most confused theories is the tight money policy often discussed in news items. How could we have added $1,000 billion to the gross debt or mortgage against future income in 16 years with a tight money policy?

Sumed up in 1948-50 wages and interest made up 64.7 percent of the national income. This can be compared with 64.5 percent in 1929 prior to the economic collapse.

In 1966 wages and interest made up 84 percent of the increase in national income over 1965 national income thus leaving only 16 percent of the increase for farm operators, small business, corporate profits after taxes, and rental income. Stated bluntly, we are liqui dating our system of private enterprise with economic theory.

Before going into the details of the balance sheet I would like to have you turn over to the next page, exhibit 1.

The following tabulations illustrate approximately the income balance of key segments in our economy from 1929 to the average in 1948-50 as 100 in computing the balance sheet. Also the movement of income for the same segments from 1948-50 as an average in the single year 1965 as published in the President's Economic Report in January 1966.

The national income from 1929 to 1948-50 increased 162 percent. The sum of wage and interest components increased 164 percent. 1 The income of four segments other than wages and interest, 160 percent.

1 Net farm income, small business income, rentals, and corporate profits before taxes.

Small business income including self-employed increased 162 per

cent.

Corporate profit after taxes increased 156 percent.

Note income of the State of Iowa increased 165 percent, one of our leading farm States.

Income of the State of Minnesota increased 164 percent.

Now, this illustrates how the 90 percent price support not only protected the income of agriculture but protected the income of the United States and all the segments within it. Following that we have permitted the farm price to move down.

INCOME MOVEMENT FROM 1948-50 TO 1965

The national income from 1948 to 1950 increased 143.6 percent.
The sum of wages and interest increased 177.3 percent.
The income of four other segments increased 83 percent.
Small business income increased 74 percent.

Corporate profit after taxes increased 102 percent.
Income of the State of Iowa increased 95 percent.

Income of the State of Minnesota increased 133 percent.

SUMMATION

In 1965 we were short approximately $76 billion of national income to balance with the increase in wages and interest from 1948 to 1950 average to 1965. This shortage was absorbed by private enterprise in terms of net farm income, small business income, rentals, and corporate profits.

The State of Iowa was short $3.1 billion to balance with 1965 wage and interest.

The State of Minnesota was short $1.7 billion.

These shortages could not have resulted from a lack of payrolls and interest. They were directly due to an underpayment for farm production of approximately $50 billion in terms of gross farm income, the source of income for rural areas.

The loss of rural income translated into a shortage of income for private enterprise due to the loss of markets in rural areas and in turn into a shortage of national income of approximately $76 billion in the year 1965.

In passing, Mr. Chairman, you are from the State of New York, and if you were to set up a balance sheet of the State income for 194850, the average in that period, and compare it to 1965 with the increase in wages and interest, you would find that your State was short $14 billion in the year 1965.

Now, the next page, after preparing a balance sheet I tried to get it before other committees and I addressed a letter to Senator Miller of Iowa. Senator Miller is from Sioux City where I used to live and where I carried on my studies from 1937 to 1950 under the name of the Raw Materials National Council of Sioux City, Iowa. The letter says:

Dear Jack: Early in April I sent you a copy of a letter and my balance sheet covering the period 1951-1965 as compared to 1948-1950 as 100. I also mailed copies of my letter to Senator Proxmire, to Senator Mundt, and Senator McGovern.

82-388-67-49

I have mailed out 200 letters to the heads of leading corporations to point up the shortage of $627 billion of national income in the 15-year period, a shortage which was absorbed by private enterprise.

With approximately one-third of the national income going to Federal, State and local taxes, this means that tax revenues were short over $200 billion to balance public budgets.

If you will check the record you will find that in 1946 the net farm income as a component of national income was $15 billion out of a national income of $182 billion. In 1966 deducting government payments it was less than $14 billion out of a national income of $610 billion.

Mr. RESNICK. Mr. Wilken, if you would like to put this all into the record, we may do so. In other words, I presume you feel that the shortage of income in the rural areas is the cause of rural poverty today. Is this your point?

Mr. WILKEN. Yes. The ratio that you have had since 1921, for every 1 percent that agriculture was underpaid below parity, or the cost of production, in comparison to the average cost of production in the United States, we have lost 1 percent of our national income.

Mr. RESNICK. I think we are all in agreement with that, that the rural farmer has been shortchanged. The question is, what do you think could be done to reverse that situation?

Mr. WILKEN. Well, unless you restore the price support, the price of farm products to balance with wages and interest, you are going to lose $7 of national income from every dollar of underpayment that takes place. Now, at the present time because of our many Government programs, the Federal Government is taking about 20 percent of the national income or a little more than that. So for every dollar that you underpay agriculture you are going to lose $1.40 of Federal tax revenue to balance the budget.

Mr. RESNICK. I think we are all aware of that. I think we all know the problem. The question is, what is the solution? We all know that the farmer is not getting paid fairly.

Mr. WILKEN. All right. Go back and examine the record of President Kennedy's report. The 90-percent price-support program worked effectively and efficiently for 10 years, maintained economic balance, and we had the answer to our problem in its operation.

Mr. RESNICK. Nobody was happy with that, the farmers, the Government, the consumer.

Mr. WILKEN. But no one set up a balance sheet so the public was unaware of it.

Mr. RESNICK. I yield to Mr. Zwach on this. As I say, I agree that the farmer needs more money. We have to get more money to rural America. Unfortunately, we have not found the way.

Mr. Zwach?

Mr. ZWACH. I think we should read his material into the record. which I think you have agreed to.

Mr. RESNICK. Yes.

Mr. ZWACH. I have read this and I really have no further questions. I have studied his figures for many years and I think he has a very fine compilation of underpayments over a period of years to rural Amèrica. Mr. RESNICK. I think we all agree with that.

Mr. ZWACH. The question is, how are we going to be able to sell it to the American people. This is the real problem. I think that basically he thinks that the 90-percent support program is a vital factor.

Mr. WILKEN. If the 90 percent does not bring about 100 percent of parity then you have to bring about 100 percent of parity because you are going to lose $7 of national income for every dollar of underpayment. Before I close, I would like to have you turn over to the last page of this letter to Senator Miller.

If you will recall, early last year there was quite a furor about the farm prices causing inflation. They had a hearing in regard to bread prices. I testified before that committee. Now, here is the proof of what happens:

Finally, the proof can be found in these facts as to the underpayment for farm products. On page 224 of the President's 1967 report you will find a table of consumer expenditures. You will note that expenditures of the consumer for food excluding alcoholic beverages in 1947 totaled $43.2 billion out of a total for $169.8 billion of disposable income or approximately 25.5 percent.

In 1966 consumer expenditures for food and beverage excluding alcohol totaled $91.3 billion out of a disposable income of $505 billion or only 18 percent. Had the consumer paid a relative price for food in 1966 the expenditures should have been 25.5 percent of $505 billion or $128.7 billion. Subtracting from this the actual of $91.3 billion the underpayment to agriculture in terms of gross farm income was $37.4 billion in the single year 1966.

If to this are added the use of farm products for alcoholic beverages, textiles, and other fabrics, the underpayment in gross farm income in 1966 was over $50 billion. In other words, gross farm income in 1966 was only about 50 percent of parity for farm production, the source of income for farm operators and rural communities.

Mr. RESNICK. Thank you very much, Mr. Wilken. You have outlined the problem very well. The next question is, what is the solution? Mr. WILKEN. I would like to add one thing. For some reason or other, this has escaped the notice of Congress. This rapid increase in underpayment to agriculture totaled $370.5 billion in the 15-year period and came about by an attack on farm prices in two ways. On the one hand, with steadily reducing levels of the percentage of support levels and, second, in the 1949 Farm Act the experts in Government were permitted to set up a modernized parity formula, as they called it. As a result of that, they reduced the parity formula 27 percent with a lead pencil. For example, in the case of corn in 1965, in a letter that I put in my balance sheet that I published and copyrighted in 1965, I have a letter from Dr. Schnittker, Assistant Secretary of Agriculture, in which he admitted that they had reduced the parity for corn from $2.04 to $1.55, and your present $1.60 price comparison for corn as parity is only 75 percent of that.

Mr. RESNICK. As I say, we all know the problems. The question is, what is the solution?

I want to thank you for appearing. I am sorry that I must run, too. We are running a little late. The hearing will be adjourned until 1:30 tomorrow afternoon.

(Whereupon, at 4:41 p.m., the subcommittee recessed, to reconvene at 1:30 p.m., Tuesday, July 11, 1967.)