Question-and-Answer Session with Farmers in State Center, Iowa

August 2, 1982

Secretary of Agriculture Block. Want to give me your attention here? Can you hear all right back there and at all the tables here? Can you hear?

Very quickly, I'm going to -- I'm not going to spend a lot of time talking. It's my great pleasure to make the introduction that I'm going to make. I'm going to introduce to you your featured guest here today.

I just want to tell you just very quickly that you're going to be hearing from and talking with someone that I've found in a year and a half to be a -- he really thinks he's a farmer-rancher. And I'm not going to quarrel with that. The President has a very warm spot for agriculture, and he has an open mind and promotes and supports the industry. Then the occasions we have talked about the problems we face are unlimited.

And it's just a pleasure for me to have the privilege of introducing the President to you today to talk to him.

Mr. President.

The President. If you're going to stop talking, I've got to stop eating this wonderful homemade ice cream. [Laughter]

Secretary Block. It's my turn now.

The President. No -- maybe we'll have a rule that everybody can talk while they're eating. [Laughter]

Well, I appreciate that and what Jack said, and it is true that in a way, in a sense at least I'm in the countryside. Some years ago, while I was still in the picture business, I started ranching and running grazer cattle. But the main purpose was, I was raising horses for the market and selling.

Now, remember -- you wouldn't think that in that kind of part-time farming while I was doing the other that you could learn anything about the problems of the farm, but I did learn some, because I got all carried away one day and thought, ``Wouldn't it be wonderful if we could put in some chickens and have our own eggs and be able to -- the morning at breakfast, be eating our own eggs.'' And I did. And I figured out that it only cost me about $1.65 an egg -- [laughter] -- to do that.

But I don't know whether -- oh, thank you -- whether any of you heard any of the speech. I've just finished making a speech down there at the -- well, then you know something of the main issues that we spoke about, so I won't make you listen twice to any of those things.

So, maybe far better than us -- than me just trying to talk would be a dialog in which -- there must have been some times when you said, ``If I could say to him -- '' or, ``If I could ask him -- '' [Laughter] Now, there might be some of the things you wouldn't want to repeat here. But there must have been some also that you could. So, here surrounded by the press -- --

Yes.

Dairy Products

Q. Mr. President, you just talked about sending the exports of grain to Russia for another year. Maybe you've heard there's a few surplus dairy products. How about selling all the dairy products to Russia, too?

The President. We have been trying and working with the dairy products, as you know, to dispose of them in a number of ways.

We have been -- there are certain rules and regulations under the law that prevent us from -- even though we -- the government has had to store them, had to buy them and store them to keep the government from going out into competition in the market, because then you'd just increase the same problem that made you buy the surplus in the first place. So, we have to be very selective as to how we do it.

One of the ways has been the disposition we've made to people who could not otherwise have them, who couldn't afford them.

Jack, maybe you know more about it than I do. I don't believe that we could just go out into the export market and sell that way, could we?

Secretary Block. We run into a problem if we take them and put them right into the market, because if it disrupts the world market, these dairy products have to be sold at below the cost to the government, because world prices are below the price that we paid for them. And we would be charged by -- under the GATT rules of trade -- with disrupting the world market and could get into -- get all kinds of trouble for doing it. And we're complaining at the European Community for doing some of those very things, and it just kind of cuts the legs out from under us. So, we'll have to be selective as we dispose of these products.

And what we have said if we can get legislation which will bring this mounting surplus under control, then I think we'll have the credibility by working with other dairy-producing countries to go into the world market and selectively move this product wherever it might be.

I think you are aware we did dispose of some to New Zealand, that went ahead and sold butter and products -- I don't know where, probably some of it to the Soviet Union.

So, we're going to try and work it out. The dairy problem is a very serious problem for us and, I know, for the dairy industry. Government got you into the trouble. You know, it wasn't the dairy farmer. It was the government that did it.

Export Contracts

Q. Mr. President, in your speech you mentioned contract sanctity, and, does that apply to all grain contracts to other people or just to the 6 million tons that -- 6 to 8 million tons that you -- [inaudible] -- the Russians?

The President. What I had in mind mainly was that the embargo that was put on with regard to the Afghanistan conflict has shaken faith in our neighbors throughout the world as to whether we're reliable or not as a supplier. And so, we feel very definitely that this is a problem that we must meet now in these negotiations that are going on, that we restore that faith in us that if we've made a deal or a contract, it'll be a contract, and we'll keep it.

Production of Ethanol

Q. Mr. President, in the interest of national security, and the farm economy, has your administration given more thought to development of the ethanol alcohol industry as a means of helping -- not only help the farm economy but also in the interest of national security?

The President. There are several things that are problems with that. One is the fact that it now develops that as the prices have leveled off, ethanol cannot be produced at a cost that is competitive with gasoline itself. That is one.

The second issue is, counting the very fact of raising the grain and so forth, unless you switch to such things as using garbage and waste to produce the same product, you actually use more energy than you get back in the ethanol that you produce. And both of these have slowed that down quite considerably.

Secretary Block. Let me add, Bob, though, to answer your question, this administration is not going to interfere with the development of ethanol. We have a four-step, gas tax exemption, and that stays in place. That is in place. And if it can economically be produced, the free enterprise system will see it happen. And that's the way it should be.

Q. Thank you.

Q. Just to follow up it, Mr. President. You know the rationale, it takes more energy to produce a gallon of alcohol than you get out of it. It certainly would apply, also, to diesel fuel and to every other refined fuel, if you were to judge it on that basis. So, we often hear that as a criticism of the ethanol alcohol industry. But I think it should also be remembered that the price of refining a gallon of diesel fuel, even kerosene and lower refined products -- the amount of energy used in that refinery system is a great deal more than the energy you get out of that gallon.

Interest Rates

Q. Mr. President, one thing you didn't mention in your speech was interest rates. And John Deere just unveiled their new line of tractors down there. And I don't know how, at present interest rates, we're going to be able to afford to buy -- at present prices and interest rates.

The President. Well, let's not forget or fail to realize -- I think the thing that brought on the recession were interest rates. I think they are the things that are holding it up. We had thought that -- well, let me go back and give you just a little history on this.

In 1980, in the usual way that we've treated recessions before, and then every recession was followed by another one, the money supply was increased at the highest rate it had ever been increased in our history -- 13 percent. And, if you look at it on a chart, it zoomed up there in a peak during that last 6 months of 1980. But with it went 21\1/2\-percent interest rates. And with it also went the second year of double-digit inflation to, when we took office, about 12.4. And we know that the other great problem of a recession had been going on, really, since 1977 -- the decline in employment, increase in unemployment.

Now, when they tried to pull down from that peak -- and this is what we came into -- they had pulled the money supply down way below even their own path that they have, that kind of a track that they have that the money supply should travel on to keep up with the economy. And, for the first 6 or 7 months that we were there, the money supply was way down here. And the result was the recession.

Now, we have brought -- and I'm happy to say, when only a couple of days ago, I had to say 16 percent -- we've brought the interest rates from 21\1/2\ -- they're down to 16 now -- or 15 now. Twice in less than 2 weeks, we've had two drops in the Federal Reserve's discount rate, each of which has been followed -- as you know, this morning there was another half-point drop from that 15\1/2\ to 15 in the prime rate. Our own Treasury notes, 90-day notes -- the last issue out were 10.7. A week before, they had been at 12. And a year ago, they were at 15\1/2\.

And the other day -- I like to get the papers like the Washington Post and turn to the real estate section on the weekend, when they have all the big real estate ads. And I am counting a little bit on competition, also helping with this, because I saw where some of the great housing developments and the condominium developments are trying to sell off. The mortgage rates -- some were boasting they were down to 13 percent. You turned the page, and there were some down there at 10.7 percent, and some of them at 11 percent. Well, pretty soon, they've got to come down and match that competition. I think that we are going to -- not as fast as we'd like -- but we are going to see a decline.

No question but that the business that you're in has been caught worse in the cost-price squeeze than virtually any other business. What happened in the two other major industries -- housing and automobiles -- was, of course, their product is sold on a mortgage basis. People buy their cars paying over a period of time and paying interest. And both of those suffered.

I don't know whether you've learned that, around the country in a number of places, there have been local banks, and they've gotten together, and they have put up sums of money. It started with a bank in Indiana. They put up a sum of money, a set sum. And they advertised that as long as that money lasts, it can be borrowed, in that instance, for automobile purchases only at an interest rate several points below the going rate. And the rush was so immediate -- then a whole group of banks did it in Ohio and around the country. And now it has spread to where there are banks doing the same thing with regard to home mortgages. And I think the signs are all there, that there is that thing that we've been waiting for out there. It isn't going to happen the day after tomorrow. But it is there.

The first time in several years, real income is up 4 percent. Since last January, retail sales are increasing at a 12-percent rate. And, as we've said, the interest rates are doing it.

Inflation -- we had thought inflation alone -- because that's one of the things that brings up interest rates. If you've got to loan money and there's a high inflation rate, you have to get back enough in interest to make up for the value your dollar's losing, and then make your interest on top of it. Well, that 12.4-percent interest rate is running, for the last 6 months, at less than half that. And we think that we've got a handle on it, and it's going to keep going down.

We think if we make the mistake of going back to the things that our opponents would go back to -- the artificial stimulant, the phony inflation of money, the quick fix -- we would see interest rates go back up.

I know I've been talking too long on this question, and there's others that want to ask. But I just have to tell you one thing. When I told you that I understood some of your problems -- I've got a Ford tractor on my ranch that I bought secondhand way back in the fifties. It was a 1953 tractor. And I bought it for $1,200. And it serves the purpose for the kind of farming I'm doing; except that now, on the ranch we have, there are a lot of rocks I'd like to move. And, every once in a while, I moan that I don't have a skiploader on it.

So, Nancy happened to be the dinner partner, one night, of a gentleman who's an official with a tractor company. And she was telling him about this. ``Well,'' he said, ``that's ridiculous. He ought to have the kind of tractor that he needs and wants.'' He said, ``I'm going to send a man, and he'll make you a good deal on that old tractor. Don't you worry.'' And the man came up, and he did.

You know, more than 25 years ago I spent $1,200 for that tractor. And he's willing to give me $4,000 on it in trade. And then all I've got to do is give him $13,000 more -- [laughter] -- and I could have a new tractor. So, we're still using the old tractor.

Grain Storage Facilities

Q. Mr. President, I am tenant farmer. And I was wondering if you couldn't do something now -- we want to seal corn and put it in the reserve. But, now, being a tenant farmer, we are kind of screwed-up there on getting some kind of loan for facilities. And I wonder if there couldn't be something done along that line to help us.

The President. Would you like to -- --

Secretary Block. Yeah, let me help you with that one.

The President. I'm going to let my right-hand man here -- --

Secretary Block. In the first place, you don't own the land that you're on, right? So, you can't get money to build grain storage on it. And what you want is a guaranteed loan or a direct loan from ASC -- CCC loan of some kind. I don't know if there's anything we could do on that that I know of.

I'll check into it, but I would say that you might have to look at private lenders if you can't -- if you could get one of them to go with you. You might have to have some kind of an agreement, but putting your own storage on somebody else's land, or maybe there's some kind of temporary storage, I think you might be able to get that done some way.

Q. I don't know if you know it, but like 47 percent of all the land in Iowa is rented by someone other than the owners. So, that's quite a problem.

Secretary Block. Maybe you could talk the owner into building it. Well, you might. [Laughter] It does happen.

Humane Treatment of Animals

Q. Mr. President, in view of the very fine facilities and practices that the Dee's have here in this operation -- I am a pork producer myself and operate similar practices like this and facilities -- what would your thoughts be in regard to legislation that would restrict this type of facilities and operations like this, such as the animal welfare that we are seeing in existence now?

The President. Well, now, when we were seeing this you mentioned something about that, and I guess it didn't register on me that this was maybe something new as a problem. I knew at the time when you said it that it sounded a little strange to me. I couldn't remember such a thing being a problem for farmers. What is this? Is this new regulations and so forth that are now -- --

Q. I don't think there's any regulations as such, but there is interest for legislation to be adopted sometime in the future. And we're just trying to warn off those types of things that might happen to us as producers. We think we're treating the livestock in a very good, humane -- giving them all the comforts and everything. But there's other people that think that they need the more natural habitats, I guess, and that would be more natural to them. So, this is one of our concerns as a producer, not only as a pork producer but as veal and poultry and other types of operations that have confinement or this sort of thing.

The President. Do you mean those same kind of ``bug-and-bunny'' people that think that the pig would be happier running around in a field and -- --

Q. Are you familiar with the Mottl bill?

The President. No.

Secretary Block. I'd just say that -- I really -- I'm convinced and I know the President -- you know, if this is really a big issue, I mean, if it was a huge issue, we would have really been talking about it. But I just don't see it that way. For producers to make money raising livestock, the livestock must be healthy; they must be well cared for; they must be content; they need to be happy, or they're not going to do well. And, after all, that's all you can ask in terms of humane treatment to livestock. And the good producers all have to do that anyway. It's just -- it's part of the economics of raising livestock. So, in the long run I just don't see it as a big issue.

I know that there may be cases somewhere where animals aren't treated properly. There are. We all know that. But none of us condone that, I mean, as producers. But I think having heavy government regulations or restrictions would not be appropriate. You know, the normal economics are going to make us do a good job.

The President. I want you to know this, just one thing. The reason I asked about regulations is we've set up a task force with George Bush heading it up. I came with one promise to government, among others, and one was to start getting rid of the regulations that were imposing a blizzard of paperwork on everyone in this country. And I'm happy to tell you right now that while it's a long, slow job -- you can't just say, do away with that regulation; got them pretty well entrenched -- but George's task force has done enough that right now we have eliminated 200 million man-hours of labor filling out paperwork, with what he's been able to get rid of so far.

So, we will -- and we have vastly reduced any flow of new regulations. The Federal Register, which lists all the regulations, has 23,000 fewer pages than it did before we got here.

Q. I hate to expound on this -- --

Mr. Dee. We know, Mr. President, you're in a hurry. We appreciate your coming.

The President. I am? [Laughter]

Mr. Dee. Okay.

The President. No, I know I am. I know. I'm sorry.

Q. I would like to add one thing. Last January it was a pleasure to go down and take care of those two buildings. It's a pleasure this afternoon likewise.

The President. Well, thank you very much.

Let's just take that last question there. I know that I have to go. It ain't right, and you've been very kind to me. [Laughter]

Q. Mr. President, this isn't a question. It's a statement on animal rights. There's no regulations as such now, but it's something that's working in the background. We have many, many people in the big cities that are putting money in it by the millions of dollars and are going to start lobbying. And I think it's something to look out for in the future. And I would hope that Mr. Block would stay on it real tight. I'm sure Mr. Grassley will. Thank you.

Q. One comment. You get all the blame for everything, but we're sure happy with $60 hogs, if you want to take a little credit back.

Q. So am I.

The President. Oh, right. You know, with some of those people -- and we will be on guard. And I know that Jack will be watching for it with some of those other people.

Note: The question-and-answer session began at 3:36 p.m. outside the home of Allan and Eric Dee, and their father, Donald Dee, who own and operate the farm the President was visiting. Prior to his remarks, the President toured the farm with the Dee's.

Following his visit to the farm, the President returned to Des Moines and went to the Des Moines Marriott Hotel, where he met with executive officers of the Iowa Farm Bureau. He remained at the hotel overnight.