ECONOMIC

demand and supply at support prices, there was continued resort to productioncontrol schemes. Measures taken to restrict production have included:acreage allotments and marketing quotas for the major crops; Governmentpurchase and slaughter of sows and baby pigs in the 1930s; paymentsto farmers to turn cropland to less productive use under croplandadjustment, conservation reserve and cropland conversion programs; and,more recently, requirements to "set aside" cropland acres as a prerequisiteto participation in price support programs, supplemented by diversion paymentsto induce further reduction in crop acreage.The typical result of these programs was a reduction in food output, orat least in domestic consumption, and inefficiency in the allocation ofresources. Establishment of domestic prices above world market levels requiredmeasures inconsistent with our overall trade liberalization objectives.Food prices were more stable, but at the cost of higher average pricesthan if prices had been unregulated. Apart from efficiency losses, costs tothe nonfarm public included many billions of dollars in direct paymentsto farmers. In 1968-70, annual budget outlays for farm programs averaged$5 billion, and Government payments amounted to over one-fourth of totalnet farm income. Over the years the program benefits were largelycapitalized into land values, so that they accrued primarily to owners offarm real estate.Reductions in some crop support prices in the mid-1960s began a reorientationof farm policy toward unregulated market prices, and since 1972increases in world market demand have permitted an almost complete abandonmentof restrictive features in U.S. farm programs for major crops. Reformswhich only a few years ago were considered a practical impossibilityhave now been put into effect. At the same time, extreme price increasesfollowing the sharp reduction in U.S. and world carryover stocks of grainsin 1972—73 have renewed interest in measures to stabilize prices. This concernfor stability, together with a desire for farm income protection, couldopen the door to a return to past restrictive approaches.THE THREAT TO MARKET-ORIENTED POLICIESFarm programs differ from other regulatory activities in that regulatedprices and means of controlling production are more often specified inlegislation. Consequently the features of farm programs tend to be a moredirect political issue, and more subject to sudden change in approach, than isthe case in the regulation of most other industries. Farm policy will be consideredby the Congress in 1977 because much of the legislation authorizingcurrent programs will expire, including the Agriculture and ConsumerProtection Act of 1973, which covers the major crops. The machinery setup under the 1973 act allows the separation of farm income supportfrom price stabilization measures to a greater degree than waspossible under preceding programs. Farm income support can be providedby means of deficiency payments, which are based on the difference between159