Agricultural Adjustment Act

Template:Short description Template:About Template:Infobox U.S. legislation The Agricultural Adjustment Act (AAA) was a United States federal law of the New Deal era designed to boost agricultural prices by reducing surpluses. The government bought livestock for slaughter and paid farmers subsidies not to plant on part of their land. The money for these subsidies was generated through an exclusive tax on companies that processed farm products. The Act created a new agency, the Agricultural Adjustment Administration, also called "AAA" (1933–1942), an agency of the U.S. Department of Agriculture, to oversee the distribution of the subsidies.<ref>Agricultural Adjustment Act, Template:USPL, Template:USStat, enacted May 12, 1933.</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref name="Hurt2002, p69">Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 69.</ref> The Agriculture Marketing Act, which established the Federal Farm Board in 1929, was seen as an important precursor to this act.<ref>Harris Gaylord Warren, Herbert Hoover and the Great Depression (New York: Oxford University Press, 1969), p. 175.</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> The AAA, along with other New Deal programs, represented the federal government's first substantial effort to address economic welfare in the United States.<ref>Gates, Staci L. 2006. "Agricultural Adjustment Act of 1933." Federalism in American: An Encyclopedia.</ref>

BackgroundEdit

When President Franklin D. Roosevelt took office in March 1933, the United States was in the midst of the Great Depression.<ref name="Hurtful, P">Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 67.</ref> "Farmers faced the most severe economic situation and lowest agricultural prices since the 1890s."<ref name="Hurtful, P" /> "Overproduction and a shrinking international market had driven down agricultural prices."<ref name="Hurtful, p68">Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 68.</ref> Soon after his inauguration, Roosevelt called the Hundred Days Congress into session to address the crumbling economy.<ref name="Hurtful, p68" /> From this Congress came the Agricultural Adjustment Administration, to replace the Federal Farm Board. The Roosevelt Administration was tasked with decreasing agricultural surpluses.<ref name="Hurtful, p68" /> Wheat, cotton, field corn, hogs, rice, tobacco, and milk and its products were designated as basic commodities in the original legislation. Subsequent amendments in 1934 and 1935 expanded the list of basic commodities to include rye, flax, barley, grain sorghum, cattle, peanuts, sugar beets, sugar cane, and potatoes.<ref name="Rasmussen, p2" /> The administration targeted these commodities for the following reasons:

Changes in the prices of these commodities had a strong effect on the prices of other important commodities.
These commodities were already running a surplus at the time.
These items each required some amount of processing before they could be consumed by humans.<ref name="Hurt2002, p69"/>

Goals and implementationsEdit

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File:20111110-OC-AMW-0033 - Flickr - USDAgov.jpg

A Roosevelt County, New Mexico, farmer and a County Agricultural Conservation Committee representative review the provisions of the AAA farm program to determine how it can best be applied on that particular acreage in 1934.

"The goal of the Agricultural Adjustment Act, restoring farm purchasing power of agricultural commodities or the fair exchange value of a commodity based upon price relative to the prewar 1909–14 level, was to be accomplished through a number of methods. These included the authorization by the Secretary of Agriculture (1) to secure voluntary reduction of the acreage in basic crops through agreements with producers and use of direct payments for participation in acreage control programs; (2) to regulate marketing through voluntary agreements with processors, associations or producers, and other handlers of agricultural commodities or products; (3) to license processors, association, and others handling agricultural commodities to eliminate unfair practices or charges; (4) to determine the necessity for and the rate or processing taxes; and (5) to use the proceeds of taxes and appropriate funds for the cost of adjustment operations, for the expansion of markets, and for the removal or agricultural surpluses."<ref name="Rasmussen, p2" />

"Congress declared its intent, at the same time, to protect the consumers interest. This was to be done by readjusting farm production at a level that would not increase the percentage of consumers' retail expenditures above the percentage returned to the farmer in the prewar base period."<ref name="Rasmussen, p2" />

The juxtaposition of huge agricultural surpluses and the many deaths due to insufficient food shocked many, as well as some of the administrative decisions that happened under the Agricultural Adjustment Act.<ref name="Poppendieck, Janet 1986">Template:Cite book</ref> For example, in an effort to reduce agricultural surpluses, the government paid farmers to reduce crop production<ref>Template:Cite book</ref> and to sell pregnant sows as well as young pigs.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> Oranges were being soaked with kerosene to prevent their consumption and corn was being burned as fuel because it was so cheap.<ref name="Poppendieck, Janet 1986"/> There were many people, however, as well as livestock in different places starving to death.<ref name="Poppendieck, Janet 1986"/> Farmers slaughtered livestock because feed prices were rising, and they could not afford to feed their own animals.<ref name="Poppendieck, Janet 1986"/> Under the Agricultural Adjustment Act, "plowing under" of pigs was also common to prevent them reaching a reproductive age, as well as donating pigs to the Red Cross.<ref name="Poppendieck, Janet 1986"/>

In 1935, the income generated by farms was 50 percent higher than it was in 1932, which was partly due to farm programs such as the AAA.<ref name="Rasmussen, p4">Rasmussen, Wayne D., Gladys L. Baker, and James S. Ward, "A Short History of Agricultural Adjustment, 1933-75." Economic Research Service, United States Department of Agriculture, Agriculture Information Bulletin No. 391 (March 1976), pg. 4.</ref>

The Agricultural Adjustment Act affected around 99% of farmers in this time period.Template:Citation needed

Tenant farmingEdit

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Barn on tenant's farm in Walker County, Alabama, 1937

Tenant farming characterized the cotton and tobacco production in the post-Civil War South. As the agricultural economy plummeted in the early 1930s, all farmers were badly hurt but the tenant farmers and sharecroppers experienced the worst of it.<ref>Template:Cite book</ref>

To accomplish its goal of parity (raising crop prices to where they were in the golden years of 1909–1914), the Act reduced crop production.<ref>Template:Cite book</ref> The Act accomplished this by offering landowners acreage reduction contracts, by which they agreed not to grow cotton on a portion of their land. By law, they were required to pay the tenant farmers and sharecroppers on their land a portion of the money; but after Southern Democrats in Congress complained, the Secretary of Agriculture surrendered and reinterpreted section 7 to no longer send checks to sharecroppers directly, hurting the tenants. The farm wage workers who worked directly for the landowner suffered the greatest unemployment as a result of the Act. There are few people gullible enough to believe that the acreage devoted to cotton can be reduced one-third without an accompanying decrease in the laborers engaged in its production.<ref>Fred C. Frey and T. Lynn Smith, "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 at p 489 online</ref> Researchers concluded that the statistics after the Act took effect "indicate a consistent and widespread tendency for cotton croppers and, to a considerable extent, tenants to decrease in numbers between 1930 and 1935. The decreases among Negroes were consistently greater than those among whites." Another consequence was that the historic high levels of mobility from year to year declined sharply, as tenants and croppers tended to stay longer with the same landowner.<ref name="Frey, RuralSociology">Fred C. Frey and T. Lynn Smith, "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 at pp. 501–3 online</ref>

According to researchers Frey and Smith, "To the extent that the AAA control-program has been responsible for the increased price [of cotton], we conclude that it has increased the amount of goods and services consumed by the cotton tenants and croppers area." Furthermore, the landowners typically let the tenants and croppers use the land taken out of cotton production for their own personal use in growing food and feed crops, which further increased their standard of living. Another consequence was that the historic high levels of turnover from year to year declined sharply, as tenants and croppers tend to stay with the same landowner. These researchers concluded, "As a rule, planters seem to prefer Negroes to whites as tenants and croppers."<ref name="Frey, RuralSociology"/>

However, according to researcher Harold C. Hoffsommer, many landlords were concerned that aid given directly to tenant farmers would have a "demoralizing effect." An article appearing in the St. Louis Dispatch in 1935, quoted Hoffsommer's survey conducted for the Federal Emergency Relief Administration.

Tenant demoralization from relief had either one or both of two meanings to the landlord. In the first place, it might have been a fear that the tenant would escape from under his influence. It is probably not too much to say that the cropper system can only be maintained by the subordination of the tenant group. If the cropper were to become self-directing and take over his own affairs, the system would necessarily crumble. Hence anything that disrupts dependence is demoralizing. In the second place, the landlords were influenced by the belief that when members of any group are given privileges to which they are unaccustomed, they are likely in their inexperience to abuse them for a time. There can be no question that a considerable number of the sharecroppers reacted in this fashion, when under the Civil Works Administration, for example, they received more cash in a single week than they had been accustomed to receiving in an entire year. In their inexperience the money was spent foolishly and from this standpoint the outcome was demoralizing.<ref>Template:Cite news</ref>Template:Failed verification

Delta and Providence Cooperative Farms in Mississippi and the Southern Tenant Farmers Union were organized in the 1930s principally as a response to the hardships imposed on sharecroppers and tenant farmers.<ref>Smith, Fred C. (2004). "Cooperative Farming in Mississippi." Template:Webarchive Mississippi Historical Society.</ref>

Although the Act stimulated American agriculture, it was not without its faults. For example, it disproportionately benefited large farmers and food processors, with lesser benefits to small farmers and sharecroppers. In his criticisms of the Act, Henry Wallace's assistant Paul Appleby described it as "an organization whose function had to do with the more successful farmers by and large."<ref>Template:Cite book</ref><ref>Daniel, 1985; Page 105</ref> With the spread of cotton-picking machinery after 1945, there was an exodus of small farmers and croppers to the city.

Thomas AmendmentEdit

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Senator Elmer Thomas (left) with Claude M. Hurst and John Collier, members of the Senate Indian Affairs Committee, and unassociated (directly) with the Thomas Amendment.

Attached as Title III to the Act, the Thomas Amendment became the 'third horse' in the New Deal's farm relief bill. Drafted by Senator Elmer Thomas of Oklahoma, the amendment blended populist easy-money views with the theories of the New Economics. Thomas wanted a stabilized "honest dollar," one that would be fair to debtor and creditor alike.<ref name="Webb, RuralOklahoma">David Webb, "The Thomas Amendment: A Rural Oklahoma Response to the Great Depression," in Rural Oklahoma, ed. Donald E. Green (Oklahoma City: Oklahoma Historical Society Template:Webarchive, 1977).</ref>

The Amendment said that whenever the President desired currency expansion, he must first authorize the Federal Open Market Committee of the Federal Reserve to purchase up to $3 billion of federal obligations. Should open market operations prove insufficient, the President had several options. He could have the U.S. Treasury issue up to $3 billion in greenbacks, reduce the gold content of the dollar by as much as 50 percent, or accept 100 million dollars in silver at a price not to exceed fifty cents per ounce in payment of World War I debts owed by European nations.<ref name="Webb, RuralOklahoma"/>

The Thomas Amendment was used sparingly. The treasury received limited amounts of silver in payment for war debts from World War I.<ref name="Webb, RuralOklahoma"/> On 21 December 1933, Roosevelt ratified the London Agreement on Silver (adopted at the World Economic and Monetary Conference in London on 20 July 1933).<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> At the same time, Roosevelt issued Proclamation 2067, ordering the United States mints to buy the entire domestic production of newly mined silver at 64.5¢ per ounce.<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> "Roosevelt's most dramatic use of the Thomas amendment"<ref name="Webb, RuralOklahoma"/> came on 31 January 1934, when he decreased the gold content of the dollar to 15 5/21 grains (0.98741 grams) .900 fine gold, or 59.06 per cent of the previous fixed content (25 8/10 grains, or 1.6718 grams).<ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref><ref>{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> "However, wholesale prices still continued to climb. Possibly the most significant expansion brought on by the Thomas Amendment may have been the growth of governmental power over monetary policy.<ref name="Webb, RuralOklahoma"/>

The impact of this amendment was to reduce the amount of silver that was being held by private citizens (presumably as a hedge against inflation or collapse of the financial system) and increase the amount of circulating currency.

Ruled unconstitutionalEdit

On January 6, 1936, the Supreme Court decided in United States v. Butler that the act was unconstitutional for levying this tax on the processors only to have it paid back to the farmers.<ref name="Rasmussen, p4"/> Regulation of agriculture was deemed a state power. As such, the federal government could not force states to adopt the Agricultural Adjustment Act due to lack of jurisdiction. However, the Agricultural Adjustment Act of 1938 remedied these technical issues and the farm program continued.