Agricultural Adjustment Act of 1933
The Agricultural Adjustment Act (AAA) represented the first significant effort by the federal government to directly improve the earnings of American farmers. Enacted on May 12, 1933, as part of Franklin D. Roosevelt’s New Deal, the AAA marked a turning point in federal agricultural policy. The AAA regulated agricultural production using the constitutional authority to tax and spend. It, along with other New Deal programs, also signified a new responsibility of the federal government in promoting economic welfare.
After consulting with farm leaders, Henry Wallace, Roosevelt’s secretary of agriculture, drafted the act, which established the Agricultural Adjustment Administration. Its purpose was to enter into agreements with farmers to reduce production in return for benefit payments. In addition, the AAA imposed marketing restrictions and levied a tax on the middlemen in order to fund benefit payments. Basic farm goods included in the program were cotton, corn, tobacco, rice, wheat, hogs, and dairy products. The AAA sought to restore parity—that is, the farmers’ purchasing power—to what it was during the period of 1910–14, when farm commodity prices were in balance with the price of goods and services. During the 1920's and early 1930's, farmers overproduced because of advances in farm equipment and an increase in acreage due to foreign demand during World War I. After the war, the European market no longer needed American farm commodities, causing an agricultural depression a decade before the Great Depression.
By the time the AAA passed Congress, American farmers had already planted their year’s crops. To prevent an additional year of overproduction, Wallace ordered farmers to destroy millions of acres of young corn, cotton, and wheat, and to butcher millions of baby hogs, in order to qualify for subsidy payments. The cost of improving the economic situation for U.S. farmers meant higher prices for the public at a time when unemployment was severe. The justification for this was that the restoration of the farmers’ purchasing power would allow them to buy enough industrial goods to stimulate industrial production and provide jobs for urban labor. This was the first time that the federal government paid farmers to restrict production and marketing, an approach that continued in the post-Depression United States.
The AAA was not entirely successful in reaching its goals. Despite the reduction of acreage by 25 percent, farmers still produced more in 1933 than they had in 1932. In 1934, changes made to the act, along with a severe drought, helped reduce production significantly. Even though 1935 farm prices rose 52 percent from their 1932 average, they would never achieve parity.
The 1936 Supreme Court case United States v. Butler declared the AAA unconstitutional by a 6–3 vote. The Court ruled it unconstitutional because of the discriminatory processing tax. In reaction, Congress passed the Agricultural Adjustment Act of 1938, which eliminated the tax on processors. The AAA legislation represented only one of many ways that federal authority increased during the Great Depression.
| BIBLIOGRAPHY:
Berta Asch and A. R. Mangus, Farmers on Relief and Rehabilitation (New York: Da Capo Press, 1937); James T. Patterson, The New Deal and the States: Federalism in Transition (Princeton, NJ: Princeton University Press, 1969); and Van L. Perkins, Crisis in Agriculture: The Agricultural Adjustment Administration and the New Deal, 1933 (Berkeley: University of California Press, 1969). |
Staci L. Gates
Last updated: 2006
SEE ALSO: Dairy Compacts; New Deal