Agricultural Adjustment Act
|Other short title(s)||
|Long title||An Act to relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency, to provide emergency relief with respect to agricultural indebtedness, to provide for the orderly liquidation of joint-stock land banks, and for other purposes.|
|Enacted by the||73rd United States Congress|
|Effective||May 12, 1933|
|Stat.||48 Stat. 31|
|United States Supreme Court cases|
|United States v. Butler|
The Agricultural Adjustment Act (AAA) was a United States federal law of the New Deal era which restricted agricultural production by paying farmers subsidies not to plant on part of their land and to kill off excess livestock. Its purpose was to reduce crop surplus and therefore effectively raise the value of crops. The money for these subsidies was generated through an exclusive tax on companies which processed farm products. The Act created a new agency, the Agricultural Adjustment Administration, to oversee the distribution of the subsidies. The Agriculture Marketing Act, which established the Federal Farm Board in 1929, was seen as a strong precursor to this act.
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.
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 $300 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.
The Thomas Amendment was used sparingly. The treasury received limited amounts of silver in payment for war debts from World War I. Armed with the Amendment, Roosevelt ratified the Pittman London Silver Amendment on December 21, 1933, ordering the United States mints to buy the entire domestic production of newly mined silver at 64.5¢ per ounce. Roosevelt’s most dramatic use of the Thomas amendment came on January 31, 1934, when he decreased the gold content of the dollar to 40.94 percent. 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.
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.
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.
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. It 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." 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.
For most tenants and sharecroppers the AAA was a major help. Frey and Smith concluded, "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. Researchers concluded, "As a rule, planters seem to prefer Negroes to whites as tenants and coppers."
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.
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. With the spread of cotton-picking machinery after 1945 there was an exodus of small farmers and croppers to the city.
In 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. Regulation of agriculture was deemed a state power. However, the Agricultural Adjustment Act of 1938 remedied these technical issues and the farm program continued.
- Agricultural Adjustment Act, Pub.L. 73–10, 48 Stat. 31, enacted May 12, 1933.
- Peters,Gerhard; Woolley, John T. "Franklin D. Roosevelt: "Statement on Signing the Farm Relief Bill" May 12, 1933". The American Presidency Project. University of California – Santa Barbara. Retrieved July 4, 2013.
- Harris Gaylord Warren, Herbert Hoover and the Great Depression (New York: Oxford University Press, 1959), p. 175.
- "The New Deal Farm Program". The Depression Begins: President Hoover Takes Command. Ludwig von Mises Institute.
- Badger, Anthony J (January 1, 1989). The New Deal. The Depression Years, 1933–1940. Chicago: Ivan R. Dee. pp. 147–89. ASIN B00B8TO1SY.
- Folsom, Jr., Burton (2008). New Deal or Raw Deal?. Simon and Schuster. p. 62.
- "Galbraith and the Southern Sharecroppers". David Henderson. Retrieved August 21, 2013.
- 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
- 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
- Frey and Smith, "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," pp. 501–3
- Smith, Fred C. (2004). "Cooperative Farming in Mississippi." Mississippi Historical Society.
- Hamilton, David. Agricultural Adjustment Act: An entry from Macmillan Reference USA's Encyclopedia of the Great Depression. s.v. "Sharecroppers" 1. Macmillan Reference USA.
- Frey, Fred C. and Smith, T. Lynn. "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 online
- Sumner, Daniel A. (2008). "Agricultural Subsidy Programs". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.
- Encyclopedia of Oklahoma History and Culture – Agricultural Adjustment Act