What was the Agricultural Adjustment Act of 1938?
The Agricultural Adjustment Act of 1938 was one of many pieces of legislation promulgated to counteract the effects of the Great Depression. The AAA Act of 1938 was signed into law by President Franklin Roosevelt as a replacement for the Agricultural Adjustment Act of 1933 which was ruled unconstitutional by the United States Supreme Court in U.S. v. Butler. The newly adopted AAA Act, along with the Soil Conservation and Domestic Allotment Act of 1936, permitted the federal government to pay subsidies to farmers for growing "soil-building" crops instead of "staple crops." The Act specifically empowered the federal government to dispense loans to farmers on staple crop yields in good crop years, and store the surplus to be used in low yield years.
Overproduction & lower demand for crops
Throughout World War I farmers were producing record yields of produce in order to supply the military and the needs of the roaring 20's. As a result, when the war was over and the Great Depression hit, prices of food dropped dramatically. Due to the large surplus of crops entering the market the demand deteriorated. Because of the lower prices farmers were able to get for their crops they began to produce more crops in order to maintain their income.
During the 30's many farmers went bankrupt and lost their farms. Bushels of corn were being sold for as little as 10 cents. As a result farmers in the United States took to the streets and in some instances, violent means in frustration over their treatment. In one instance a group of Iowa farmers stormed a courtroom and took the judge from his bench ordering him not to take any more cases that would be detrimental to farmers. In another situation upset dairy farmers began "The Farm Strike." The Farm Strike involved preventing dairy products from getting to market. Farmers blockaded country roads and ordered trucks delivering milk, cheese or other dairy products to turn around. The Farm Strike was an attempt by farmers to reduce the supply of product in the market and hopefully drive up demand but it had no effect.
The Dust Bowl
The dust bowl was a phenomenon that grasped the Midwest throughout the decade of the 1930'. It was caused primarily by an enormous drought that consumed the entire region but was also due in large part to over farming by farmers in the 1920's. Because farmers planted only staple crops there was no vegetation with extensive root systems, which are essential for trapping moisture in the ground. As a result, all the vegetation dried up and formed enormous "dust clouds." The efforts of the Agricultural Adjustment Act of 1933, The Conservation and Domestic Allotment Act of 1936, and the Agricultural Act of 1938 were drafted, in large part, to counteract these effects and encourage farmers to alter their farming behaviors and encourage the planting of more "soil-developing" crops that, although less profitable, would have an extensive root system to retain moisture and act as wind breakers.
The Agricultural Adjustment Act of 1933
The first Agricultural Adjustment Act was the first "Farm Bill" enacted in the United States. The purpose of the act was to encourage diversified farming techniques that would result in, not only stabilization of the farms themselves, but increase farm prices. The Act paid farmers subsidies not to plant part of their fields and to kill excess livestock. The money gathered by the federal government to subsidize the farmers was generated by a direct tax on companies that processed farm products.
Although the Agricultural Adjustment Act of 1933 was heralded as a boon to the economy and many studies showed that it had a beneficial impact on farming, and the economy in general, it was ruled unconstitutional in the case of United States v. Butler. In that case the Supreme Court of the United States concluded that the payment of subsidies to farmers in exchange for the reduction in farm output was beyond the powers of the federal government. The Court believed that the farmers did not have a choice in the matter. The Court also went on to note that the taxation the federal government could not institute a tax solely on one group of individuals in order to subsidize the farmers.
The Soil Conservation and Domestic Allotment Act of 1936
The Soil Conservation and Domestic Allotment Act of 1936 was enacted as a direct result of the unconstitutionality of the Agricultural Adjustment Act of 1933. The main goal of the Act was to reverse the damaging effects attributed to the dust bowl. The Act educated farmers on how to properly cultivate their lands in the best way to prevent damage to the soil. One of the objectives of the Act was to encourage farmers to plant grass and trees to act as "wind breakers." President Roosevelt demanded that trees be planted all the way from the Canadian border to Texas in order to cut down on the heavy winds that were one of the hallmarks of the dust bowl and large impediment to any progress that was to be made in the re-cultivation of the mid-west. As a result of the Soil Conservation and Domestic Allotment act, wind had been reduced by 65% over three years since the inception of the Act.
The Act continued with the philosophy of the Agricultural Adjustment Act of 1933 but corrected some issues. One such problem was that, under the AAA, land owners were not required to share subsidies with the sharecroppers and tenants who actually worked the land. The Soil Conservation and Domestic Allotment Act attempted to correct this by requiring subsidies to be distributed properly. This was difficult to enforce and it has been shown that this new clause did little to help the actual workers on farms.
The Agricultural Adjustment Act of 1938
The Agricultural Adjustment Act of 1938 revived many of the policies of the original Act of 1933. It reinstituted subsidies to farmers compelling them to reduce their crop yield. The Act specifically encouraged farmers to store their excess crops in years with a high yield to be used in later years with low yields. This time, instead of taxing just the processors of crops, the subsidies were provided for by a general tax on the population. The Act made price support for corn, wheat, and cotton mandatory and instituted marketing quotas to keep supply in line with market demand. The Act also created the Federal Crop Insurance Corporation which provided farmers with crop insurance protection.
Wickard v. Filburn
The case of Wickard v. Filburn stemmed from an Ohio farmer, Filburn, who was fined by the federal government due to his overproduction of wheat. By the law created in the Agricultural Adjustment Act of 1938, Filburn was required to have a specific quota on his crops. The trial court in the case found on the side of Filburn and the case ended up in the Supreme Court. Filburn argued that because he was selling his grain locally it was an intrastate activity and Congress had no right to regulate the act. The government countered by arguing that the interstate commerce clause applied to the production and sale of farm products. The Court held that Filburn's crops were subject to the interstate commerce clause, and thus, could be regulated by the federal government. The ruling was rationalized on the basis that, even though most farmers produce and sell locally, in the aggregate the production of crops has a substantial effect on interstate commerce.
To read the complete text of the Agricultural Adjustment Act of 1938
please go to https://www.law.cornell.edu/uscode/usc_sup_01_7_10_35.html