Agricultural Adjustment Administration (AAA)

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AGRICULTURAL ADJUSTMENT ADMINISTRATION (AAA)

The Agricultural Adjustment Administration (AAA) was established in 1933 to carry out the production control and marketing agreement provisions of the Agricultural Adjustment Act. Unlike the Federal Farm Board of the Herbert Hoover administration, the AAA was made a part of the U.S. Department of Agriculture (USDA). The AAA was originally conceived as an emergency program to meet the farm crisis of the Great Depression, but it evolved into a permanent system of price and income supports for American farmers. Although much criticized, the AAA was able to resuscitate a devastated system of agriculture and overcome the deeprooted constitutional and political obstacles to an enlarged role for the federal government in American life.

THE CRISIS, CHALLENGES, AND PROGRAMS

At the start of the New Deal, agriculture's condition was grim. Prices of staple commodities and annual farm incomes were lower than they had been in decades; the farm credit system had nearly ceased to function, and massive unemployment and a gnarled system of international trade were depressing prices and causing commodity stocks to pile up. The effects of the deflation were brutal because farmers could not shield themselves from credit and price risks in the increasingly capital-intensive farm economy of the twentieth century. How to respond to the immediate crisis and how to rebuild the farm economy posed formidable challenges because of deeply ingrained fears that governmental programs would mean the creation of coercive bureaucracies, and maybe even a police state, in agriculture.

Deep divisions over the AAA's objectives further complicated its task. Farmers, farm leaders, members of Congress, and some USDA officials wanted the AAA to restore farm purchasing power to the more profitable levels of the 1909 to 1914 period, or what had come to be known as parity price levels. Major figures within the Department of Agriculture, including the economists M. L. Wilson, Mordecai Ezekiel, and Howard Tolley, saw the AAA as an short-term "adjustment" program that would stabilize the farm economy and serve as a transition to a long-term farm program based on trade liberalization, land use planning, and soil conservation. Secretary of Agriculture Henry A. Wallace hoped for both higher incomes and longterm adjustments.

From 1933 through 1935, the AAA focused on establishing production control programs for wheat, cotton, tobacco, hogs, corn, milk and milk products, rice, and potatoes. Participation was to be voluntary and farmers who agreed to cooperate would be paid a benefit payment for reducing acreage. The payments were financed by a tax on the processors of agricultural goods. The program would be administered through a decentralized system of farmer committees in collaboration with county extension agents, land-grant universities, and the USDA. Curtailed production would improve domestic prices while the benefit payments would supply desperate farmers with immediate income. The cooperative and voluntary nature of the program, Wallace and other USDA officials hoped, would create new forms of grassroots democracy within agriculture.

Implementing the AAA programs was an unprecedented undertaking. It required establishing a three-year production base for all participating farmers, determining how much each farm would have to cut back on acreage, ensuring compliance, allocating benefit payments, and adjudicating disputes. This array of tasks was made easier by the prior development of the Department of Agriculture's data-gathering capabilities, its county and state extension system, and its economic research divisions, but even so the AAA administrators faced constant challenges.

CONTROVERSY AND OPPOSITION

The AAA was engulfed in controversy from the start. Faced with gluts of hogs and cotton before production controls could be instituted, the AAA paid producers to slaughter pigs and plow up planted cotton. Critics denounced these attempts to create artificial scarcities when many millions of Americans were in need of food and clothing. Internal policy divisions marred the AAA's early months as well. Its first administrator, George N. Peek, was a prominent farm leader who objected to the emphasis on production controls and frequently clashed with Wallace. He resigned after seven months and was replaced by Chester Davis, also a farm leader, but one who was more sympathetic to reducing acreage. Under Davis, the AAA's cotton program became the center of a national controversy when southern landlords began exploiting the production control contracts to evict sharecroppers or deny them an equitable distribution of AAA benefit payments. Davis investigated but, in spite of extensive evidence indicating wholesale violations of the contracts by growers, he was unwilling to impose new rules that would protect the South's rural poor. When Jerome Frank, the head of the AAA's legal division, tried to impose a stricter interpretation of the contract for the benefit of tenants and sharecroppers in 1935, Davis responded by hastily firing Frank and many of his staff. The New Deal then tried to address rural poverty outside the AAA by creating first the Resettlement Administration in 1935 and then the Farm Security Administration in 1937.

Economic and political crises also forced frequent changes in AAA policies and programs. In October and November of 1933, a sharp increase in the prices of manufactured goods, caused in part by the policies of the National Recovery Administration, brought new threats of farm strikes and demands for currency inflation and price-fixing. President Roosevelt responded to the protests with an executive order creating the Commodity Credit Corporation (CCC) to make commodity loans to farmers and to serve as an adjunct to AAA programs. The CCC could establish loan rates for commodities, and if prices fell below the rate, farmers did not have to repay the loan. Political pressure from growers also minimized the voluntary features of some commodity programs. Angry at the effect non-cooperators were having on prices, growers of potatoes, tobacco, and cotton succeeded in pressuring Congress in 1934 and 1935 to make participation in their acreage control programs virtually mandatory.

The processors and the Supreme Court posed a more formidable problem. Bitterly resentful at having to pay the processing tax, the middlemen challenged its constitutionality and in a six to three vote the Supreme Court ruled in their favor in the United States v. Butler decision of January 6, 1936. During the nearly three years before Butler, the AAA succeeded in injecting $1.1 billion in benefit payments into the farm economy and contributed to a modest but desperately needed $2.5 billion increase in gross farm income. The AAA did succeed in involving many thousands for farmers in its committee system, but the results were not always what the advocates of grassroots planning had envisioned. In the south, the committees empowered white landlords who took advantage of black and white tenants and sharecroppers. The AAA also encouraged a dramatic growth in American Farm Bureau Federation membership, which in turn fostered a narrow interest group orientation on the part of many farmers.

Following Butler, AAA programs shifted yet again. In response to the devastating droughts of 1934 and 1936, which had greatly curtailed grain production, Henry Wallace began to advocate the creation of an Ever-Normal Granary. This would involve extensive CCC commodity loans and storage operations, which, Wallace argued, would ensure stable food supplies and also help maintain higher levels of farm income. In addition, Congress approved the Soil Conservation and Domestic Allotment Act (1936), which authorized the AAA to pay farmers to shift some portion of their acreage to soil-conserving crops in place of surplus commodities. In 1937 Wallace campaigned for a more extensive farm bill, which became the second Agricultural Adjustment Act (1938). The act formally established the CCC commodity loans and crop storage programs, provided conservation payments for growers who restricted production, established a system of crop insurance, and provided mandatory production controls, or marketing quotas, if twothirds of the producers of a commodity voted to accept them. The act was a compromise between Wallace, who favored price supports as a means of establishing economic security for farmers, and the Farm Bureau, which wanted rigid production controls and high price-support loans to ensure parity prices.

Unlike the original Agricultural Adjustment Act, the second act envisioned the Department of Agriculture having a permanent role in supporting farm prices and incomes. The efficacy of the new tools, however, was almost immediately overwhelmed by the combination of an economic recession, favorable growing weather, and a deteriorating world trade situation. Faced with a new round of crises, the AAA and the CCC struggled to sustain prices and needed both supplemental appropriations from Congress and massive export subsidies for wheat, cotton, and corn to avoid sharp price breaks. Only the sudden increase in wartime demand prevented a major farm crisis at the start of the 1940s.

ASSESSMENT

Economists have criticized the AAA for its ineffective production controls, for limiting American agricultural exports by pushing U.S. prices out of line with world prices, and for impeding adjustments in crop and livestock specializations. Historians and other critics have criticized the AAA for programs that benefited successful commercial farmers at the expense of the rural poor and for spurring the growth of narrowly focused farm interest groups. Such criticisms have validity, but they should not obscure the fact that the AAA ended the catastrophic unraveling of the farm economy during the early Depression years, allowed many farmers to survive the 1930s, and stabilized the farm economy in ways that encouraged new investment in tractors and technology later in the decade. Nor should the AAA's critics overlook the limited tools and strategies available for devising a farm program amidst the Great Depression.