AGRICULTURAL ADJUSTMENT ACT OF 1933 48 Stat. 31

This act, the set piece of the new deal for agriculture, emphasized production controls in an effort to revive farming from its 1920s torpor. Stressing collective action, the act sought to boost farm prices. After world war i ended, American farmers had found stiff new competition in the world market for the tremendously expanded U.S. farm output. As a result, surpluses ballooned and prices deflated. A modest recovery by 1923 had not taken firm hold, and the Depression in 1929 struck hard at farmers. Agricultural prices had dropped four times as far as industrial prices between 1929 and 1933. Shortly after franklin d. roosevelt's inauguration in March 1933, his secretary of agriculture, Henry Wallace, met with farm leaders to formulate a relief plan. The resulting bill, drafted in part by jerome frank, was ready in five days. To secure wide support, rexford tugwell and others recommended that this "farm relief" measure comprise elements of plans already proposed. As a result, it established parity prices—a price level that would allow the purchasing power of income from a commodity to equal its purchasing power in the base period, 1909–1914.

The act's avowed purpose, "to relieve the existing national economic emergency by increasing agricultural purchasing power," would be accomplished primarily by raising prices of seven basic commodities to parity levels. Control of production would be the means of achieving this goal. The secretary of agriculture could exert control by regulating benefit payments to farmers who voluntarily reduced production, by imposing marketing quotas, and by providing for government purchase of surpluses. The government would fund these efforts by imposing on the primary processors of agricultural goods an excise tax based on the difference between farm and parity prices. Benefit payments were designed to entice cooperation although participation was theoretically voluntary.

Senate opposition gave way to substantial public pressure for action and a lack of workable alternatives. The act also granted the secretary of agriculture power to make regulations to enforce the act (subject to presidential approval), assess penalties, and (with the secretary of the treasury) to have ultimate say in issues of payments to farmers. By late 1935 the act and a drought had provided much relief (net farm income rose 250 per cent), forecasting a profitable recovery for American agriculture. In January 1936, however, a 6–3 Supreme Court invalidated the statute in united states v. butler. A determined Congress passed a second agricultural adjustment act in 1938.

David Gordon
(1986)