Agricultural Adjustment Act

Agricultural Adjustment Act

The Agricultural Adjustment Act (USPL|73|10, enacted May 12, 1933) restricted production during the New Deal by paying farmers to reduce crop area. Its purpose was to reduce crop surplus so as to effectively raise the value of crops, thereby giving farmers relative stability again. The farmers were paid subsidies by the federal government for leaving some of their fields unused. The Act created a new agency, the Agricultural Adjustment Administration, to oversee the distribution of the subsidies. It is considered the first modern U.S. farm bill.Fact|date=November 2007

Agricultural Adjustment Administration

By the time the Agricultural Adjustment Administration began its operations, the agricultural season for many crops was already under way. The agency oversaw a large-scale destruction of existing cotton crops and livestock in an attempt to reduce surpluses. No other crops or animals were affected in 1933, but six million piglets and 220,000 pregnant cows were slaughtered in the AAA's effort to raise prices. Many cotton farmers plowed under a quarter of their crop in accordance with the AAA's plans. [cite book | author=Brinkley, Alan | title=American History: A Survey | edition=10th Ed. | publisher=McGraw-Hill College | year=1999 | id=ISBN 0-07-303390-1 | pages=p.879] Adlai Stevenson and Telford Taylor worked in the AAA. Farmers benefited from the AAA policy of reducing surpluses, "Gross farm income increased by 50% during the first three years of the New Deal". [Brinkley, 2005 "p. 404"] The increase in gross income for farmers was largely paid for through government subsidies. Despite the reduced production, food price increases between 1933 and 1937 were negligible. [Brinkley, 2005 "p. 404"] Consumers bore the brunt of higher food prices and were "horrified with its policy of enforced scarcity." [Cushman, Barry (2007). Rethinking the New Deal Court. Oxford University Press. p. 34] A Gallup Poll printed in "The Washington Post" revealed that a majority of the American public opposed the AAA. [Cushman, Barry (1998). Rethinking the New Deal Court. Oxford University Press. p. 34] This is mostly because of the mass killing of pigs which was criticised by many people at the time.

The AAA was declared unconstitutional by the Supreme Court in the case "United States v. Butler" (297 U.S. 1, January 6, 1936) because, among other stated reasons, it taxed one farmer to pay another. Congress then achieved part of the original Act's goals with the Soil Conservation and Domestic Allotment Act of 1935 until the enactment of a second AAA (USPL|75|430) on February 16, 1938. This second AAA was funded from general taxation, and therefore acceptable to Josh Kucer.

Thomas Amendment

Attached as title III to the Act, the Thomas Amendment became the “third horse” in the New Deal’s farm relief bill. Drafted by Oklahoma Sen. Elmer Thomas, 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 stated that whenever the president desired currency expansion, he must first authorize the open market committee of the Federal Reserve to purchase up to $3 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 owned by European nations.

The Thomas Amendment was used sparingly. The treasury received limited amounts of silver in payment of 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.



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