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The Agricultural Adjustment Act was a New Deal reform designed to assist struggling farmers by providing subsidies and quotas on agricultural production. It paid farmers to produce less to increase demand and raise prices, but was controversial due to destroying food while people went hungry. The 1938 act corrected some issues, but the practice of subsidizing farmers to limit production remained controversial and in effect into the early 21st century.
The Agricultural Adjustment Act is the name of a series of US laws designed to assist struggling farmers by providing subsidies and quotas on agricultural production. It was created as part of the New Deal reforms initiated by Franklin D. Roosevelt’s administration to ease the effects of the Great Depression. The first law was enacted in 1933, and a revised version went into effect in 1938. Like many New Deal measures, it was controversial in its time and ever since.
One effect of the Great Depression that began in 1929 was a dramatic nationwide devaluation of crop prices. In simple terms of supply and demand, more food was being produced than people could afford to buy. This, in turn, has destabilized the incomes of numerous farmers across the nation. The Agricultural Adjustment Act sought to remedy this situation by paying farmers a subsidy to produce less. This would increase demand and raise prices.
The farming season was already in full swing when the law was passed, so farmers wishing to qualify had to destroy crops and livestock. This was an early source of controversy, because it meant destroying food while people went hungry. Many agricultural industry leaders, such as John Simpson of the National Farmers Union, condemned the practice, but individual farmers were eager to join. Millions of dollars in farm subsidies were paid in 1933 and 1934.
Another controversial measure involved taxing food processing companies to finance the subsidies. The United States Supreme Court declared this measure unconstitutional in 1936. This was one of several legal challenges to New Deal policies during this period. The 1938 act corrected this by providing subsidies from the US Treasury instead.
Although the Supreme Court invalidated the original 1933 act, the Agricultural Adjustment Act of 1938 remained in effect into the early 21st century. Many agricultural laws have been enacted since the 1930s, but the 1938 act states that its statutes will resume if any of the new laws expire without suitable replacements. The law became the model for all subsequent agricultural bills, although the agricultural sector has changed markedly since that time. The practice of subsidizing farmers to limit production also remained in place into the early 21st century and has also remained controversial.
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