When was aaa

By , cotton was not as profitable as tobacco, and tobacco was losing profitability as farmers struggled to negotiate prices with cigarette producers. To achieve this goal, planters were required to reduce production by thirty percent between and Acreage taken out of use could be used to grow home-used feed crops or left vacant, but growers could not increase their harvest of crops limited by the AAA. In return for taking these acres out of production, the government gave farmers two payments that were calculated by acreage forfeited and crop prices.

Even critics admitted that the AAA and related laws helped revive hope in farm communities. Farmers were put on local committees and spoke their minds. Government checks began to flow. The AAA did not end the Depression and drought, but the legislation remained the basis for all farm programs in the following 70 years of the 20th Century.

The subsidies were meant to limit overproduction so that crop prices could increase. After the U. Supreme Court struck down the AAA in January , a slightly modified version of the law was passed in The program was largely successful at raising crop prices, though it had the unintended consequence of inordinately favoring large landowners over sharecroppers.

Many states enjoyed a manufacturing and production boom throughout the s, spurred by an increase in consumer goods and new access to credit. First, the boll weevil , introduced to the state in , greatly reduced state cotton yields. Second, overproduction in other parts of the country and foreign competition increased the supply of cotton and decreased the price. Between and , the national price of cotton decreased from The price of cotton bottomed out in , at 5. Finally, new fashions, such as the flapper dress, which used less fabric as well as new man-made materials, including rayon, decreased demand for cotton.

These factors combined to push many small family farmers off their land. Many either moved into cities or became sharecroppers. The act passed both houses of Congress in with the unanimous support of Georgia senators and representatives.

In essence, the law asked farmers to plant only a limited number of crops. If the farmers agreed, then they would receive a federal subsidy. The subsidies were paid for by a tax on the companies that processed the crops. By limiting the supply of target crops—specifically, corn , cotton, milk , peanuts , rice , tobacco, and wheat—the government hoped to increase crop prices and keep farmers financially afloat. The AAA successfully increased crop prices. Black, was generally seen as the most promising alternative to McNary-Haugenism.

The basic thinking behind it was that, while tariffs on farm products alone had proven ineffective in raising farmers' earnings, they could become effective if farmers limited their output to levels consistent with domestic needs. The plan's "essential principle," Black told the House Agriculture Committee in ,.

A version of Black's plan, which had many progressive Republican supporters, including future Agriculture Secretary Henry Wallace, was taken up by Congress twice during But the "Jones Bill," named after Congressman Marvin Jones D-Texas , who became chair of the House Agriculture Committee when the Democrats gained control of Congress that year, was rejected by the Senate both times, and would certainly have been vetoed by Hoover had it not been. Once in office, FDR, who had encouraged Jones's efforts, [1] asked him to assist Wallace in revising a draft bill also based on the domestic allotment idea.

The revised measure differed from Jones's earlier efforts mainly by replacing transferable allotment rights with direct payments made to farmers in return for their agreeing to limit output to allotted amounts, to be financed by taxes on food processors. The resulting Agricultural Adjustment Act , promising to "relieve the existing national economic emergency by increasing agricultural purchasing power," flew through the House on March 22, , gained the Senate's approval five weeks later, and was signed by FDR on May 12th.

By creating a government agency—the Agricultural Adjustment Administration—expressly charged with restoring farmers' purchasing power to levels last seen in the years just before World War I, the new law broke new and untested ground.

Whether its combination of direct benefit payments and reduced farm output would suffice to achieve its immediate goal was doubtful enough. But even if it succeeded, just how were farmers' higher earnings supposed to translate into improved all-around prosperity? Direct benefits to farmers were funded by taxes on food processors, which ultimately tended to be passed on to consumers.

Crop reduction programs likewise benefited farmers only by making food less abundant and more costly for everyone. Or could it? Actually, it could—in theory at least. For it to do so, it sufficed for farmers taken as a whole to have a higher "marginal propensity to consume" than those, apart from farmers themselves, who bore the brunt of higher food prices. That, at least, is how economists might put it today. During the first years of the depression, before the General Theory had taken the economics profession by storm, the same idea was stated more prosaically, if also more awkwardly.

According to the Brookings study, by initially shifting "purchasing power" to farmers from others, the AAA intended to "exert a significant influence toward accelerating the release of [that] purchasing power into the general market. In his message transmitting the bill to Congress, he admitted that it took the government down "a new and untrod path. Did the AAA actually "produce the hoped-for results"? FDR, for his part, never suggested otherwise; and all experts agree that the AAA boosted overall farm earnings.

Although AAA officials themselves claimed much bigger gains , they tended to credit the AAA both for its genuine contributions to farm earnings and for concurrent improvements in those earnings for which other factors were responsible. To call the AAA's contributions gains to "farmers" is nevertheless misleading, because they mostly ended up going to landlords, rather than to their tenants or to actual farm workers. When AAA benefits went to cash-paying tenants, they tended to be fully offset by higher rents.

When, instead, they were meant to be divided between sharecroppers and their landlords, as in the cotton-growing South, the landlords often prevented sharecroppers from being paid directly, while dispensing with those they no longer needed. As a result, hundreds of thousands of tenant farmers and their family members found themselves homeless , with no means of survival save those offered by other New Deal relief programs. A Cornell agricultural economist estimated that, all told, the AAA added roughly 2 million former farm tenants and workers to the ranks of the unemployed.

But so far as we're concerned, the relevant question is whether the AAA helped to lift the U. Did it serve in practice to boost aggregate demand, as it was supposed to do in theory? According to two of Brookings' three experts, it did, both because farmers were more inclined to spend extra resources that came their way than the groups from which those resources were diverted, and because AAA programs often "advanced" purchasing power to farmers before they deprived food processors of it by taxing them.

With confidence renewed that he was to be enabled to keep his farm and continue supplying the market under more favorable commercial conditions, the farmer expanded his purchases of consumption goods and farm supplies up to the limit made possible by enhanced prices, better credit, and direct benefit payments.

This expansion of orders…improved the financial position and the business confidence of certain classes of manufacturers and in turn enlarged their purchases of raw materials and equipment. This reacted favorably on employment, payrolls, and urban buying. Ultimately…there was a larger flow of national income from which to divert the larger share that went to the farmer.

The same experts concluded that there was no reason to doubt the AAA's claim that increased rural demand accounted for two-fifths of the rise in factory employment between the spring of and the fall of , although AAA programs themselves only accounted for part of this, the rest having been due to "relief, public works, the Farm Credit Administration, and the drought.

For some, even Brookings' tempered conclusion gave the AAA too much credit. These included Joseph S. Davis, the third author of its in-depth study. That conclusion, he observes in a footnote to that study, "conveys a materially exaggerated impression of the extent of the AAA's recovery contribution.