Government Intervention in U.S. Agriculture: Part 6

One of the best ways of understanding the burden that Depression-era agricultural programs created is by looking at their results on prices and personal income. Using data figures from a six-year period during the 1930s, a 2005 study by Fishback, Horrace, and Kantor seeks to establish precisely what effect the Agricultural Adjustment Act – and its ensuing bureaucratic agency, the Agricultural Adjustment Administration – had on retail sales between 1933 and 1939.

Broken-down tractor

In the 1930s, the U.S. government paid millions of dollars to farmers who were willing to take farmland out of production. Photo: Dominic Morel.

They determine that the AAA’s impact on consumer prices and consumption was mostly negative. Not only did market prices suffer, but AAA policies also played a part in decreased income among workers in the agricultural sector, specifically those who were not landowners. The AAA was one of many programs enacted by the Roosevelt administration. These grants in particular, the study notes on page 38, “were specifically designed to pay farmers to take land out of production” In effect, the federal government offered millions of dollars every year to farmers who would destroy their own crops and livestock. Not only has the opinion grown in recent years that New Deal programs were a huge burden on economic recovery during the Depression, but Fishback observes that those policies exacerbated the problem, especially in the case of the AAA.

Because of the production-limiting specifications of the law, there was a great amount of private industry activity and general leeway that was unnecessarily prevented from happening; farmers, in addition, were required to pay excise taxes on anything produced which exceeded specified limits.

As Fishback explains, the Roosevelt administration’s emphasis on government spending, rather than private spending, was borne out of the prevalence of Keynesianism in economic policies – the wrongheaded belief that higher government spending is the best way to achieve economic growth.

The fact that such a spending policy resulted in substantial government growth, of course, is not surprising! And that entire argument over the proper role of government in America’s economy would be raised not only during the AAA’s institution, but throughout the entirety of the New Deal’s implementation. When the Philadelphia Public Ledger called the AAA a “dangerous dictatorship bolstered by a new bureaucracy,” even as early as 1933,  it was setting the tone for an opposition that would last for decades to come.