Agricultural Adjustment Act

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The Agricultural Adjustment Administration (AAA) (Pub.L. 73-10, 48 Stat. 31, enacted May 12, 1933) restricted agricultural production in the New Deal era by paying farmers to reduce crop area. Its purpose was to reduce crop surplus so as to effectively raise the value of crops, thereby a portion of their fields lie fallow. The money for these subsidies was generated through an exclusive tax on companies which processed farm products. The Act created a new agency, the Agricultural Adjustment Administration, to oversee the distribution of the subsidies.[1] It is considered the first modern U.S. farm bill.

In 1936, the Supreme Court case United States v. Butler declared the Act unconstitutional for levying this tax on the processors only to have it paid back to the farmers. Regulation of agriculture was deemed a state power. However, the Agricultural Adjustment Act of 1938 remedied these issues


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 $4 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 $4 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 owed by European nations.

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

Negative Effects

Tenant farming characterized the cotton and tobacco production in the post-Civil War South. Even before the Great Depression, tenant farmers lived and worked in extremely difficult situations. As the agricultural economy plummeted in the early 1930s, tenant farmers and sharecroppers experienced the worst of it.

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