arguing the AAA

Constitution, Article I, Section 8:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States...to regulate Commerce with foreign Nations, and among the several States...…

10^th Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The AAA encourages production limits on seven “basic crops” (corn, wheat, cotton, rice, peanuts, tobacco, and milk) by paying farmers not to grow them, with the intent to return crop prices to what they had been in the 1909-14 period.

This is necessary because farm prices have collapsed: Between 1929 and 1934, farm production drops 15% in volume, 40% in price. The ratio between the prices the farmer receives for crops and that he/she pays for products drops from 109 in 1919 to 64 in 1931. Farm income is down 64%, farm indebtedness down only 7%. In North Carolina, cotton went for more than 30 cents per pound in 1919, less than 6 cents per pound, 1931. Tobacco had gone from 86 cents per pound to 9. In other words, it's almost impossible to make a living as a farmer.

As a solution, farmers are asked to plow under 25-50% of their 1933 crops, then 45-55% of their 1934 crops. This results in the killing of 6 million little pigs and 200,000 sows and the plowing-up of 10 million acres of cotton in 1933 alone, paid for by a tax on the processing of farm goods—canning, milling, meatpacking, textile manufacture. (It’s not mandatory: ¼ of cotton farmers don’t participate.)

Farm incomes more than double, 1933-35, and food prices rebound, though checks are not sent directly to tenant farmers—many of whom have been thrown off the land when production drops—at the behest of Southern Democrats. Farm discontent of 1933 disappears. But the Dust Bowl continues, as does economic despair.

FDR: Address on the AAA, 5/14/35: “We were faced with three possible ways of meeting the situation. The first method that was suggested involved price fixing by Federal decree. We discarded that because the problem of overproduction was not solved thereby.

The second plan was to let farmers grow as much as they wanted of everything, and to have the Federal Government then step in, take from them that portion of their crop which represented what we called the exportable surplus and, in their name and on their behalf, dump this surplus on the other Nations of the world. We discarded that plan for a good many reasons and one was because the other Nations of the world had already taken steps to stop dumping. From that time on, with increasing frequency they were raising their tariffs, establishing quotas and clamping on embargoes against just that kind of proposition. And that is why we discarded that.

Therefore, we came to the third plan -- a plan for the adjustment of totals in our major crops, so that from year to year production and consumption would be kept in reasonable balance with each other, to the end that reasonable prices would be paid to farmers for their crops and unwieldy surpluses would not depress our markets and upset the balance.”

In 1935, according to Supreme Court justice Robert Jackson, “all hell broke loose” in the lower courts. 5 suits a day were filed against the AAA, with more than 1700 pending by the end of the year. Many injunctions argued against the processing tax, which judges granted in 90% of suits. Hoosac Cotton Mills of Massachusetts claimed that the tax is not a tax but actually a backdoor scheme to “control and regulate” agriculture, which they argued lay outside the powers of Congress as specifically enumerated in I.8. Hoosac’s counsel argued that the AAA represented “the general welfare clause gone mad” because if was allowed to continue, Congress “would be subject to no restraint except self-restraint.” “I pray almighty God,” he concluded, “that not in my time may ‘the land of the regimented’ be accepted as a worthy substitute for ‘the land of the free.’” He then returned to his chair and sobbed, overcome by his love of freedom.

After the case had been argued, FDR himself remarked that “I believe part of the genius of our form of government is its adaptiveness to the needs of changing times. The wise and sound general principles upon which our government rests…were not intended to become rigid formulae, inflexible, resistant to the stresses and strains…out of which true progress arises.”

In US v Butler (1936), the Court held 6-3 that the AAA was unconstitutional because the tax was not really a tax: taxes are meant to raise revenue, not to take money from one group and give it to another, which is exactly what the AAA did by taking from processors and giving to farmers. It added that all the Court can do is “announce its considered judgment” on a question; its only power is “the power of judgment. This court neither approves nor condemns any legislative policy.” It also held, somewhat contradictorily to its earlier decisions, that the Hamiltonian reading of the general welfare clause was correct in general, but not in this case, because a) the tax wasn’t a tax b) agriculture was “a purely local activity” and nationwide drought, overproduction, etc. reflected merely “a widespread similarity of local conditions” that “by no reasonable possibility” were the federal government’s business. The AAA “obliterate[ed] the constituent members of the union,” and thus violated the Tenth Amendment and could not be enforced by the federal government, only by the states.

So the Roosevelt administration tried again. The second AAA, chartered in 1938, imposed marketing quotas and overproduction penalties rather than subsidies for farmers who limited production. The second act changed the financing, which would be provided by the federal government, not a processor’s tax. This version was upheld in the Supreme Court in Mulford v. Smith (1939) because the new program, the Court ruled, was “intended to foster, protect and conserve [interstate] commerce.”

In Mulford, the Court held, "the appellants plant themselves upon three propositions: (1) that the Act is a statutory plan to control agricultural production and, therefore, beyond the powers delegated to Congress; (2) that the standard for calculating farm quotas is uncertain, vague, and indefinite, resulting in an unconstitutional delegation of legislative power to the Secretary; (3) that, as applied to appellants' 1938 crop, the Act takes their property without due process of law.

"First. The statute does not purport to control production. It sets no limit upon the acreage which may be planted or produced, and imposes no penalty for the planting and producing of tobacco in excess of the marketing quota. It purports to be solely a regulation of interstate commerce, which it reaches and affects at the throat where tobacco enters the stream of commerce -- the marketing warehouse. The record discloses that at least two-thirds of all flue-cured tobacco sold at auction warehouses is sold for immediate shipment to an interstate or foreign destination. In Georgia, nearly one hundred percent. of the tobacco so sold is purchased by extrastate purchasers.

"The Act was approved February 16, 1938. The Secretary proclaimed a quota for flue-cured tobacco on February 18th and, on the same date, issued instructions for holding a referendum on March 12th. March 25th, the Secretary proclaimed the result of the referendum which was favorable to the imposition of a national marketing quota. In June, he issued regulations governing the fixing of farm quotas within the states. July 22nd, he determined the apportionment as between states and issued regulations relative to the records to be kept by warehousemen and others. Shortly before the markets opened, each appellant received notice of the allotment to his farm.

"On the basis of these facts, it is argued that the statute operated retroactively, and therefore amounted to a taking of appellants' property without due process. The argument overlooks the circumstance that the statute operates not on farm production, as the appellants insist, but upon the marketing of their tobacco in interstate commerce. The law, enacted in February, affected the marketing which was to take place about August 1st following, and so was prospective in its operation upon the activity it regulated. The Act did not prevent any producer from holding over the excess tobacco produced, or processing and storing it for sale in a later year, and the circumstance that the producers in Georgia and Florida had not provided facilities for these purposes is not of legal significance."

DO YOU THINK THE COURT RULED CORRECTLY IN THE FIRST CASE? IN THE SECOND? WHY OR WHY NOT? WHERE WOULD YOU CHANGE ITS DECISION?