Whitney Hockman

9/20/16
4th Hour

The Agricultural Adjustment Act of 1933

The Agricultural Adjustment Act (AAA) of 1933 was an attempt made by the federal
government to increase income for farmers during The Great Depression. The goal of the
administration was to use government funds to financially support farmers to cut their output of
many basic food commodities desperately needed by the starving, and poor people of the time.
The belief was that this system would reduce the surplus of food in the country, and return the
prices of food to pre WWI prices. The act was considered effective by farmers, but it was
eventually declared unconstitutional in 1936. (Encyclopedia Britannica)
The reasoning behind paying farmers to produce less food was due to the surplus of food
in the country. The surplus creation began during World War I when the demand for food was
high. This was a result of the fighting in Europe, which disrupted European farmers from
producing. American farmers were then able to produce for a much larger market, which
included their own country, countries overseas, and the military. When both a demand and supply
shift occur, the equilibrium rises, so farmers could sell food at a higher price. Farmers were
confident in their ability to produce a lot of food, and sell it. They took out loans to buy new
equipment, and more land. (Brinkley)
But when the fighting ceased overseas, American farmers were left with a smaller
demand for food, debt, and lower food prices. To maintain their income, farmers began
producing more food, which created a surplus. The surplus was created because the quantity of
food exceeded the demand. When a surplus is created, goods are sold at lower prices, which hurt
farmers. (government-programs.laws.com)

Theoretically, The Agricultural Adjustment Act would get rid of the surplus that was
hurting farmers, balance supply and demand, and return prices to the equilibrium price.
To accomplish this, a tax was levied on companies that processed farm products. Money
from this tax was given to farmers so they would produce less food, and kill excess livestock,
effectively destroying the surplus. (government-programs.laws.com)
Studies did show that The Agricultural Adjustment Act had a positive impact on farming,
and the economy overall, but it was declared unconstitutional in 1936, only 3 years after the
program was enacted. In the Supreme Court Case United States v. Butler, it was decided that the
powers being used were beyond the powers of the federal government. (Encyclopedia
Britannica) Justice Roberts stated that The act invades the reserved rights of the states. It is a
statutory plan to regulate and control agricultural production, a matter beyond the powers
delegated to the federal government. The tax, the appropriation of the funds raised, and the
direction for their disbursement, are but parts of the plan. They are but means to an
unconstitutional end. Essentially, he implied that the act was specifically for controlling
agricultural production, which wasnt a power of the federal government, and additionally, the
ways that was achieved were unconstitutional.
The equilibrium price of a good occurs when the quantity supplied is equal to the
quantity demanded. Quantity demanded and quantity supplied are both changed by price. Shifts
in the overall demand and supply are caused by taste, consumer income, number of buyers,
expectations, and price of related goods. In the 1930s, the equilibrium of farm products were
affected by WWI, and The Great Depression, which led to the The Agricultural Adjustment Act
of 1933.

Citations
The Editors of Encyclopdia Britannica. "Agricultural Adjustment Administration (AAA)."
Encyclopedia Britannica Online. Encyclopedia Britannica, n.d.
SSN, By. "Agricultural Adjustment Act." Government Programs. Laws.com, n.d.
Brinkley, Alan. American History: A Survey. New York: McGraw-Hill, 1995. Print.