You have found an item located in the Kentuckiana Digital Library.
No. 110 "The New AAA: A Measure Which Seeks to Circumvent the Recent Decision of the Supreme Court and Regardless of Constitutionality Permits Resumption of the Payment of Subsidies to Farmers," March 9, 1936. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_110 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 110 "The New AAA: A Measure Which Seeks to Circumvent the Recent Decision of the Supreme Court and Regardless of Constitutionality Permits Resumption of the Payment of Subsidies to Farmers," March 9, 1936. American Liberty League. American Liberty League. Washington, D.C. 1936. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. AN INVITATION TO JOIN THE AMERICAN LIBERTY LEAGUE We extend to every American citizen who believes in the fundamental principles which gave birth to the Constitution of the United States an invitation to become a member of the American Liberty League. You may indicate your acceptance of this invitation by filling in the necessary information as to your name and address on the enrollment blank below and mailing it to American Liberty League, National Press Building, Washington, D. C. There are no fees or dues. If you are willing and able to give monetary help for the League's support your contribution will be appreciated, as our activities are supported entirely by the voluntary gifts of our members. ENROLLMENT BLANK Date_ I favor the principles and purposes of the American Liberty League and request that I be enrolled as a regular \ ♦contributing Signature . ? member. County ♦As a contributing member I desire to give $_ to help support the activities of the League: Cash herewith_ Installments as follows:_ ★ ★ THE NEW AAA ★ ★ ★ A Measure Which Seeks to Circumvent the Recent Decision of the Supreme Court and Regardless of Constitutionality Permits Resumption of the Payment of Subsidies to Farmers AMERICAN LIBERTY LEAGUE Rational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. Document No. no March, 1936 The New AAA Wh 'hex you have finished with this pamphlet please pass it on to some friend or acquaintance who might be interested, calling his attention to the membership blan\ on page 2.4. The Soil Conservation and Domestic Allotment Act, signed by the President on February 29, 1936, is chiefly a political device to insure continuance of cash benefits to farmers beyond the date of the November elections. This ill-considered law is of doubtful constitutionality, threatens new dislocations in agriculture, injects further elements of uncertainty into the entire economic structure and promises no permanent solution of the farm problem. The new AAA, thus risen from the ashes of the old, offers even greater freedom of experiment than its predecessor to a group of theorists whose record has been one of tragic blunder. Under the reconstructed mechanism the AAA retains the power of "coercion by economic pressure" which the Supreme Court held was inherent in the methods employed by authority of the old law. The situation with respect to the new law is in brief as follows: 1. Control of agricultural production, ruled unconstitutional by the Supreme Court, is intended to be accomplished. 2. Despite the absence of contracts with farmers, the law is designed to facilitate their regimentation in a manner in conflict with basic principles of the American form of government. 3. The Secretary of Agriculture is delegated even greater legislative power than under the old Agricultural Adjustment Act. 4. Weaknesses of the previous "parity price" formula are recognized and the arbitrary character of statistical bases is made evident by a shift of emphasis to agricultural net income. 5. A proposed redistribution of income between agricultural and industrial classes will lead to new inequities unless those in command prove to possess omniscience. 6. The law will perpetuate harmful effects of the old AAA such as narrowed markets both at home and abroad, abnormal relationships between commodities, increased relief rolls, extra burdens upon processing industries and excessive prices to consumers. 7. Dairy and livestock industries are menaced by a contemplated diversion of large acreages to feed crops. 8. Like the old law, the new act, when stripped of those features which are either ineffective or injurious, is merely a subsidy to agriculture at the expense of the taxpayers. 9. The law will not encourage farmers to be efficient, thrifty and self-reliant, nor will it promote cooperative effort, accomplish the greater abundance necessary for a higher standard of living, force development of new uses for farm products, or restore foreign markets, all essentials in a lasting solution of the agricultural problem. The Court Decision The Supreme Court on January 6, 1936, in the Hoosac Mills Corporation Case held the regulation of agricultural production under the Agricultural Adjustment Act to be unconstitutional. The Court ruled that control of agriculture in the manner proposed was outside the authority of the Federal Government under the clause of the Constitution authorizing the Congress "to lay and collect taxes, . . . to . . . provide for the . . . general welfare," as well as under the commerce clause. Respecting the commerce clause the Court said: "The third clause (of Article I, Section 8, of the Constitution) endows the Congress with power 'to regulate commerce . . . among the several states.' Despite a reference in its first section to a burden upon, and an obstruction of the normal currents of commerce, the act under review does not purport to regulate transactions in interstate or foreign commerce. Its stated purpose is the control of agricultural production, a purely local activity, in an effort to raise the prices paid the farmer. Indeed, the Government does not attempt to uphold the validity of the act on the basis of the commerce clause, which, for the purpose of the present case, may be put aside as irrelevant." The Court rejected the Government's contention that under the general welfare clause the Congress may appropriate and authorize the spending of money for agriculture. While holding that the power to tax and spend is not limited by the direct grants of legislative power, the right to do so for the general welfare is subject to restrictions, such as the reserved rights of the states. The Court said: "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 4 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. "From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states or to the people. To forestall any suggestion to the contrary the Tenth Amendment was adopted. The same proposition, otherwise stated, is that powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden." The Court in disposing of the fiction that no coercion was applied to farmers said: "If the taxing power may not be used as the instrument to enforce a regulation of matters of state concern with respect to which the Congress has no authority to interfere, may it, as in the present case, be employed to raise the money necessary to purchase a compliance which the Congress is powerless to command? The Government asserts that whatever might be said against the validity of the plan, if compulsory, it is constitutionally sound because the end is accomplished by voluntary cooperation. There are two sufficient answers to the contention. The regulation is not in fact voluntary. The farmer, of course, may refuse to comply, but the price of such refusal is the loss of benefits. The amount offered is intended to be sufficient to exert pressure on him to agree to the proposed regulation. The power to confer or withhold unlimited benefits is the power to coerce or destroy. If the cotton grower elects not to accept the benefits, he will receive less for his crops; those who receive payments will be able to undersell him. The result may well be financial ruin. The coercive purpose and intent of the statute is not obscured by the fact that it has not been perfectly successful. It is pointed out that, because there still remained a minority whom the rental and benefit payments were insufficient to induce to surrender their independence of action, the Congress has gone further and, in the Bankhead Cotton Act, used the taxing power in a more directly minatory fashion to compel submission. This progression only serves more fully to expose the coercive purpose of the so-called tax imposed by the present act. It is clear that the Department of Agriculture has properly described the plan as one to keep a non-cooperating minority in line. This is coercion by economic pressure. The asserted power of choice is illusory." Referring further to contracts with fanners, the Court said: 5 "It is said that Congress has the undoubted right to appropriate money to executive officers for expenditure under contracts between the Government and individuals; that much of the total expenditures is so made. But appropriations and expenditures under contracts for proper governmental purposes cannot justify contracts which are not within Federal power. And contracts for the reduction of acreage and the control of production p are outside the range of that power. An appropriation to be expended by the United States under contracts calling for violation of a state law clearly would offend the Constitution. Is a statute less -objectionable which authorizes expenditure of Federal moneys to induce action in a field in which the United States has no power to intermeddle? The Congress cannot invade state jurisdiction to compel individual action; no more can it purchase such action." Such hope as the sponsors of the new law have that it will be held constitutional rests upon an assertion by the Court that "there is an obvious difference between a statute stating the conditions upon which moneys shall be expended and one effective only upon assumption of a contractual obligation to submit to a regulation which otherwise could not be enforced." Despite this qualification many Senators and Representatives expressed the belief during the debates in Congress that the payments of agricultural benefits, even without contracts, will be held to be a regulation of agriculture in violation of the Constitution. In their view "coercion by economic pressure" would be applied through the offer of cash payments regardless of the existence of contracts. Federal payments to agricul- f ture are not in this respect comparable to conditional grants for education which the Court i used as an illustration of those which properly may be made. Status of Old Laws The Agricultural Adjustment Act, enacted on May 12, 1933, amended in minor particulars on several occasions and extensively revised on August 24, 1935, was held to be void only as to certain sections. Under its authority the AAA personnel, which at the time of the Court decision totaled about 6,500, has been kept largely intact and will be used in the administration of the new Soil Conservation and Domestic Allotment Act. Besides the 6,500 regularly on the payroll, the AAA has paid many thousands of 6 others who have served on local committees in connection with the administration of control programs. While the provisions of the Agricultural Adjustment Act relating to the collection of processing taxes and the payment of benefits on basic agricultural commodities are unquestionably invalid, there is doubt as to some of the other sections. As the AAA interprets the Court decision, it did not affect marketing agreements and orders, which under the amendments of August 24, 1935, are applicable only to milk, fruits, vegetables, tobacco, soy beans and naval stores. Several decisions adverse to the constitutionality of the license system established in the original act for use with marketing agreements were rendered in the lower courts prior to the revision of the act in August, 1935. In that act licenses were eliminated and a system of orders substituted. Marketing agreements are in effect by which production of milk, fruits and vegetables in numerous areas is controlled. On the recommendation of the President the Congress repealed on February 10, 1936, three compulsory laws administered by the AAA -the Bankhead Cotton Control Act, the Kerr Tobacco Control Act and the Potato Control Act. The first was enacted on April 21, 1934; the second on June 28, 1934; and the third was incorporated in the AAA amendments of August 24, 1935. All three used the taxing power to force compliance with production quota systems. It was obvious from the decision in the AAA case that these would have been declared unconstitutional. By obtaining their prompt repeal the administration was able to escape adverse decisions by the Supreme Court on three laws in addition to the half dozen already held to be invalid in whole or in part. The new Soil Conservation and Domestic Allotment Act is an amendment to an act of April 27, 1935, which authorized the Secretary of Agriculture to carry out preventive measures respecting soil erosion and created a Soil Conservation Service under his direction. Notwithstanding the existence of this service the new law provides that the Secretary of Agriculture may assign such powers conferred upon him as he deems appropriate to the AAA. For such purposes the provisions of law applicable to the appointment and compensation of persons employed by the AAA shall apply. The significance of this is that employees of the Soil Conserva-7 tion Service are subject to Civil Service and Classification laws while those of the AAA are not. A Political Law Methods employed in the consideration of the new Soil Conservation and Domestic Allotment Act testify to its political character. The dominant purpose was to put on the statute books as quickly as possible a law which would continue agricultural benefits during the campaign. It was evident that the administration was willing to take a chance on another adverse Court decision, a year or more hence, if the recipients of cash benefits could be kept satisfied while issues were under discussion by the candidates for the Presidency and Congress. Despite the repudiation of its policy by the Supreme Court, the administration and its leaders in Congress were unwilling to allow those not in sympathy with the AAA program to be heard. Only such farm organizations as were favorable to the administration were consulted, one critical group being denied admittance to a general conference called by the Secretary of Agriculture. In neither branch of the Congress were there hearings cf a character warranted by the importance of the subject. The House Committee on Agriculture heard the Secretary of Agriculture and the Administrator of the Agricultural Adjustment Act informally, but its majority members rejected repeated requests by minority members for permission to invite outside experts. The testimony of the Secretary of Agriculture and the AAA Administrator was not printed for public distribution as is customary. The Senate Committee on Agriculture allowed spokesmen for farm organizations supporting the administration program to appear in a public hearing but heard AAA officials in executive session. Alternative plans offered in both houses received no consideration whatever. On the floors of the two houses administration forces rode roughshod over amendments lacking the approval of the AAA. Terms of the Law Under the new law the powers conferred upon the Secretary of Agriculture by the original Soil Erosion Act are supplemented by a declaration 8 broadening its purposes to include five objectives, as follows: 1. Preservation and improvement of soil fertility. 2. Promotion of the economic use and conservation of land. 3. Diminution of exploitation and wasteful and unscientific use of national soil resources. 4. The protection of rivers and harbors against the results of soil erosion in aid of maintaining the navigability of waters and water courses and in aid of flood control. 5. Reestablishment, at as rapid a rate as the Secretary of Agriculture determines to be practicable and in the general public interest, of the ratio between the purchasing power of the net income per person on farms and that of the income per person not on farms that prevailed during the five-year period August, 1909-July, 1914, inclusive, as determined from statistics available in the Department of Agriculture, and the maintenance of such ratio. The Secretary of Agriculture is authorized to make payments or grants of other aid to agricultural producers, including tenants and sharecroppers, "in amounts determined by the Secretary to be fair and reasonable . .. and measured by, (1) their treatment or use of their land, or a part thereof, for soil conservation, or the prevention of erosion, (2) changes in the use of their land, (3) a percentage of their normal production of any one or more agricultural commodities designated by the Secretary which equals that percentage of the normal national production of such commodity or commodities required for domestic consumption, or (4) any combination of the above." In lieu of the contracts under the old AAA it is provided that any payment or grant of aid shall be conditioned upon the utilization of land in conformity with farming practices which the Secretary finds tend to effectuate the purposes of the act. Payments to producers by the Federal Government will cease after January 1, 1938, at which time, or earlier in the case of such states as obtain approval of plans, the same purposes are to be accomplished under a state-aid program. Expenditures under the act in any year shall not exceed $500,000,000. While the AAA was created for an indefinite period until the President "proclaims that the national economic 9 emergency in relation to agriculture has been ended," the new law is of a permanent character. It establishes definitely a policy of subsidizing agriculture. Control of Production While the purposes in the new law are stated somewhat differently than in the Agricultural Adjustment Act, the real objective is to control production just as it was in the earlier law. By controlling production it is hoped to adjust prices. To such extent as methods of control are unsuccessful agriculture will be subsidized. Whether or not farmers sign contracts can make little difference in the effect of the plan. They could have elected not to sign contracts under the old AAA. Nevertheless the Supreme Court held that they were subject to "coercion by economic pressure." Similarly, the farmers need not qualify for benefits under the new scheme but they will be just as much subject to "coercion by economic pressure" as before. The Court's finding that "the regulation is not in fact voluntary" appears applicable to the new plan. As stated by the Court "the amount offered is intended to be sufficient to exert pressure on him to agree to the proposed regulation," and one who does not receive the benefits is at a competitive disadvantage with his neighbor and "the result may well be financial ruin." It is ridiculous to insist as have sponsors of the law that there will be no regimentation of farmers. If they are to qualify for payments, they must follow the program of the AAA, whether it be for new treatment of land, for diversion of land from one crop to another, or for a curtailment of production. The domestic allotment clause authorizes payments to farmers for "a percentage of their normal production of any one or more agricultural commodities designated by the Secretary which equals that percentage of the normal national production of such commodity or commodities required for domestic consumption." Presumably such payments will not be made unless farmers comply with certain conditions. If there is a stipulation that any excess production above the amount allotted for domestic consumption shall not be marketed, the type of restriction will be almost identical with that which has heretofore been applied to wheat, cotton, corn, hogs and other commodities. The farmers will know in advance just what 10 they must do in order to qualify for benefits. The existence or non-existence of contracts seems immaterial. Cooperating farmers will be told what to plant, how to plant it and what to do with the crops. If the new plan involves any less regimentation than the old, it is difficult to understand wherein such is the case. Delegation of Power The new law takes rank with the Work-Relief Act of 1935 in its broad delegation of power. Merely by reading it one cannot obtain an adequate conception of the exact form of the new farm program. The general purposes as stated give a vague idea that something will be done with respect to soil fertility, soil conservation, soil erosion and farm income. There are no details. The Secretary of Agriculture told the House Committee on Agriculture informally that it is proposed to divert to other uses from 20,000,000 to 30,000,000 acres of land, now in cotton, wheat, corn and tobacco. Exactly how it is to be done was not explained. There is no mention of specific farm commodities in the law. The field is wide open as to which crops may be the subject of experimentation. The Secretary of Agriculture becomes the Czar of Agriculture. His only limitations are the sum of $500,000,000 per year and a stipulation that he shall pay out the money to farmers without requiring them to sign contracts in advance. Specific terms of the new law are in marked contrast with the more precise language of the Agricultural Adjustment Act. Under the provisions of the latter act, which were invalidated by the Supreme Court, the Secretary of Agriculture was authorized to provide by agreements with producers an adjustment of acreage or production and to make payments in compensation therefor. The payments were to be such as would yield to the producers approximately "parity prices" as defined in the law. The agreements might relate only to certain specified "basic" agricultural commodities, originally seven in number and expanded to fifteen. While the Secretary of Agriculture had considerable discretion under the old law, any infringement upon the constitutional theory of separation of powers was mild compared with the broad powers delegated by the Congress under the new law. 11 If the administration now fails to solve the agricultural problem, it will not be because of lack of authority. The Congress has abdicated with respect to agriculture. The Secretary of Agriculture can do practically anything he pleases in the manipulation of economic elements. Here we have "economic planning" in full flower. Parity Prices In a statement issued at the time of signing the new law the President emphasized that its goal is "parity, not of farm prices, but of farm income." A farm price parity formula was included in the Agricultural Adjustment Act and presumably was not affected by the Court decision except insofar as it has become impractical to use it by reason of the elimination of control programs affecting "basic" agricultural commodities. The shift to a formula affecting net income is a recognition of weaknesses of the parity price system and also illustrates the arbitrary character of the statistical bases upon which control programs have rested. There is a substantial difference between a formula based on the relative purchasing power of a bushel of wheat or a pound of cotton and the relative purchasing power of a farmer's net income. Congress was told during the consideration of the new law that the net income formula would mean a total cash farm income somewhat greater than under the parity price plan. To attain such an income either prices must be materially increased or the people of the whole country must be taxed permanently to subsidize agriculture. Under the parity price system prices reached levels so high as to result in decreased domestic consumption as well as decreased exports. Any formula which proposes a larger net income to agriculture than under the system recently in effect promises new maladjustments in the economic structure. The chief weakness of the parity price formula is that it fails to take account of changes in productiveness per acre or per farm worker by reason of improved methods and labor-saving machinery and changes in the number of persons on farms. It is recognized that there has been a very great advance in productivity, barring the effects of drought and other untoward acts of Nature. By reason of changes even in such a recent period as since the World War, it should be possible to produce farm commodities at 12 lower prices without any reduction in aggregate net income. Nevertheless, under the parity price formula it was sought to give the farmer a price per bushel or pound which would be equal in purchasing power in industrial commodities to a bushel or pound in the pre-war base period without taking into account any increase in the quantity produced per acre, farm or farm worker. The parity price has a tendency to spiral upward as allowance is made for advancing prices of industrial commodities, attributable in part to increases in prices of raw materials from the farm. Under the formula in the new law the purpose is to reestablish and maintain "the ratio between the purchasing power of the net income per person on farms and that of the income per person not on farms that prevailed during the five-year period August, 1909-July, 1914." According to computations of the Department of Agriculture the purchasing power of the per capita farm income, including benefits, in 1935 is represented by the index number 83.1 on a basis of 100 for the 1910-1914 period, while the purchasing power of the per capita non-farm income is represented by the index number 92.9. The ratio of per capita purchasing power of farm income to per capita purchasing power of non-farm income is 90 or, if benefit payments are excluded from farm income, 82. To attain the goal of 100, the per capita farm income would have to be increased 20 per cent above the total in 1935, exclusive of benefits, or 11 per cent above the total with benefits. The Department of Agriculture experts estimate that the restoration of the relative purchasing power of the farm population in 1935 to that of the non-farm population would have required, besides $480,000,000 in agricultural benefits under the old law, an addition of $670,-000,000 to the $5,214,000,000 of net income from farm products. Actual net farm income during the period just before the World War averaged about $5,300,-000,000. In 1935 the average farm income per capita, including men, women and children, was $159 without benefits and $174 with benefits, as compared with $172 in 1914. Redistribution of Income The new law provides for experimentation in the redistribution of income on a grand scale. 13 There is no formula except for the determination of the approximate amount to be shifted from industrial classes to agriculture. Whether prices of certain farm commodities will be raised without disturbing others, whether prices of all commodities will be advanced, or whether price changes will be moderate and the bulk of the amount transferred for an indefinite period by the power of taxation, is left to the discretion of the Secretary of Agriculture. Aside from the infinite number of new economic dislocations which may result from any experimentation of this character, proof is lacking that the net income formula is based on sufficient data to make it a useful guide. Economists quite generally have agreed that there was no sound basis for the arbitrary attempts under the old "parity price" formula to shift a greater share of the national income to agriculture. There is no adequate information by which it can be determined whether or not farmers are receiving a proper share. Even a casual examination of the statistics which are the basis of the new net income formula raises serious doubts as to their adequacy. As stated by the Department of Agriculture expert who developed the plan, "the relative per capita purchasing power per person not on farms we may consider as the measure of income parity for agriculture, just as the index of prices paid by farmers has been used as a measure of price parity." The selection of such a measure of income parity assumes that there is no difference between life on the farm and in city slums, that there are no advantages in the country which offset those in the urban areas, and that the difference in living costs can be properly measured. It also assumes that an average per capita net income figure, which includes the very wealthy as well as the very poor, is a sufficiently accurate index to justify steps to promote an economic upheaval. As computed by the Department of Agriculture the per capita income of the non-farm population in 1935 was $530, this figure being obtained by dividing the estimated national income, excluding agriculture, of $49,800,000,000 by a non-farm population of 94,012,000. The per capita income, thus obtained, is represented by an index figure of 132.4 on a basis of 100 for 1910-1914. The urban living cost is shown by an index figure of 142.5 and the purchasing power per capita by an index figure of 92.9. 14 In the farm income tabulations the Department of Agriculture experts start with an estimated gross income, including benefits, for 1935 of $8,110,000,000. From this is deducted $2,416,-000,000 for "selected expenditures" including production expenses, property taxes and mortgage interest. This gives gross income minus expenditures of $5,694,000,000 or, if benefits are excluded, $5,214,000,000. These totals are divided by the farm population of 32,779,000, yielding a net income of $174 per capita with benefits and $159 without benefits. The amounts are represented by index numbers of 103.1 and 94.2 respectively, indicating the actual respective differences from the income level of 1910-1914 without taking account of changed costs of products which farmers must buy. The index of prices paid by farmers for family maintenance is 124. The purchasing power of the net farm income per capita in 1935 is represented by 83.1 with benefits and 76 without them. By balancing the index numbers against each other it is deduced that the ratio of per capita purchasing power of farm income to per capita purchasing power of non-farm income is 90 with benefits and 82 without them. The theoretical goal is 100. One of the most definite provisions in the new law is that the net income formula shall be based on "statistics available in the United States Department of Agriculture." The details above are the high points in the official computations. Prices and the AAA Ample evidence is available to show that the AAA control programs were to a large extent ineffective except as supplemented by price-pegging loans, monetary devaluation, punitive taxes and, most important of all, drought. Processing taxes were responsible for part of the extra burden on the consumer. Even the friends of the AAA in the Senate Committee on Agriculture gave little credit to the control programs in the report adopted at the time of favorable action on the new law. In this report, which was written by an inflationist member with an exaggerated idea of the importance of monetary devaluation, it was asserted that if the gold dollar had not been reduced in value cotton would be selling for less than 7 cents per pound and wheat for less than 60 cents per bushel. Almost the entire increase above these figures 15 was attributed to monetary rather than agricultural policies. Cotton and wheat are important products in international trade and thus are recognized as subject to the effects of dollar devaluation, although not to such an extent as claimed in the Senate Committee Report. The President in his famous "horse and buggy" press conference following the adverse decision of the Supreme Court in the NRA Case predicted that if crop control under the AAA were abandoned, there would be a sharp drop in prices of farm products. Excerpts from the accounts of the President's press conference in two New York newspapers of June 1, 1935, follow: New York Times "If we abandon crop control, wheat would immediately drop to 36 cents a bushel and cotton to 5 cents per pound, he held." New York Herald-Tribune "If crop control were abandoned, he stated, it meant there would be 36-cent wheat and 5-cent cotton." The only essential difference between the two accounts is the use in one of them of the word "immediately." Verbatim transcripts of presidential press conferences are not available. There can be no question, however, on the basis of the indirect quotations in these and other newspapers that the President meant to give the impression that there would be a precipitate decline in prices of farm products if the crop and production control programs of the AAA were abandoned. The abandonment of these programs, following the adverse decision of the Supreme Court on January 6, 1936, actually had no appreciable effect upon prices to the farmer in the weeks immediately following. Elimination of processing taxes contributed to a decline in prices to the consumer. So far as could be judged from all available statistics the decision was not harmful to agriculture just as the NRA decision was not injurious to industry. An announcement by the Department of Agriculture on March 2 showed that the farm price index, based on 100 for the pre-war period, was 109 on February 15, exactly the same as on January 15, and only 1 point below December 15. Between January 15 and February 15, according to the announcement, there was an advance of 43 cents per 100 pounds in hogs and an advance of 2 cents per bushel in corn. Cotton, which like hogs and corn were subject to 16 control programs, declined only one-tenth of 1 cent per pound. There was, a decline of 3 cents per 100 pounds in beef cattle, which were not subject to control. January cash income of farmers was the highest in five years according to the Bureau of Agricultural Economics. According to the Bureau of Labor Statistics of the Department of Labor the index of wholesale prices of farm products rose more than 4 per cent between December 28, 1935, and February 22, 1936. The advance was from 78.4 to 81.6 on a basis of 100 for 1926. While the farmer was not hurt except for the temporary loss of the subsidy, the consumer benefited, according to the figures on retail food prices of the Bureau of Labor Statistics. Between December 31, 1935, and February 11, 1936, retail prices of foods subject to processing taxes decreased by about 9 per cent for pork chops, 11 per cent each for lard and wheat flour, 5 per cent for bacon, and 2 per cent each for corn meal, rice and bread. By reason chiefly of these items the index of all food prices declined by 2 per cent. The following table shows changes in retail prices of foods subject to processing taxes between dates six days before the court decision and five weeks afterwards: DecSl.im Feb. 11, IBM Per Cent (Cents per pound) Decrease Pork Chops .................. 35 32 8.0 Lard .......................... 18.9 16.8 11.1 Sliced Bacon .................. 44.2 42 4.8 Corn Meal .................... 5 4.9 2 An amendment for the protection of consumers which was incorporated in the new law with the approval of the AAA can give no real assurance that prices will not be advanced to excessive levels. It merely serves to emphasize the administrative difficulties to be encountered in attempting both to increase farm income and to maintain "a continuous and stable supply of agricultural commodities adequate to meet consumer demand at prices fair to both producers and consumers." Under the section the powers of the Secretary of Agriculture "shall not be used to discourage the production of supplies of foods and fibers sufficient to maintain normal domestic human consumption as determined by the Secretary from the records of domestic human consumption in the years 1920 to 1929, inclusive, taking into consideration increased population, quantities of any commodity that 17 were forced into domestic consumption by decline in exports during such period, current trends in domestic consumption and exports of particular commodities, and the quantities of substitutes available for domestic consumption within any general class of commodities." Destruction of Export Trade One of the most serious results of policies under the old AAA was a curtailment of exports of important commodities. More than half of the domestic cotton crop normally has been sold abroad. Exports of cotton in 1934 and 1935, years in which the AAA was effective, were less by about 3,000,000 bales than in each of the years 1932 and 1933 before the AAA got under way. The loss of cotton exports was due to the higher American prices sustained by loans from the Commodity Credit Corporation together with increased foreign production encouraged by the reduction in acreage enforced through the Bankhead Act. The loss of export trade has had devastating effects in the South throughout the various trades dependent upon the movement of cotton to foreign destinations. Exports of pork products and wheat were at a low ebb in 1935 under AAA policies and those of tobacco also fell off. The following tabulation shows exports from 1932 to 1935, inclusive, of commodities affected by AAA control programs: Wheat includ- Tobacco Bacon, Hams, Lard Cotton {Tuning Flour (Leaf) Shoulders ning bales) (1000 bu.) (1000 lbs.) (1000 lbs.) (1000 lbs.) (1000 bales) 1932 ... 82,118 387,766 84,175 546,202 8,918 1933 .... 26,611 420,418 100,169 579,132 8,533 1934 .... 36,538 418,983 83,725 431,237 5,753 1935 .... 16,015 381,182 61,691 96,354 5,860 American farmers while reducing their production have been seriously damaged by steadily increasing imports. Enormous increases have taken place in imports of corn and wheat, commodities under control, as well as in various other farm products. The following tabulation shows imports of important agricultural commodities between the years 1932 and 1935, inclusive: Cattle (live) Butter Wheat Corn Oats (1000 head) (1000 lbs.) (1000 bu.) (1000 bu.) (1000 bu.) 1932 ..... 106 1,014 10,026 344 59 1933 ..... 82 1,022 10,318 160 132 1934 ..... 66 1,253 18,542 2,959 5,580 1935 ...... 377 22,674 38,871 43,243 10,106 Increased Unemployment Professor James E. Boyle of Cornell University is authority for an estimate that the AAA program added at least 2,000,000 persons to the ranks of the unemployed. More than 200,000 share-croppers with their families, including more than 1,000,000 persons, have been on relief in the South or have drifted to other regions where they have been added to the unemployed. Hundreds of thousands of workers lost their jobs in packing houses, cotton gins and in other industries involved in the distribution of farm products. The policy of scarcity underlying the restrictive program not only was unsound and ineffective in its direct application to agriculture but had harmful consequences in related industries. The processing taxes were a heavy burden to processing industries as well as to the consumers. The cotton textile industry felt the effect of processing taxes in consumer resistance to higher prices. Other Injurious Effects In numerous other respects the old AAA caused havoc. The control programs threw out of balance relationships between commodities and between geographical areas from a domestic as well as an international standpoint. Interference with the natural course of events in the case of one commodity made it necessary to exert control over a related commodity. Thus, cotton control and tobacco control were followed by a restriction of peanuts. The resultant abnormal expansion of potato acreage in a southern area suitable to the growing of these four crops was in large part responsible for the enactment by the Congress of the Potato Act. Agricultural industries not under control, notably livestock and dairying, were injured by the diversion of land to feed crops and pasture. Except for cash benefits many farmers would have made a greater profit if they had not reduced acreage or production under AAA contracts. A study of income of three southern plantations showed that the higher prices of cotton were not sufficient to offset the reduced volume of output permissible under the AAA. The estimated gross returns from cotton and cottonseed were less than they would have been without the control program. Suppression of this fact from a report of the Bureau of Agricultural Economics was recently disclosed. 18 Menace to Dairy Industry In enacting the new law the Congress at the instance of the AAA rejected amendments which would have safeguarded the dairy and livestock industries. According to representations made on behalf of the National Cooperative Milk Producers' Federation and other related groups the effect of the program will be to divert large acreages to grasses and forage upon which cows will feed with a consequent expansion of dairy and livestock products. A proposed amendment which was rejected by both houses of the Congress provided that payments to farmers for growing soil-restoration, soil-conservation or erosion-preventing crops should be subject to the condition that no crops intended for sale should be harvested from such lands and that no livestock intended for sale or the products of which are intended for sale should be grazed or pastured thereon. While theoretically many of the soil-building crops are to be plowed under, the sponsors of the program were unwilling to write into the law any such requirement. Cost of the AAA A wave of protest spread over the country when $345,000,000 of the $500,000,000 revolving fund of the Hoover Farm Board was lost over a period of three and one-half years in its efforts to stabilize prices. Under the AAA, according to the Daily Treasury Statement of February 29, 1936, total appropriations to that date amounted to $1,856,573,023, of which only $941,639,670 was raised from processing taxes. Of the total, $405,006,494 remained unexpended. Actual expenditures from the beginning of the AAA in 1933 to February 29 totaled $1,451,566,529, of which at least $250,000,000 represented administrative and other costs apart from actual agricultural benefit payments. The Supplemental Appropriation Act, approved February 11, authorized the expenditure of $296,000,000 for the fulfillment of adjustment contracts entered into prior to the decision of the Supreme Court. Any advantages to agriculture from the AAA thus far have come from the disbursement of the huge amount of cash. Higher prices have been chiefly from natural causes. Much of the injurious effects would have been avoided if 20 the Congress had frankly voted a subsidy without accompanying it with an authorization to the AAA to experiment with fanciful theories. Stripped of its ineffective and harmful features, the AAA has been merely a subsidy to agriculture. Satisfactory proof has not been given that it has been worth the cost to the taxpayers. The Future Political considerations have so surrounded the agricultural problem in recent years that it has become impossible for average citizens and least of all for candidates for public office to retain a proper perspective. The candidates who have promised the most to agriculture usually have stood highest in the favor of the rural voting population. The new law was patched together in the quickest possible time in order that cash, which furnishes the strongest possible bid for support, might continue to flow to farmers throughout the 1936 campaign. The administration claims credit for this bounty to agriculture but the taxpayers are paying the cost. Policies under the AAA have contributed in an alarming degree to the trend toward a centralized government of a character akin to European dictatorships. The control of production and regimentation of agriculture through "coercion by economic pressure" cannot do other than weaken the independence and initiative which are fundamental in the American system of government and free enterprise. The substitution of a government by men for a government of law as typified in the broad grant of authority to the Secretary of Agriculture embodies the threat of destruction to American institutions. The farm problem will never be solved while present methods are pursued. If farmers are encouraged to be efficient, thrifty and self-reliant instead of dependent upon the public Treasury, if there is a return to emphasis upon development of cooperative marketing, if the government assists in promoting a proper use of the soil and better methods of cultivation without attempting to regulate, if persistent efforts are made to find new uses for agricultural products, if practical steps are taken toward the recovery of foreign markets and if producers find it worthwhile to produce more crops at lower prices instead of less at higher prices, the welfare of the entire nation as well as of the farming element will be advanced. 21 PAMPHLETS AVAILABLE /^OPIES of the following pamphlets ^ and other League literature may be obtained upon application to the League's national headquarters. Statement of Principles and Purposes American Liberty League Its Platform The $4,880,000,000 Emergency Relief Appropriation Act The Bonus Inflation The Thirty Hour Week Bill The Holding Company Bill Price Control The Labor Relations Bill The TVA Amendments The President's Tax Program Expanding Bureaucracy Lawmaking by Executive Order Potato Control Budget Prospects Dangerous Experimentation Economic Planning Mistaken But Not New Work Relief The AAA and Our Form of Government Alternatives to the American Form of Government A Program for Congress The 1937 Budget Professors and the New Deal Wealth and Income The Townsend Plan The Story of an Honest Man The President Wants More Power (leaflet) The Townsend Nightmare (leaflet) The New Deal Works Program (leaflet) The American Liberty League By Dr. Ray Bert Wester field (leaflet) The National Labor Relations Act Summary of Conclusions from Report of the National Lawyers Committee Straws Which Tell Statement by National Lawyers Committee of the American Liberty League The Constitution What It Means to the Man in the Street By John W. Davis What the Constitution Means to the Citizen By G. W. Maxey The Duty of the Church to the Social Order Speech by S. Wells Utley The American Bar The Trustee of American Institutions Speech by Albert C. Ritchie PAMPHLETS AVAILABLE (continued) Legislation By Coercion or Constitution Speech by Jouett Shouse The Impediment of Democracy Speech by Fitzgerald Hall The Spirit of Americanism Speech by William H. Ellis Today's Lessons for Tomorrow Speech by Captain William H. Stayton The Duty of the Lawyer in the Present Crisis Speech by James M. Beck The Constitution and the Supreme Court Speech by Borden Burr The Economic Necessity in the Southern States for a Return to the Constitution-Speech by Forney Johnston The National Lawyers Committee of the American Liberty League Speech by Ethan A. H. Shepley Our Growing National Debt and Inflation Speech by Dr. E. W. Kemmerer Inflation is Bad Business Speech by Dr. Neil Carothers The Real Significance of the Constitutional issue Speech by R. E. Desvemine Arousing Class Prejudices Speech by Jouett Shouse The Fallacies and Dangers of the Townsend Plan Speech by Dr. Walter E. Spahr What of 1936? Speech by James P.Warburg Americanism at the Crossroads Speech by R. E. Desvemine The Constitution and the New Deal Speech by James M. Carson The American Constitution Whose Heritage? Speech by Frederick H. Stinchfield The American Form of Government Let Us Preserve It Speech by Albert C. Ritchie The Redistribution of Power Speech by John W. Davis Time to Stop Speech by Dr. Neil Carothers The President Has Made the Issue Speech by Charles I. Dawson The Facts In the Case Speech by Alfred E. Smith The Townsend Utopia Speech by Dr. Ray Bert Westerfield Shall We Plow Under the Supreme Court? Speech by Jouett Shouse Inflation and Our Gold Reserve Speech by Dr. E. W. Kemmerer The Power of Federal Courts to Declare Acts of Congress Unconstitutional Speech by John H. Hatcher The Constitution The Fortress of Liberty Speech by James A. Reed Entrenched Greed Speech by Dr. George B. Cutten