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No. 30 "The AAA Amendments: An Analysis of Proposals Illustrating a Trend toward a Fascist Control Not Only of Agriculture but Also of a Major Sector of Manufacturing and Distributing Industries," April 22, 1935.
No. 30 "The AAA Amendments: An Analysis of Proposals Illustrating a Trend toward a Fascist Control Not Only of Agriculture but Also of a Major Sector of Manufacturing and Distributing Industries," April 22, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_30 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 30 "The AAA Amendments: An Analysis of Proposals Illustrating a Trend toward a Fascist Control Not Only of Agriculture but Also of a Major Sector of Manufacturing and Distributing Industries," April 22, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. 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. Pamphlets Available â˜… Copies of the following pamphlets may be obtained upon application to the League's national headquarters: Why, The American Liberty League? Statement of Principles and Purposes American Liberty League Its Platform An Analysis of the President's Budget Message N. R. A. Its Past, and Recommendations for the Future Analysis of the $4,880,000,000 Emergency Relief Appropriation Act. Economic Security A Study of Proposed Legislation The Bonus An Analysis of Legislative Proposals The Constitution Still Stands Speech by Jouett Shouse Inflation Possibilities Involved in Existing and Proposed Legislation The Thirty Hour Week Dangers Inherent in Proposed Legislation The Pending Banking Bill A Proposal to Subject the Nation's Monetary Structure to the Exigencies of Politics The Holding Company Bill An Analysis of Proposed Legislation "What is the Constitution Between Friends?" Speech by James M. Beck Where Are We Going? Speech by James W. Wadsworth Congress at the Crossroads Speech by Jouett Shouse Price Control An Analysis of Experiments' and Recommendations for the Future Yesterday, Today and Tomorrow A Review of Factual Analyses issued by the American Liberty League and a discussion of the Legislative Situation The Labor Relations Bill An Analysis of an Undesirable Measure Government by Experiment Speech by Dr. Neil Carothers How Inflation Affects the Average Family Speech by Dr. Ray Bert Westerfield â˜… AMERICAN LIBERTY LEAGUE NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… THE AAA AMENDMENTS â˜… â˜… â˜… An Analysis of Proposals Illustrating a Trend toward a Fascist Control Not Only of Agriculture but Also of a Major Sector of Manufacturing and Distributing Industries AMERICAN LIBERTY LEAGUE Rational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… Document No. 30 April, 1935 The AAA Amendments * Amendments proposed by the Administration to the Agricultural Adjustment Act typify the highly disturbing trend toward the delegation of unwarranted authority to the Executive branch of the government. Regardless of what the immediate purpose may be, the amendments lodge in the Secretary of Agriculture powers which are both far too sweeping and altogether too indefinite in character. They would permit decisions by Executive officers on policies which should be reserved for determination by the Congress. The tendency of the proposed legislation is distinctly toward a Fascist control not only of agriculture but of a major sector of the manufacturing and distributing industries. The amendments recommended by the Secretary of Agriculture offer these objectionable possibilities: 1. An arbitrary one-man control of industries handling, processing and distributing agricultural and other products in an annual volume of more than $20,000,000,000. 2. Licensing of these industries under terms involving experimentation in price-fixing, production control, labor conditions or any other phase of operations at the discretion of the Secretary of Agriculture. 3. Imposition of the will of one economic group upon another through provisions giving farmers a voice in decisions respecting licensing of processors and distributors. 4. Further regimentation of agriculture through quotas and allotments under marketing agreements. 5. Indirect compulsion upon agriculture through terms of licenses imposed upon processing and distributing industries. 6. Broadening of an act whose constitutionality is open to serious question. 7. Danger of political coercion through use by the AAA of its powers over books and records of industry. 8. Experimentation at the expense of the taxpayers with the "ever normal granary" and other new schemes for overcoming laws of nature. Present Law The existing Agricultural Adjustment Act declares it to be the policy of the Congress "to establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities r a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period." The base period is the pre-war period, August 1909 July 1914, except in the case of tobacco for which the post-war period, August 1919 â– July 1929, is used. Section 8(1) of the Act gives the Secretary of Agriculture power to provide for reduction in acreage or production of basic agricultural commodities through agreements with producers or by other voluntary methods. Rental or benefit payments may be made to farmers in connection therewith in such amounts as the Secretary deems fair and reasonable. Basic agricultural commodities as enumerated in a subsequent section are wheat, rye, flax, barley, cotton, field corn, grain sorghums, hogs, cattle, rice, tobacco, sugar beets and sugar cane, peanuts and milk and its products. Section 8(2) of the Act gives the Secretary of Agriculture power to enter into marketing agreements with processors, producers, associations of producers and others engaged in the handling of any agricultural commodity. Anti-trust laws are waived under such agreements. Section 8 (3) of the Act gives the Secretary of Agriculture restricted authority to issue licenses permitting processors, associations of producers and others to engage in the handling of any agricultural commodity or product thereof or any competing commodity or product thereof. Section 9 of the Act authorizes the Secretary of Agriculture to levy taxes upon the first domestic processing of any basic agricultural commodity for which rental or benefit payments are to be made. The Secretary may fix a rate equaling the difference between the current average farm price and the fair exchange value of the commodity. Proposed Amendments The most important of the amendments now recommended by the Secretary of Agriculture are those which seek to strengthen the licensing section. In place of the present restricted language there is substituted a greatly broadened provision in which the Secretary is given power, with or without the consent of the parties affected, to license processors, associations of producers and others engaged in handling any agricultural commodity or product thereof or any competing commodity or product thereof. Licensing is not limited to basic commodities. Under terms of the licenses, which are intended to assist in making marketing agreements effective, the Secretary would have very great power over the operations of agricultural industries. Moreover, his control over agriculture would be strengthened inasmuch as the effect of the licensing of processors and distributors would be to limit the market for farm products. The licensing amendments include a broadening of the definition of interstate commerce and give the Secretary of Agriculture access to books and papers of agricultural industries. Another proposed amendment tightens control over agriculture by specific authorization of quotas and allotments in marketing agreements. Other proposed amendments give authority to adopt the so-called "ever normal granary" plan. The government would be allowed to purchase farm commodities held as collateral on loans and to use such commodities in lieu of cash in benefits to farmers. Status of Legislation The administration amendments to the Agricultural Adjustment Act were introduced on February 12, 1935, as S. 1807 and H.R. 5585. Hearings were held before the Committees on Agriculture of the Senate and the House. S. 1807 has been approved by the Senate Committee on Agriculture with amendments which do not materially alter its essential provisions. A revised bill, H.R. 7088, was approved by the House Committee on Agriculture but subsequently was recalled for further consideration by the Committee. In its licensing provisions H.R. 7088 is less far-reaching than the original administration measure. In other respects, notably in authority granted to the Secretary of Agriculture to use 30 per cent of customs receipts annually in new schemes for the benefit of agriculture, the bill is broadened. This provision would allow the Secretary to adopt, without specific authority by the Congress, any or all of several plans heretofore the subject of much controversy, among them the equalization fee and the export debenture. The purposes for which processing taxes 5 as well as other funds may be used are broadened to include the expansion of foreign as well as domestic markets for agricultural products. Licensing Provisions The present law in Section 8(3) gives the Secretary of Agriculture power "to issue licenses permitting processors, associations of producers, and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof." The licenses shall be subject to such terms and conditions "as may be necessary to eliminate unfair practices or charges that prevent or tend to prevent the effectuation of the declared policy and the restoration of normal economic conditions in the marketing of such commodities or products and the financing thereof." The present provision has been interpreted by at least one of the lower courts to imply that licenses must be confined to terms and conditions necessary to eliminate unfair practices. The right of the Secretary to issue licenses otherwise has been questioned. In the pending bill, both in its original form and as amended, it is provided that licenses may be issued not only to eliminate unfair practices but also to make effective any marketing agreement signed by persons handling not less than 50 per cent of the volume of business done in the respective classes of industrial and commercial activity. Furthermore, it is provided that licenses may be issued for which the necessary majority approval within the processing or distributing industry is lacking. This can be done whenever the Secretary of Agriculture with the approval of the President determines, following a hearing, that such course is "the only practical means of advancing the interests of the producers of such commodity pursuant to the declared policy." H.R. 7088 and S. 1807 as amended contain an additional requirement that the issuance of licenses without the consent of the majority of the industry involved must be "approved or favored by at least two-thirds of the producers who, during a representative period determined by the Secretary, have been engaged in the production for market of the commodity specified in such marketing agreement or license, or by 6 producers who, during such representative period, have produced for market at least two-thirds of the volume of such commodity produced for market during such period." The effect is to permit two-thirds of the farmers either in number or volume to dictate a course to be followed with respect to processors or distributors. H.R. 7088 provides that except in the case of milk and its products, tobacco, sugar beets and sugar cane, no license shall be issued for basic agricultural commodities under the clause permitting the Secretary to make effective a marketing agreement which does not have the approval of a majority of the industry. This change gives a measure of protection to a considerable number of industries such as those which process or distribute wheat, corn, hogs, cattle and cotton. The chief need for licenses according to officials of the Agricultural Adjustment Administration is in milk, a basic commodity, and in various fruits, vegetables and nuts, which are not basic commodities. H.R. 7088 contains other provisions intended as safeguards with respect to the exercise of arbitrary authority in the issuance of licenses, such as a prohibition against a national application of licenses to processors and distributors unless first tried without success along regional lines. It is provided that the licensing system shall not apply to farmers. However, if a farmer also processes or distributes agricultural products, he may be subject to a license. It is obvious that the power of the Secretary of Agriculture exerted through the licensing of agricultural industries will be felt by farmers whose only market is thus controlled. Representative James W. Wadsworth of New York emphasized this point in a radio address on March 29. "The Administration does not dare to urge the licensing of farmers themselves," said Mr. Wadsworth, "but it knows full well that if it can regulate, through a license system, every person engaged in buying or selling or processing farm products, the farmer himself will be regulated. That is the objective." Control of Industry The Secretary of Agriculture would have almost limitless authority to control an important list of industries if the pending legislation were enacted in the form originally recom- mended. The suggested modifications would restrict his power somewhat. But even the revised bills are very far-reaching in their implications and possibilities. There is nothing in the proposed legislation to limit the terms of licenses except that in the revised bills it is stipulated that no license shall be issued except in aid of an executed or proposed marketing agreement. The Secretary of Agriculture may experiment with price control and production control and may attempt a Utopian improvement of labor conditions, provided he believes that it would be "in aid of" a marketing agreement and would tend to accomplish the purposes of the Act and the restoration of normal conditions. If he so willed, the Secretary of Agriculture, a political appointee of the government, might take over under the original bill the virtual management of far-flung industries engaged in canning, milling, brewing, distilling, meat packing, textile manufacturing, cotton seed crushing, soap making and the manufacture of sugars, feeds, tobacco products, various foods, fertilizers and automobile tires, as well as truckers, commission houses, distributors, and retailers handling all kinds of farm products. At the least, these industries would be burdened with rules and regulations, intolerable bureaucratic supervision and interference and the added costs of AAA administrators, accountants, investigators and lawyers. Only lower profits, increasing losses and more unemployment could result. The uncertainties involved in such a broad delegation of power to the Executive branch of the government would be very great. In some respects it might be more advantageous to the owners of these industries to provide for outright nationalization. Under such a program the owners would receive compensation. If the industries were classed as public utilities, there would be definite laws for their guidance. If merely licensed to carry out objectives approved by producers of agricultural commodities, the industries would remain with their owners who would suffer losses incurred but would be restricted in the exercise of management. The authority to the Secretary to license an industry without even majority approval forms one of the most objectionable features of the bill. No warrant has been shown for the lodging of such vast power in the hands of an Executive official. The Secretary of Agriculture would have power akin to that of a European dictator. By modifying this clause so as to give farmers a voice in the determination of licensing policies, the congressional committees have made it doubly dangerous. The farmers should have every opportunity to pass upon proposals apply-to themselves. It is contrary to American principles to allow one economic group to exert special influence over another group. Interstate Commerce The evident purpose of the legislation is to facilitate governmental control of all industries processing, handling and distributing agricultural products. The Constitution limits Federal authority to commerce among the states. This bill seeks to overcome this limitation. Recent decisions in milk cases have shown that the courts still recognize a constitutional bar to the infringement by the Federal government upon the jurisdiction of the states or infringement by the states upon the jurisdiction of the Federal government. The Supreme Court held that the State of New York could not interfere with the retail sale of milk brought in from another state even when this sale threatened to disrupt a program designed for the economic good of milk producers and consumers in the state. Simultaneously, the United States Circuit Court of Appeals in San Francisco ruled that the Federal government could not interfere with the sale of milk within a state even though such sale threatened to disrupt a program designed for the economic good of producers in a region embracing several states. The sponsors of the pending bill have stated their purpose to make it possible to embrace within milk marketing agreements sales which are entirely within the boundaries of a single state. The bill amends the law so as to permit the licensing of processors and distributors of commodities "in the current of or in competition with, or so as to burden, obstruct or in any way affect interstate or foreign commerce." The excuse for the change from "in the current of interstate or foreign commerce" is that the other language already appears in the marketing agreement section as modified by the Jones-Connally Cattle Act in April 1934. The narrower defini- tion of interstate commerce was used in both sections of the law as originally enacted in May 1933. The change in definition is in line with other efforts to stretch the authority of the Federal government over industry which is not involved in interstate commerce. If the proposed language is too broad under the Constitution, the courts eventually will invalidate it. In the meantime industries would be subjected to unjust and improper burdens for which there could be no adequate recompense. Tendencies in this direction should be checked. Nothing will be gained by flagrant disregard of constitutional principles. Access to Books Evidence of a desire to dominate the affairs of processors and distributors is given by the section of the bill making the books and papers of licensees open to inspection by the Secretary of Agriculture and his agents. There is no such provision in the existing law. The bill provides that all parties to marketing agreements and all licensees shall furnish regular reports to the Secretary to enable him to determine the extent to which the agreement or license has been carried out and has accomplished the declared policy of the Act, and to determine whether there has been any abuse of the privilege of exemption from anti-trust laws. To ascertain the correctness of any such report or to obtain information called for but not furnished, the Secretary is authorized "to examine any books, papers, records, accounts, correspondence, contracts, documents or memoranda within the control (1) of any such party to such marketing agreement, or any such licensee, from whom such report was requested, and/or (2) of any person having, either directly or indirectly, actual or legal control of or over such party or such licensee, and/or (3) of any subsidiary of any such party, licensee, or person." While it is stipulated that the information thus obtained shall be kept confidential and shall be disclosed only in a suit or administrative hearing involving a marketing agreement or license, the Secretary of Agriculture is given the right to issue general statements based upon such reports and to publish the names of alleged violators of agreements or licenses. Neither a clause inserted in H.R. 7088 re-10 stricting the examination to such books and papers as the Secretary "deems relevant" nor a clause in the amended Senate bill restricting it to those which he finds "necessary or pertinent" furnishes any protection against "fishing expeditions" by hostile administrative officials. Under the ordinary procedure of the courts the Federal government now can obtain such records as are legitimately required. General authority to inspect books and papers would offer opportunity for a dangerous abuse of authority, particularly by a politically-minded administration. Quotas and Allotments The bill facilitates the regimentation of agriculture through a section relating to quotas and allotments for producers. Sales quotas or marketing allotments have been included in various marketing agreements and licenses under the existing law, particularly with respect to fruits, vegetables and nuts. Specific authority for such action, however, has been lacking. The present bill has the effect of confirming authority which has been assumed to exist but is now admitted to be open to question. The quotas and allotments form one method of controlling production. The terms of marketing agreements permit processors and distributors to buy certain amounts of a commodity, which allotments are prorated back to the producers. The market for a product in excess of quotas or allotments is cut off from the farmer who refuses to submit himself to regimentation. Greater consideration is shown farmers in the operation of the quota and allotment section than is shown processors and distributors in the operation of the licensing section. It is provided that no marketing agreement or license shall contain provisions for quotas or allotments unless the Secretary of Agriculture first determines that such provisions are favored by at least two-thirds of the producers, either in number or volume of product. The Secretary is required to suspend the operation of any marketing agreement or license at the end of a current period whenever he finds its termination is favored by a majority of producers, provided such majority has produced more than 50 per cent of the commodity. The bill does not provide any specific penalty for producers who exceed their allotments. It ll would appear, however, that they would be subject to a penalty in amendments applying to sugar which were approved by the Congress in May 1934. Those amendments provided for quotas and allotments only of sugar, but a penalty clause requiring forfeiture of a sum equal to three times the current market value of any excess over quotas and allotments was so phrased as to apply to the entire Act. The quota and allotment system forms one phase of a control which, while benefiting some individuals and groups, injures others. It might ruin some farmers whose yields would be cut too low and whose sales of minor products would be eliminated entirely. It might also cause losses to processors and distributors by reducing their volume of business with a consequent increase in overhead cost per unit. Under it many individual producers could be forced under government control against their desires and best judgment. "Ever Normal Granary" Two amendments proposed by the administration are designed to make possible a trial of the "ever normal granary" scheme. This plan contemplates the holding by the government of stocks of various staple crops in times of surplus production as a protection against periods of crop shortage. The immediate reason for the inauguration of such a plan is the fact that the government actually is holding considerable stocks of farm commodities as security for loans. One of the amendments authorizes the Secretary of Agriculture to use proceeds from processing taxes to purchase farm commodities pledged for loans. The other permits the use of these commodities in payment of agricultural benefits in place of cash. To some extent tax revenues already have been used to acquire farm commodities pledged for loans under a provision of the Act permitting use of funds for removal of surpluses. The proposed amendment makes explicit the authority of the Secretary of Agriculture to take over commodities on which loans have been made in connection with the adjustment programs. The proposal to permit the payment of agricultural benefits to farmers in commodities in lieu of cash is an extension of the principle involved in the cotton option plan of the original Act. Under that plan cotton growers agreeing 12 to reduce acreage were allowed to take an option for the purchase of cotton transferred by the former Farm Board to the Secretary of Agriculture. In effect, the government financed the farmers in a speculation in which they were relieved of any possible loss. The payment of benefits in the form of commodities is now proposed as a means of facilitating the distribution of accumulated stocks in years when production is at a low level. Regardless of any theoretical advantages of a plan for equalizing supplies over a period of years, previous attempts to accomplish this purpose have resulted in failure. In an earlier experiment of this kind under the Farm Board of the Hoover Administration heavy losses were borne by the taxpayers. The existence of surpluses, even though withheld from the market, tends to depress prices. Government purchases or loans at fixed prices encourage overproduction. This in turn causes price declines and inevitable losses on stored products. While the present adjustment programs include agreements for acreage reductions, which were not possible at the time of the operations of the Farm Board, there is no evidence that the devices set up will prove able to cope with the forces of nature. These particular amendments furnish an illustration of the fact that a program of control once begun is a process that must be continued. One piece of legislation leads to another. It is impossible ever to call a halt. The final result is a network in which adverse effects offset those which are favorable. Subsidies from Customs Duties The new provision in H.R. 7088, under which the use of 30 per cent of gross receipts from customs duties is authorized for various agricultural subsidies, is an example of a type of legislation which is becoming too frequent. In a blanket authorization the Congress would delegate to the Executive branch of the government power to carry out any or all of numerous schemes which have been a subject of controversy over a long period of years. Heretofore, it would have been thought essential under our system of government that the Congress consider and decide upon specific measures of this character. Under the terms of the new provision it would 13 be possible to divert more than $100,000,000 annually from the Treasury for the payment of benefits or losses on exportable basic agricultural commodities, for the purchase or lease of sub-marginal or grazing lands and for payments in connection with limitation of basic agricultural commodities. The authorization is sufficiently broad to permit the adoption of the equalization fee and export debenture plans over which the Congress fought in several successive sessions. Regardless of the possible merits of these plans, the Congress should not evade its responsibility by such a general delegation of power. Emergency Powers The American people are willing to confer special powers upon the Executive branch of the government in times of emergency. The pending amendments would broaden existing authority. They do not constitute a measure to cover only the period of an emergency. The legislation is virtually of a permanent character inasmuch as the Agricultural Adjustment Act will remain in effect until such time as the President "finds and proclaims that the national economic emergency in relation to agriculture has been ended." There has been no suggestion of any intention to declare the end of the emergency even when economic conditions become more nearly normal. The highly experimental nature of the present law and the lack of proof of its economic success thus far can scarcely justify any increase in existing powers. Agriculture, industry and the consuming population have suffered from too much regimentation. Reduced cotton acreage and a pegging of the price above world levels have resulted in a loss of foreign markets for our greatest export crop. Foreign nations have increased their cotton acreage very greatly as buyers have turned from the high-priced American product. The domestic cotton textile industry has been hard hit by inability to compete in world markets because of the higher cost due to the processing tax. Restriction of cotton acreage has forced share-croppers, tenants and farm laborers on the relief rolls. Reduced production and actual destruction of other farm commodities have resulted in imports of foodstuffs our own farmers should have raised. Mounting prices for pork due to the corn-hog program, which have caused consumers to shift to cheaper meats, fish and other foods, have injured rather than benefited the farmers. Nature with its droughts, dust storms and similar manifestations of power has made a mockery of wheat and other adjustment programs. In this country as elsewhere benefits accruing from attempted economic shortcuts have been of a temporary character and have been nullified by subsequent injurious effects. No urgency has been shown for the enactment of legislation conferring specific emergency powers upon the Secretary of Agriculture. Nothing whatever has been offered to justify the granting of blanket authority for an indefinite period. The sponsors of the amendments say that the object is to compel compliance with existing law by recalcitrant minorities. The actual effect would be to give the Secretary of Agriculture arbitrary control over majorities.