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No. 45 "The Revised AAA Amendments: An Analysis of Proposals Which Represent a Confession of the Unconstitutionality of the Present Law and an Attempt to Postpone the Day of Reckoning in the Supreme Court," July 1, 1935.
No. 45 "The Revised AAA Amendments: An Analysis of Proposals Which Represent a Confession of the Unconstitutionality of the Present Law and an Attempt to Postpone the Day of Reckoning in the Supreme Court," July 1, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_45 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 45 "The Revised AAA Amendments: An Analysis of Proposals Which Represent a Confession of the Unconstitutionality of the Present Law and an Attempt to Postpone the Day of Reckoning in the Supreme Court," July 1, 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 and other League literature may be obtained upon application to the League's national headquarters: Why, the American Liberty League? Statement of Principles and Purposes Progress vs. Change Speech by Jouett Shouse American Liberty League Its Platform An Analysis of the President's Budget Message Analysis of the $4,880,000,000 Emergency Relief Appropriation Act Economic Security The Bonus Inflation Democracy or Bureaucracy? Speech by Jouett Shouse The Thirty Hour Week The Pending Banking Bill The Holding Company Bill The Legislative Situation Speech by Jouett Shouse "What is the Constitution Between Friends?" Speech by James M. Beck Where Are We Going? Speech by James W. Wadsworth Price Control Yesterday, Today and Tomorrow The Labor Relations Bill Government by Experiment Speech by Dr. Neil Carothers How Inflation Affects the Average Family Speech by Dr. Ray Bert Westerfield The AAA Amendments Political Banking Speech by Dr. Walter E. Spahr The Bituminous Coal Bill Regimenting the Farmers Speech by Dr. G. W. Dyer Extension of the NRA Human Rights and the Constitution Speech by R. E. Desvernine The Farmers' Home Bill The TV A Amendments The New Deal, Its Unsound Theories and Irreconcilable Policies Speech by Ralph M. Shaw Is the Constitution for Sale? Speech by Capt. William H. Stayton How to Meet the Issue Speech by William E. Borah The Supreme Court and the New Deal The Duty of the Church to the Social Order Speech by S. Wells Utley An Open Letter to the President By Dr. Neil Carothers â˜… AMERICAN LIBERTY LEAGUE NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… The Revised AAA Amendments â˜… â˜… â˜… An Analysis of Proposals Which Represent a Confession of the Unconstitutionality of the Present Law and an Attempt to Postpone the Day of Reckoning in the Supreme Court AMERICAN LIBERTY LEAGUE T^aticmal Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… Document No. 45 June, 1935 The Revised AAA Amendments â˜… Perpetuation of a system of regimentation of agriculture, admitted to be of doubtful constitutionality, is the avowed purpose of amendments to the Agricultural Adjustment Act passed by the House of Representatives on June 18, 1935, and awaiting action in the Senate. The bill, H.R. 8492, revised from earlier drafts to meet legal points raised as a result of the Supreme Court's decision in the Schechter case invalidating codes under the National Industrial Recovery Act, represents both a confession of the unconstitutionality of the present law and an attempt to postpone as long as possible a verdict by the highest court. Provisions of the bill which embody specific admissions of the invalidity of the existing statute include the following: 1. Enactment of present rates of processing taxes in lieu of an existing undue delegation of blanket power to the Secretary of Agriculture. 2. Retroactive ratification of the assessment and collection of nearly $900,000,000 in processing taxes. 3. A prohibition against the bringing of suits for refunds or credits of processing taxes on the ground of their invalidity. 4. A prohibition against suits to enjoin the collection of processing taxes or to obtain a declaratory judgment in connection with them. 5. Repeal of the present general authority to the Secretary of Agriculture with respect to rental or benefit payments to producers and substitution of lengthy new language setting forth methods and policies in detail. 6. Repeal of the present licensing section and substitution of new language authorizing the issuance of "orders" applicable to processors and other handlers of a restricted list of agricultural commodities. 7. Nominal restriction of orders and marketing agreements to interstate commerce, but in language designed to make possible continued control of a considerable volume of intrastate business. Dishonest Legislation No more dishonest piece of legislation has come before the present session of the Congress. Under a mass of verbiage is concealed a recognition of the complete demolition of the AAA by the Schechter case decision. Scarcely anything of importance was left in the Act within consti- tutional bounds, judging from the repeal of virtually all important sections and substitution of entirely new language. The bill bears little resemblance in text either to the present law or to the earlier drafts of amendments to the Act which have been before the Congress throughout the present session. In effect, the bill conveys an admission that the entire AAA structure is unconstitutional. Nevertheless, it is attempted to validate everything that has been done and to continue the same regimentation of agriculture without substantial change. The draftsmen who drew the original Act failed to make it conform to the Constitution. It is now proposed to try a different set of legal phrases to accomplish the same purposes. While in some particulars the powers of the Secretary of Agriculture are strengthened as contemplated by the earlier bills, it is obvious that the immediate objective now is to delay a final determination of the constitutionality of the Agricultural Adjustment Act by the Supreme Court. The same sharp practice is contemplated that was proposed with respect to the National Industrial Recovery Act. The NRA extension bill, which was pressed by the Administration when it supposed that the Supreme Court at its recent term would not rule upon the validity of the law, contained a revision of language so complete as to mean that, if enacted, pending litigation would have been dropped. This would have meant further delays while new suits were being started on the long road to the Supreme Court. H.R. 8492 would have the same effect with respect to litigation affecting the validity of the Agricultural Adjustment Act. Although more than two years have elapsed since the enactment of the Agricultural Adjustment Act on May 12, 1933, its constitutionality has not been passed upon by the Supreme Court. Some of the lower Federal courts have ruled adversely. Several cases are scheduled to reach the Supreme Court next winter. Presumably most of them would be dropped if the pending bill is enacted. Processing taxes, which are involved in some of the cases, would be given a different legal status under the bill. Similarly, if the licensing section of the Act is repealed, the cases involving the validity of action taken under it would be abandoned even though the same control would be exercised through orders. In such circumstances two more years might elapse before a test case involving the new law could reach the Supreme Court. 3 History of Bill The pending legislation has had a remarkable history. H.R. 8492 is the fifth draft of the bill actually introduced in the House during the present session. An even earlier draft, different from any of the five, was offered in the 1934 session of the Congress. Each time the bill has been revised it has been expanded. The 1934 version consisted of only about eight pages. It was sidetracked after protests were voiced against its far-reaching character. H.R. 5585, introduced on February 12, 1935, consisted of 10 pages. H.R. 7088, introduced on March 28, and H.R. 7713, introduced on April 24, each contained about 20 pages. H.R. 8052, introduced on May 14, had 23 pages. H.R. 8492, introduced on June 14, less than three weeks following the decision of the Supreme Court in the Schechter case, has 53 pages. Several of the drafts were actually reported to the House, the bills being withdrawn for reconsideration as new developments occurred. The substitution of H.R. 8492 for the previous draft, which was less than half as long, took place upon the recommendation of the Secretary of Agriculture. It was reported to the House one day after its introduction. Passage of the bill by the House without a roll call reflected the disinclination of members to go on record for a measure which ultimately is likely to run afoul of the courts. The standing vote as announced by the Speaker was 168 to 52. The 220 thus shown to have voted represented only slightly more than a quorum of the membership of 435. Processing Taxes The validity of processing taxes is involved in many cases in the courts. The vesting of authority in the Secretary of Agriculture to impose these taxes has been attacked as an improper delegation of the taxing power by the Congress. The right to levy a tax upon one class of citizens for the benefit of another class has been challenged. Other constitutional points, such as the taking of property without due process of law in violation of the Fifth Amendment, have been raised. The extensive revision of the processing tax sections makes it evident that the legal authorities in the Agricultural Adjustment Administration were of the opinion that the Supreme Court would hold processing taxes to be invalid. Instead of allowing the Secretary of Agricul- ture to impose the taxes under a general rule, the bill provides that in the case of the commodities on which they now apply, the rates shall be as prescribed in regulations in effect on June 1, 1935. The taxes shall continue in effect until December 31, 1937. The Secretary is given authority to raise the rates or to decrease them to zero. It would appear from the bill that its drafters were not very sure of their legal ground. The bill provides that if an adjustment of rate is held invalid, the rates as specified in the bill shall be effective. In the attempt to legalize past actions the bill provides that all taxes levied and collected prior to its enactment "are hereby legalized and ratified and confirmed as fully to all intents and purposes as if each such tax had been made effective and the rate thereof fixed specifically on May 12, 1933, by Act of Congress." Denial of Refunds The provision of the bill which seeks to make it impossible for processors to recover taxes paid in the event of a decision holding them to be invalid represents a high-handed attempt to circumvent the courts and the Constitution. It would establish a precedent tending to curtail the rights of citizens. The bill provides that "no suit or proceeding shall be brought or maintained in, nor shall any judgment or decree be entered by, any court for the recoupment, set-off, refund, or credit of, or on any counterclaim for, any amount of any tax assessed, paid, collected, or accrued under this title prior to the date of the adoption of this amendment." Besides seeking to guard against refunds of processing taxes heretofore collected, the bill looks ahead to the possibility that the new provisions will be held invalid. It is provided that "no suit, action, or proceeding (including probate, administration, receivership, and bankruptcy proceedings) shall be brought or maintained in any court if such suit, action, or proceeding is for the purpose or has the effect (1) of preventing or restraining the assessment or collection of any tax imposed or the amount of any penalty or interest accrued under this title on or after the date of the adoption of this amendment, or (2) of obtaining a declaratory judgment under the Federal Declaratory Judgments Act in connection with any such tax or such amount of any such interest or penalty." The justification given for the provision deny-5 ing refunds is that the taxes paid have been passed on to the consumer. While this may have been the general rule, it is by no means true in all cases. In fact, the Agricultural Adjustment Administration in a report covering the first year of its operations asserted that there are "wide variations in the extent to which processing taxes are passed on to consumers or are absorbed in the channels of distribution." The complete denial of the right to sue for refunds is an arbitrary action which should not be tolerated. The bill is less severe with respect to refunds on taxes hereafter collected than those heretofore paid. It is stipulated that no refund or credit of any tax accruing subsequent to the date of the amendment shall be approved unless the claimant establishes that he has neither passed the tax on nor passed it back to the producer. The processing taxes have proved an excessive burden upon the industries affected. The grand total of such taxes collected up to June 25 was about $875,000,000, of which more than half applied to wheat and cotton. The Agricultural Adjustment Administration has paid out considerably more than $1,000,000,000 from the revenues from processing taxes and specific appropriations. Agricultural Benefits In the language of the report of the House Committee on Agriculture the provisions of the Act relating to rental and benefit payments to farmers have been rewritten for the purpose of "making certain that in the exercise of the powers conferred under the section the Secretary of Agriculture is bound by definite rules laid down by Congress, acts only in pursuance of findings of fact made after investigation, and puts into effect action set forth in the statute and determined on the basis of the finding made by him." As thus rewritten, the report says, the Act will conform to the requirements laid down in the Schechter case, the present provisions being admitted to be inadequate. Whereas the present law contains authority to make rental or benefit payments only in connection with acreage or production reduction, the new language adds the power to make payments in connection with the removal of any basic agricultural commodity or product thereof from the normal channels of trade and commerce, to expand domestic or foreign commerce for any basic agricultural commodity and products thereof and in connection with the production of that part of any basic commodity which is required for domestic consumption. Paragraphs in the present Act containing only a little more than 100 words have been replaced by more than 800 words of text. Licenses and Orders The proposed repeal of the licensing section of the present law has particular significance in the light of adverse court decisions. The annual report of the Agricultural Adjustment Administration, recently made public, states that the lower Federal courts in seven different jurisdictions have ruled against the validity of milk licenses. The Government unsuccessfully sought to establish the legality of Federal regulation of the purchase of milk from the producer on the ground that the transaction is so interrelated with the price of products which move in interstate commerce as substantially to affect the latter. The AAA report notes that "this theory of the Government is still somewhat novel and less familiar to the courts." The cases in question are on their way to the Supreme Court. It is apparent that if the pending legislation is enacted these cases will be dropped. Meanwhile, the Government will go ahead in an effort to accomplish substantially the same regulation through a slightly different device. In the various drafts of the pending legislation which preceded the Supreme Court's decision in the Schechter case, the purpose was to strengthen the licensing provisions of the Act. The present bill substitutes "orders" for licenses. The bill provides that the Secretary of Agriculture shall issue orders applicable to processors, associations of producers and others engaged in the handling of specified agricultural commodities. The commodities in question are milk, fruits (except apples and fruits for canning), pecans, walnuts, tobacco, vegetables (except vegetables for canning) and naval stores. The licensing section of the present law applies to any agricultural commodity or product thereof, or any competing commodity or product thereof. The narrowing of the authority to issue orders to certain commodities reflects both a doubt as to the legal ground and a desire to avoid the opposition of important processing groups which properly desire to remain free from regimentation by a Government bureaucracy. No order shall become effective until the handlers of not less than 50 per cent of the volume of the commodity or product shall sign a marketing agreement. In the event of failure to obtain sufficient signatures the Secretary of Agri- culture, with the approval of the President and following a hearing, may make an order effective, provided two-thirds of the producers in number or volume of product affected by the proposed marketing agreement shall approve. This provision means that the producers can impose their will upon another economic group, the processors. Terms of Orders Regimentation of industry as well as agriculture is made possible under the terms of orders. Under the present law the terms and conditions to which licensees are subject are left to the discretion of the Secretary of Agriculture. In the light of the Supreme Court's rulings with respect to the unconstitutional delegation of power in the National Industrial Recovery Act, the fram-ers of the bill have specified the administrative procedure to be followed and the terms which may be included in the orders. With respect to milk, prices may be fixed at which milk and its products may be bought by handlers from producers. The price-fixing authority does not extend to sales by handlers. There is permitted the fixing of minimum prices to be paid by the first handlers of fruits, vegetables, tobacco and the other commodities for which orders may be issued. An elaborate system of allotments and quotas is provided with respect to the commodities other than milk. The orders may limit the total quantity of a commodity of any grade or size which may be marketed or transported to market during specified periods, the quantity which each handler may purchase from producers, and the quantity which each handler may sell. Provision may be made for the control and disposition of surpluses and for the establishment of reserve pools of commodities. The farmer as well as the processor and handler is affected by the orders despite a clause which says that "no order issued under this title shall be applicable to any producer in his capacity as a producer." The quotas and allotments restrict the marketing possibilities for the farmer. If he has no outlet for his product, he is forced to curtail production. Furthermore, if the farmer becomes a "handler" of his own products, he may be subject to the terms of orders. Interstate Commerce The bill provides that marketing agreements and orders shall relate to commodities "in the current of interstate or foreign commerce, or so 8 as directly to burden, obstruct, or affect, interstate or foreign commerce in such commodity or product thereof." This is more sweeping than the clause in the licensing section of the present law, although slightly less so than that in the present marketing agreement section. The debate in the House indicated that it is the intention to apply control through marketing agreements and orders to transactions that are purely of an intrastate character. Thus, if a marketing area for milk is established crossing state lines, the prices fixed will be intended to apply throughout the area on all sales by producers, including those of milk which does not leave a state. The lawyers of the AAA will be called upon to prove to the courts that the control of prices of milk at the farm directly affects interstate commerce. Despite the decision of the Supreme Court in the Schechter case, the bill attempts continued control of production, subject under the Constitution only to state regulation, as distinguished from commerce which is within the jurisdiction of the Federal Government. The constitutionality of the bill as well as of existing law is open to serious question. Other Provisions Among other provisions of the bill is a section which authorizes the President, following an investigation by the Tariff Commission, to establish quotas for the importation of agricultural commodities or to impose special "compensating taxes." The highly nationalistic European quota system, which would be thus adopted, has been frequently denounced by officials of the American Government as contributing to the breakdown of international trade. The bill appropriates 30 per cent of the gross annual customs receipts for use primarily in the encouragement of the exportation of major agricultural commodities by paying benefits and indemnifying losses in connection with such exportation. This is the section which would make it possible by administrative action to adopt the McNary-Haugen or export debenture farm relief plans rejected in years past by the Congress. The fund, estimated to amount to about $100,-000,000, also might be used to encourage domestic consumption by diverting agricultural commodities from normal channels of trade and commerce such as by purchase for relief distribution and also for the retirement through purchase or lease of submarginal lands. Another provision, which, like the 30 per cent fund, was in earlier drafts of the bill, gives authorization for adoption of the so-called "ever-normal granary" plan. The power given in earlier drafts to the Secretary of Agriculture to examine books and records of parties to marketing agreements and licenses is retained in the present bill with respect to marketing agreements and orders. This is one of the most dangerous provisions of the measure. The bill provides that all parties to any marketing agreement and all handlers subject to an order shall furnish to the Secretary of Agriculture such information as he finds to be necessary to enable him to determine the extent to which the terms have been complied with and whether there has been any abuse of the privilege of exemptions from anti-trust laws. For the purpose of ascertaining the correctness of any report and to obtain information requested but not furnished, the Secretary is authorized "to examine such books, papers, records, accounts, correspondence, contracts, documents, or memoranda, as he deems relevant." Under this broad authority the Secretary of Agriculture may indulge in "fishing expeditions" in the books of processing and handling industries. There is no occasion for such power inasmuch as existing legal procedure offers a way in which the Secretary can obtain any necessary information. Such authority as is proposed would lead to serious abuses. Higher Costs of Living Consumers have reason to be aware of the higher costs of necessities of life by reason of the operation of the AAA. During the debate in the House the chairman of the House Committee on Agriculture offered a tabulation to show differences in farm prices of basic agricultural commodities in December, 1932, and on May 15, 1935. According to these figures the price of wheat advanced from 31 to 87.8 cents a bushel, rye from 21.1 to 62 cents a bushel, barley from 19.3 to 66 cents a bushel, cotton from 5.4 to 12 cents a pound, corn from 18.8 to 84.8 cents a bushel, hogs from $2.73 to $7.92 per hundredweight, beef cattle from $3.41 to $6.80 per hundredweight, rice from 40 to 86 cents a bushel, peanuts from 1.2 to 4.4 cents a pound, wholesale milk from $1.26 to $1.73 per hundredweight, butterfat from 21.1 to 27.5 cents a pound, butter from 21.3 to 27 cents a pound, and tobacco from 10.5 to 22 cents a pound. Increases in retail prices of food during the same period include an advance of more than 90 per cent for pork chops, about 40 per cent for steaks and also for rice, more than 45 per cent for corn meal, nearly 75 per cent for wheat flour, more than 30 per cent for butter and about 15 per cent for milk. The processing taxes have contributed materially to higher costs of living. Under authority of the present Act the Secretary of Agriculture has levied taxes on the first domestic processing (manufacturing) of wheat, cotton, corn, hogs, tobacco, sugar and peanuts. Forming very heavy sales taxes, these are paid in the first instance by the millers, packers and other processors (manufacturers). Necessarily, the processing taxes are a part of their costs and must be passed on to the public to as great an extent as is possible under competitive conditions. Through the processing levies the consumers of particular commodities, making up one class of citizens, are taxed for the benefit of another class. The taxes paid by the processors go into the Treasury but are segregated for use in payment of agricultural benefits. The processing taxes of 30 cents per bushel on wheat and 4.2 cents per pound on cotton are sales taxes equal to approximately one-third the farm price of these commodities. The taxes of $2.25 per hundredweight on hogs, 5 cents per bushel on corn, 6.1 cents per pound and less on different grades of tobacco, one-half cent per pound on sugar and one cent per pound on peanuts all form substantial imposts from the standpoint of percentages of the commodity prices. No Urgency for Legislation The sponsors of the pending bill have failed to show good cause for its enactment. Agriculture has had too much regimentation. There is need for a curtailment of the authority of the AAA rather than for expanded powers. The passage of further legislation should properly await decisions by the Supreme Court on the validity of the present law. In the light of such decisions the Congress can act intelligently. Enactment of the pending measure at this time would be as futile as would have been a revision of the National Industrial Recovery Act prior to the decision in the Schechter case. 11