The Agricultural Adjustment Act is the name of a series of U.S. laws designed to assist struggling farmers by providing subsidies and quotas on farm production. It was created as part of the New Deal reforms initiated by Franklin D. Roosevelt's administration to alleviate the effects of the Great Depression. The first law was enacted in 1933, and a revised version came into effect in 1938. Like many New Deal measures, it was controversial in its day and in the time since.
One effect of the Great Depression that began in 1929 was a drastic nationwide devaluation of crop prices. In simple terms of supply and demand, there was more food being produced than there were people who could afford to buy it. This, in turn, destabilized the income of numerous farmers across the nation. The Agricultural Adjustment Act sought to remedy this situation by paying farmers a subsidy to produce less. This would increase demand and drive up the prices.
The agricultural season was already in full swing when the law was passed, so farmers who wished to qualify had to destroy crops and livestock. This was an early source of controversy, because it meant destroying food while people were going hungry. Many farm industry leaders, such as John Simpson of the National Farmers Union, decried the practice, but individual farmers were eager to join. Millions of dollars in farm subsidies were paid in 1933 and 1934.
Another controversial measure involved taxing food-processing companies to finance the subsidies. The U.S. Supreme Court declared this measure unconstitutional in 1936. This was one of several legal challenges to New Deal policies during this time. The 1938 act corrected this problem by instead providing subsidies from the U.S. Treasury.
Although the Supreme Court invalidated the original 1933 act, the Agricultural Adjustment Act of 1938 remained in force in the early 21st century. Many agricultural laws have been enacted since the 1930s, but the 1938 act states that its statutes will resume if any of the newer laws expire without suitable replacements. The law became the model for all later farm bills, although the agricultural industry has changed vastly since that time. The practice of subsidizing farmers for limiting production also remained in place in the early 21st century, and it also remained controversial.