The Roaring Twenties was a strong time period for mass American culture, morale, and the economy. Contributing to this economic prosperity was the agricultural and food industry. However, this boom did not continue for long. In the height of World War I, farmers were producing more goods than ever before. Britain and France presented a huge demand for foreign food supplies to feed their populations on a regular basis. After the first World War ended and countries returned to relying on their own agricultural production. The expansion that first aided the agriculture industry, came back to aid its quick spiral downward.
Overproduction plagued the entire industry. Market prices began to fall. Farmers found it increasingly difficult to sell their product. Despite this, farmers continued contributing the food surplus in an attempt to pay their debts, taxes, and living expenses. Bankruptcy became a reality for many previously successful American farmers. In 1929, the flourishing stock market of the Twenties, plummeted. Stocks in countless companies became, essentially, worthless. This economic crash was just one of several causes of the infamous Great Depression.
The Great Depression was a horribly dark time in American history. Countless Americans were left without jobs, money, and hope. Without the demand, the agricultural product supply continued lower prices and profit for farmers. The underconsumption of the American public could not counteract the overproduction of the agricultural and food industry. What little productivity was left was destroyed by the effects of soil erosion, overworked land, and infertile soil. Accounts of farmers having to kill off their livestock and burn crop fields were common. More money would be spent than earned.
Angry and desperate, farmers turned to the United States government for intervention on their behalf. They formed labor unions, held strikes, and created blockades to grab attention. With the election of 1932, farmers finally received the governmental intercession they had longed for. President Franklin Delano Roosevelt proposed a radical and extensive series of federal programs to uplift the nation from the effects of the Great Depression. No time was wasted. In the first hundred days of his presidency, Roosevelt won the passage of fifteen major laws through the U. S. Congress.
Amongst these new directives was the Agricultural Adiustment Act (hereafter. AAA). Passed in May of 1933, the AAA’s ultimate goal was to restore the market prices paid to farmers for their goods. A leading excerpt from the actual bill solidifies the AAA’s purpose “to establish and maintain such balance between the production and consumption of agricultural commodities… ” The course of action taken to achieve this goal involved curtailing farm production, reducing export surpluses, and raising the prices of goods. Payments from the government were used as an incentive for farmers to comply with these new means of change.
These compensations from the government, or subsidies, soon became a sustaining factor for farmers and their families. By 1936, subsidies totaled $1. 5 billion. The core of the act held a provision that levied a tax on the processors of agricultural commodities. That tax money went straight into the subsidies for farmers. An example of this could be seen in the cotton industry. Cotton gin operators were taxed for the benefit of cotton farmers who had agreed to the terms of the AAA. The AAA was limited, yet favored by most farmers of the time.
The AAA relied on Article 1, section 8, clause 1 of the U. S. Constitution that outlines the power “to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States. ” However, in three years, this constitutional anchor was deemed invalid. The 1936 United States v. Butler Supreme Court case declared the Act unconstitutional. During the four years that the AAA was in place, the cash income of farmers doubled. For the most part, the AAA was successful. It was ruled that the Act “invaded the rights of the state to regulate and control agricultural production” and violated the 10th Amendment.
In 1938, a second AAA was passed with adjustments that ended taxes on agricultural processors, applied marketing quotas and overproduction penalties, and reinforced the constitutionality of its federal statutes. With these modifications, the AAA was preserved as “permanent legislation” that provided federal support for commodity prices and farm incomes. Eighty-three years later, agricultural subsidies, one of the AAA’s key components, are still in place. Today, overproduction is no longer a pressing issue. Instead of a way to reduce production, the government uses subsidies as an incentive for farmers to produce subsidized crops.
These payments are meant to “provide stability to farmers who are involved in an inherently unstable business. ” As of 2008, the United States government subsidizes more than two dozen agricultural products. Among these are American staples such as corn, wheat, soybeans, rice, and cotton. The three types of U. S. subsidies, direct payments, counter-cyclical payments, and marketing assistance loans, all result in a degree of unsustainable reliance on the government’s aid. Critics also question the basis of this federal financing. Do agricultural producers truly need this monetary cushion from the government?
Are those who truly need them are receiving what they need? Where is all of this money going? By looking at the impact and costs of farm subsidies today, a simple conclusion can be reached. The United States of 2016 no longer needs to concentrate its efforts or resources on this form of federal funding. Where is the government getting the money to finance these subsidies? Special taxes on agricultural producers no longer exist for this purpose. Therefore the burden falls on general taxpayers. Farm subsidies cost taxpayers up to $35 billion annually.
Hard-earned money is being carelessly given to people who, often, don’t need it. This system is also very prone to fraud and scandal. Since 2000, $1. 3 billion in subsidies has been given to people who own “farmland” and don’t even use it for farming. In a four year period, $10. 6 million was paid to long deceased farmers. With all of this focus and energy being placed on Americans in agriculture, a gap has been created. In the past decade, the average income of farm households has been calculated to be at least 26% higher than the average for all U.
S. households. Farmers and corporations are not solely dependent on agriculture for income. In reality, only about 38% of farm households have farming as their primary occupation. Today’s farm households are unlike those of the past. They now have more stable and balanced finances. They can handle the transition to a subsidy-free market in agriculture. This transition will benefit the U. S. economy on its path of stability and prosperity. The beneficiaries of farm subsidies are not the small-scale farmers they were originally created to support.
Today, politicians rationalize subsidies behind the rhetoric of “preserving the family farm”. However, most farmers do not benefit at all. Instead, these payments have given rise to the dominance of large corporate farms. Much of this monetary support is funnelled straight into the largest and most financially secure farm operations. Dubbed “welfare for the wealthy”, these payments are insuring those who need it the least. Although food and agriculture expenditures only make up 5% of the proposed federal spending budget for 2016, it still amounts to nearly $126. 3 billion.
And according to recent research done by the Environmental Working Group, the biggest 10% of farm businesses receive 72% of that money. Notable farm-subsidy recipients since 1995 include individuals like Penny Pritzker, commerce secretary and billionaire, David Rockefeller, and Ted Turner, the founder of CNN. These corporate operations, producing staple commodities such as corn, soybeans, and rice are taking over the agriculture industry. Farm businesses are already well-off and the rich do not need to become richer. Perhaps a middle ground could be found in trying to rebalance the levels of support given.
Regardless, it is the system that is truly flawed. Even if the farm subsidies were balanced between corporate farms and smaller businesses, the inequality between them is innate. If the U. S. continues down this path of unfair economic concentration, it would end up upsetting the balance of economic power in the national market as it did leading up to the Great Depression. The United States government needs to look to New Zealand as an example of the positive effects that can result from a subsidy-free agricultural market. In the midst of a budget crisis, New Zealand repealed nearly all of their farm subsidies in 1984.
Before this reform, New Zealand farmers enjoyed a similar level of federal aid as Americans today. Though the transition to a free market was difficult for some, it was well worth in it the long run. As articulated in a recent Huffington Post article, there was no “mass exodus from agriculture and an end to family farms”, a dramatic concern held by many Americans. Today, their agriculture industry is flourishing. New Zealand farmers were able to save money, diversify their land use, seek income in other industries, and develop new products. Another fact to consider that New Zealand’s economy is much more reliant on agriculture than the U. S. is.
If farm subsidies ended, the American people could adjust just as those in New Zealand did. Mark Ross, general manager of the Federated Farmers of New Zealand, New Zealand’s leading farm organization, supports this notion in saying “a stronger and more innovative agriculture industry would emerge. ” Taxpayers cannot afford another government farm bill. Instead, the U. S. government needs to broaden its focus and explore free market farming, proven by its success in New Zealand. The Agricultural Adjustment Act and its provisions made sense for the time they were created for. Farm subsidies originated in a time of depression.
Since the 1930s, the U. S has progressed industrially, economically, and agriculturally. They no longer benefit today’s dynamic economy. Hard working taxpayers have carried the burden of financing farm subsidies for too long. The money being given out isn’t even reaching those who may truly need it. Instead, it is getting tied up in the largest and economically stable farm operations. Eliminating farm subsidies also gives the U. S. government an opportunity to reduce the ominous and ever-growing federal deficit. The U. S. needs to recognize that free market farming is the new, proven direction for its evolving agriculture industry.
