Chapter 4: Crisis and Activism: 1929-1940

Although the stock market crash of October 1929 represents, for many, the onset of the Great Depression, the decade of the 1920s was one of depression for much of agricultural America. Production had flourished under the high prices generated by World War I. Wartime demand ended suddenly with the Armistice in 1918. The 1920s saw overproduction and declining prices. When the Great Depression struck an already depressed rural America, the effect was devastating.

From 1910 to 1930, the number of farms in the U.S. steadily declined from 6.4 million to 6.3 million, and to 6.1 million by 1940. Clearly the trend was one of farmers moving out of agriculture. However, with the Great Depression gripping cities as well as rural areas, there were few alternatives. Farm mortgage debt rose from $3.2 billion in 1910 to $9.6 billion by 1930, and down to $6.5 billion by 1940. Farmers who had joined in the optimism of the 1910s and 1920s, were exercising great caution in borrowing in the 1930s, even when they could get the credit.

At the outset of the 2nd Session of the 71st Congress on December 2, 1929, the Committee on Agriculture and Forestry was chaired by Senator Charles McNary a Republican from Oregon in his third term as Chairman. The Committee members were 10 Republicans and eight Democrats. The Committee was located in room 328 of the new (Russell) office building. It was also at this time that the first women elected to the Senate was assigned to the Agriculture Committee. Hattie Caraway of Arkansas was elected January 2, 1932, to fill the vacancy caused by the death of her husband, Senator Thaddeaus H. Caraway. Mrs. Caraway asked for the Committee assignment because she wanted to carry on the programs her husband had initiated. (Hope Chamberlin, A Minority of Members: Women in the U.S. Congress, Praeger, New York, 1974, pp. 92-95.)

In response to the depression gripping rural America, the Agricultural Marketing Act of 1929, which created the Federal Farm Board from the Federal Farm Loan Board, with a stabilization fund of $500 million, was the subject of a Senate Committee hearing January 31, 1930. (71st Cong., 2nd Session, Hearing, "To Abolish the Federal Farm Loan Board and Transfer Functions to the Federal Farm Board" January 31, 1930, unprinted). The Act was a direct outgrowth of the unsuccessful attempts to get the McNary-Haugen proposals enacted into law. The Agricultural Marketing Act of 1929 was endorsed by President Hoover as a substitute for the proposal to increase the domestic price level for the major export crops relative to the world level. The Federal Farm Board had two major fields of activity: strengthening farmer cooperatives and engaging in direct price stabilization operations with the $500 million revolving fund made available to it.

Creating policies that benefit U.S. farmers in the world marketplace has been debated by Congress throughout American history. Depending on the domestic and international atmosphere, Congress has enacted legislation adjusting trade policies to reflect the political and economic realities of the time. Congress has debated and assessed domestic and international policy relationships, striving for agricultural, as well as general, trade policies that would benefit U.S. producers, consumers, and the Nation as a whole. Trade policies have ranged from protectionism during the 1930s, reflected in the Smoot-Hawley Tariff of 1930 (championed by Senator Reed Smoot a Republican of Utah and Congressman Willis C. Hawley a Republican of Oregon), to the gradual elimination of most tariff and nontariff barriers after World War II.

In addition, Congress established the Farmers Home Administration (FmHA) in response to the economic impact of the Great Depression of the 1930s. Both the Farm Credit System (FCS) and FmHA have played major roles in supplementing agricultural credit provided by private lenders such as commercial banks and life insurance companies by providing credit to enable producers to purchase farmland as well as to finance annual production expenses. The two lenders play different roles. The Farm Credit System provides credit to creditworthy borrowers. Farmers Home Administration makes financial assistance available primarily to family farmers unable to secure credit from private lenders.

By March, 1933, the beginning of the 73rd Congress, the Senate Committee on Agriculture and Forestry chairman was now Senator Ellison D. Smith, a Democrat of South Carolina, who, from his work as an organizer for cotton interests, was to gain the nickname "Cotton Ed." Senator Smith chaired a committee of 11 Democrats and eight Republicans, an exact reversal from 1929. The Committee at this time was dominated by Senators representing Western states. The West had 11 members, the Central states four, the South three, and the East one.

In 1933, President Roosevelt and Secretary of Agriculture Henry Wallace faced an unprecedented crisis in American agriculture. There had been sporadic outbreaks of violence on American farms and on January 25, 1933, the President of the American Farm Bureau Federation, traditionally the most conservative of the farm organizations, warned that "unless something is done for the American farmer we will have revolution in the countryside within less than 12 months." (Agricultural Adjustment Relief Plan: Hearings on H.R. 13991 before the Senate Committee on Agriculture and Forestry, 72nd Cong., 2nd Session p. 15, 1933)

Secretary Wallace responded to the mounting pressure by urging President Roosevelt to ask Congress to address farm problems at the special session which had been called for March 9, 1933, to act on the banking emergency. The President agreed and asked Wallace to call a farm leaders' conference to reach a consensus on legislation. (H. Wallace, New Frontiers, 1934, pp. 162-64). The fifty leaders proposed to the President that legislation conferring broad emergency powers on the executive branch be recommended to Congress. (American Farm Bureau Federation, Official News Letter, March 21, 1933) Secretary Wallace gave responsibility for drafting the legislation to Mordecai Ezekiel, a senior Agriculture Department economist, and Frederic P. Lee, a Washington lawyer employed by the American Farm Bureau Federation. (T.Saloutos, The American Farmer and the New Deal, 1982, pp. 44-46)

Roosevelt sent the draft to Congress on March 16, stating "I tell you frankly that it is a new and untrod path, but...an unprecedented condition calls for the trial of a new means to rescue agriculture."(77th Cong., Congressional Record 1933, p. 529.) Congress made a number of changes in the proposed legislation partly because Marvin Jones of Texas, Chairman of the House Agriculture Committee, insisted on emphasizing the voluntary and self-determining concepts of the legislation. (I. May Jr., Marvin Jones, The Public Life of an Agrarian Advocate, 1980, pp. 101-104)

Congress passed the far reaching legislation, and it was signed on May 12, 1933, as the Agricultural Adjustment Act. This Act authorized production adjustment programs that were a direct outgrowth of the experience of the Federal Farm Board. The Agricultural Adjustment Act of 1933 also authorized the use of marketing agreements and licenses, which had been used already by producers to promote orderly marketing of perishable fruits and vegetables. Under authority of the Agricultural Adjustment Act of 1933, large quantities of surplus food were distributed to needy households and to school lunch programs.

To meet the critical situation facing U.S. producers during the Great Depression, Congress enacted several new programs, domestic and international, designed to provide income support and supply stabilization for the farm sector. To encourage trade and alleviate the unfavorable effects of trade on domestic policy, Congress passed two significant pieces of legislation affecting agricultural trade. Section 22, the first nontariff legislation for the general regulation of agricultural imports, was added to the Agricultural Adjustment Act of 1933 by amendment on August 24, 1935. It was revised several times, but its purpose was to ensure that imports not interfere with Department of Agriculture domestic farm programs. It authorized the President to impose import fees or quotas, if deemed necessary.

The use of nonrecourse government loans (which could be repaid by delivery of the product) to support the price of storable crops such as cotton, corn, and wheat began in a modest way in the first year's activities of the Agricultural Adjustment Administration. To assure farmers of immediate market prices in line with expected longer run price levels, the Secretary of Agriculture, in the fall of 1933, made available nonrecourse loans on cotton and corn at levels in excess of current market prices.

In 1936 the Supreme Court of the United States declared major portions of the Agricultural Adjustment Act of 1933 unconstitutional as an encroachment upon the reserved rights of the states. (United States vs Butler, 297 U.S. Code 1, 68, 1936) Congress instead tried to solve the problem of price instability by providing incentives for farmers to reduce production and conserve land resources. The first general authority to conserve soil resources dates back to the early 1930s when dust from wind erosion in the Great Plains darkened the skies across America all the way to our eastern shores. Congress and the Administration moved quickly and replaced the 1933 Act with the Soil Conservation and Domestic Allotment Act of 1936. The Act established land and water conservation as a national policy and created the Soil Conservation Service (SCS) to develop and implement a long range conservation program.

The Farm Credit Act of 1933 established the third component of the system--local production credit associations to make short- and intermediate-term production loans to farmers. Congress created these associations to channel funds directly to producers from each intermediate credit bank because private lenders were unable to meet the credit needs of farmers coping with the Great Depression. Responding to the financing difficulties which farmer cooperatives had faced in the 1920s, the 1933 Act also provided for 12 district banks for cooperatives and a Central Bank to make loans to farmers' marketing, purchasing, and business service cooperatives. The Farm Credit Administration (FCA), which supervises the Farm Credit System, was established as an independent agency in 1933 by an Executive Order. Under a reorganization plan, the FCA was transferred to the Department of Agriculture in 1939. The Farm Credit Act of 1953 reconstituted the FCA under the direction, supervision, and control of the Federal Farm Credit Board and established it as an independent Federal agency. When Congress established each component of the FCS, the Federal Government provided capital to establish a financial base to carry out each bank's operations. The 1953 Act, however, declared the policy of Congress to favor increased borrower participation in the control and ultimate ownership of the Farm Credit System and the eventual retirement of all Federal Government funds. By 1969, all government funding had been retired.

Throughout the 1930s, commodity programs unsuccessfully attempted to annually adjust supplies of the major crops in line with available market outlets at satisfactory prices. Marketing agreements and orders, which promoted more organized marketing and gave producers increased bargaining power, also were utilized by the producers of milk for fluid use in a number of city "milk sheds". Since the United States imported much of its sugar, special legislation was passed in 1934 that allocated the domestic market between local producers, Cuban and other offshore producers, and provided for supplementary payments to domestic producers from a special tax on all sugar.

The Agricultural Adjustment Act of 1938 ultimately became the legislative cornerstone for commodity price support programs for nearly thirty years. It authorized mandatory supply controls through acreage allotments and marketing quotas. In an amended form, this Act served as the foundation for commodity program policy until implementation of the FAIR Act in 1996.

Under the Soil Conservation and Domestic Allotment Act of 1936, Congress first authorized the Agricultural Stabilization and Conservation Service (ASCS) to provide cost-sharing for soil and water conservation through the Agricultural Conservation Program (ACP). Under this program, the Federal Government shared costs with farmers and ranchers to assist them in carrying out soil-building and soil and water-conserving practices. ASCS, like the SCS, eventually had employees in virtually every rural county to deliver cost-sharing assistance to individual producers. Each county also had advisory boards, like the soil conservation districts, to help determine which practices should receive priority funding. Congress amended the goals and authorities of this program in title X of the Agriculture and Consumer Protection Act of 1973, and made less significant adjustments to the program through other enactments during the past decade.

During the Depression, Congress not only passed legislation assisting farmers, it also provided for food assistance to help meet the nutritional needs of poor people. Food assistance programs also were aimed at diminishing the excess supply of farm products. The high unemployment levels of the Depression created the paradox of hunger side-by-side with the low prices and mounting surpluses of farm products. Under authority of the Agricultural Adjustment Act of 1933, large quantities of surplus food were distributed to needy households and to school lunch programs. By 1939 the federal government was distributing foods to 12.7 million unemployed and poor persons suffering under the weight of the Great Depression. The early federal commodity donations also helped to spur expansion of locally-operated school lunch programs, as schools became the first regular institutional recipients of "Section 32" foods. An experimental food stamp program, initiated in 1939, was suspended in 1943.

Section 32 of P.L. 320, the Act of August 24, 1935, provided authority for subsidy payments to be made to assist exports of specified U.S. surplus commodities such as wheat and cotton. Section 32 authorizes three programs: (1) to encourage the exportation of agricultural commodities and products thereof; (2) to encourage domestic consumption of commodities or products by diverting them from the normal channels of trade and commerce, or by increasing their use among persons in low income groups; and reestablish farmers, purchasing power by making payments in connection with the normal production of any commodity for domestic consumption. During the late 1930s, more than 60 different types of section 32 acquired commodities were being distributed. Meanwhile, separate programs were underway aimed at improving the nutritional status of needy families in general. These programs would not be targeted to special groups like children but rather be made available mainly on the basis of low income.

The Depression era spawned a number of credit and grant programs designed to meet the basic needs of rural people and their communities. The impact of the Depression had revealed in stark terms the disparity in standards of living between city dwellers and rural residents. Congress responded to this problem, initially by providing funding for electrical service to rural areas and providing resources to make water available where droughts and water shortages had adversely effected rural residents. Congress created the Rural Electrification Administration and the Farmers Home Administration in part to provide these basic services.

The second major source of Government-sponsored agricultural credit, the Farmers Home Administration, had its beginnings in the Resettlement Administration, a rural rehabilitation agency established by Executive Order in 1935. This agency was created to advance short-term loans to low-income tenant farmers who did not qualify for credit from other lenders.

The Rural Electrification Administration (REA) was also established by Executive Order by President Roosevelt in 1935 as part of the New Deal emergency relief program. At that time, only 12 percent of all farms in the United States had electric service. The Rural Electrification Act of 1936 established REA as a lending agency with the statutory authority to make loans to improve electric service in rural areas. Loans could be made to construct and operate generating plants and transmission lines, and to develop distribution lines to bring power to rural residents without central station service. Until 1944, REA made loans primarily to rural electric service cooperatives and public power districts at interest rates that fluctuated with the Government's cost of borrowing money. The Department of Agriculture Organic Act of 1944 liberalized the terms of REA loans by establishing a fixed interest rate at the approximate cost of borrowing money, and extended the loan repayment period.

The establishment and expansion of the Farmer's Home Administration's role to assist rural development activities had its genesis in Congressional passage of the Water Facilities Act of 1937. This law authorized the Resettlement Administration to make loans for individual and association farm water systems in seventeen western States. In 1954, Congress expanded this water supply program to apply nationwide, permitting non-farm customers in rural towns to tie into farm area water systems.

In July 1937, Congress passed the Bankhead-Jones Farm Tenant Act to expand the Resettlement Administration's farm lending programs. This Act authorized the Resettlement Administration, shortly thereafter renamed the Farm Security Administration, to implement a new program that made available supervised farm ownership loans with 40-year terms to farmers who lacked other credit sources to purchase their own land and to improve their farms and homes. This program was successful in strengthening many family farmers who helped meet the awesome food-producing challenges during World War II.

In some ways, the Bankhead-Jones Act was an extension of the earlier Purnell Act of 1925 which had expanded the scope of agricultural research to include investigation of the social and economic problems associated with agriculture. The Purnell Act also expanded Federal funding to further the development of the agricultural extension system.

During the 1930s, the general philosophy of farm policy was that of assisting producers to adjust their production and marketing to improve and stabilize farm income and prices in a period of continued unemployment. The overall objective was the attainment of prices by farmers equal to a certain percentage of "parity" in purchasing power with nonfarm groups-i.e., a purchasing power equivalent to that enjoyed by farm producers in the period 1910-14.

The advent of World War II caused a change in attitudes toward farm policy and its objectives. During the war years the emphasis was on maximum production of farm commodities to assure ample supplies of food for the United States and its allies. The Federal Government was exhorting farmers to produce more. In this atmosphere, farm leaders and others felt that potential adverse post-war effects of expanded production would require some compensatory action.

During the 76th Congress in 1939, Senator Ellison D. "Cotton Ed" Smith, a Democrat of South Carolina, chaired the Agriculture and Forestry Committee made up of 13 Democrats and six Republicans. The staff of the Committee remained stable through the decade ranging from five to seven employees, varying from all women in 1929 to an equal number of men and women by 1940 (see appendix). One female clerk, Isobel Smith in 1936 changed her name to Isobel Lawton, the same as the Chief Clerk of the Committee, C. Alfred Lawton. It appears that romance was alive and well on the Committee in the midst of the Great Depression.

As the end of the 1930s approached, issues considered by the Senate Agriculture and Forestry Committee had been substantially transformed. As agriculture had come out of the Great Depression, spurred by the demands of a wartime economy, committee hearings of 1930 focused on using domestic farm surpluses. By 1942, there was no talk of surplus. Instead, Committee hearings now focused on how cotton and rayon could be used in the manufacture of rubber tires for the war effort.