Where Farm Subsidies Came From

With the economy what it is these days (bad), Americans are hearing a lot about the Great Depression of the 1930s and FDR's New Deal. Believing that the New Deal worked, many folks are calling now for similar federal government interventions to get the country back to prosperity.

Before haphazardly passing any more new subsidies and programs, it would be wise for America to take a communal deep breath and consider the short-term and long-term effects of New Deal policies before we continue replicating them on a massive scale.

Back in the 1930s many Americans were losing their homes and farms. Feeling compelled to "do something" to save the farmers, FDR and his supporters passed the Agricultural Adjustment Act of 1933 (AAA) to help stabilize and elevate commodity prices for farmers.

At the time, farmers' incomes were declining, just like most Americans at the time, and they couldn't pay the debts they had accrued based on the higher incomes they were earning prior to the Great Depression. To get farmers' incomes higher so they could pay their debts and not lose their farms, FDR used the AAA to reduce the amount of commodities produced by destroying crops and livestock. It is estimated that over 6 million hogs were destroyed by the program while many Americans went hungry.

In the short term the policy may have "worked" by raising prices of some commodities. Of course, the non-farmers, whose incomes were also dropping, would have had to pay more to feed their families which would have reduced their ability to pay other bills like home mortgages.

Despite the U.S. Supreme Court having rejected the AAA as unconstitutional in 1936, the Act is considered the foundation of modern farm subsidies since FDR would resurrect the idea in 1938 with a new Agricultural Adjustment Act.

Last year, the 2008 Farm Bill cost the nation roughly $89 billion dollars for that fiscal year. Most of that amount doesn't even go directly to farmers. Included in the 2008 Farm Bill are subsidies for food stamps, rural energy development, forests, reconstructing farming in Iraq and Afghanistan, and other items one wouldn't traditionally associate with farming in America.

Those are the long-term effects of the New Deal. What started out as an ultimately counterproductive attempt at helping farmers keep their farms during the Great Depression has morphed over the last seventy years into a burden on our generation that is too great to ignore.

To help you understand where things started out, we just added a whole new section on the Agricultural Adjustment Acts of 1933 and 1938. Check out the quotes, the charts, the commentaries, the audiovisuals, and definitely read the primary documents.

Keep all of it in mind when you hear politicians and planners today calling for a "New Deal 2.0" involving subsidies for green technology, infrastructure of all sorts, homeowners, and other projects. Beyond the injustice of subsidies, the fiscal and regulatory burden from morphing New Deal policies is already too great on our generation. How can we possibly sustain more?