Agricultural Policy
The evolution of the federal government’s efforts to stabilize
agricultural markets.
The federal government had always maintained policies
designed to encourage the development of agriculture, but
not until the 1920s did it formulate policies to specifically
regulate fundamental market forces in the agricultural sector.
Intensifying urbanization at the turn of the twentieth century generated increased demand for American farm products and subsequent improvements in the standard of living
for American farmers. World War I further stimulated this
expanding market as European allies began to depend on
American agricultural exports. However, this wartime
demand could not be sustained after the Armistice, and agricultural prices fell precipitously.
As falling commodity prices began to trigger bankruptcies
in rural areas, Congress searched for the means to strengthen
agricultural markets. An alteration of the mandate of the War
Finance Corporation provided credit for farm exports; the
Capper-Volstead Act (1922) protected agricultural cooperatives from antitrust prosecution; the Fordney-McCumber
Tariff (1922) protected American farmers from foreign competition. The most controversial of these efforts came with the
McNary-Haugen legislation. Beginning in 1924, members of
Congress attempted to legislate a price support system in an
effort to restore to farmers the purchasing power they had
during the prewar boom. This system would guarantee
domestic prices for key agricultural products and dump any
Agricultural Policy 5surpluses on the international market. President Calvin
Coolidge’s two vetoes (in 1924 and 1928) of the McNaryHaugen legislation sparked a debate over farm policy that
formed the groundwork for the New Deal’s approach to agriculture in the administration of Franklin D. Roosevelt.
The farm crisis that began after World War I continued to
deepen with the Great Depression. Under the New Deal, the
federal government responded with the Agricultural
Adjustment Act (1933). As it had done with the McNaryHaugen proposals, Congress designed the AAA to guarantee
farmers a higher standard of living by enabling the federal
government to set prices for key agricultural products. Unlike
McNary-Haugen, the bill contained limits on agricultural
production. By the end of the 1930s, the government’s ability
to set minimum prices for agricultural products and to limit
the number of acres in production formed the core of federal
agricultural policy.
This effort to create stability in prices coincided with support for modernization. Under the Rural Electrification
Administration (REA), farmers in remote areas gained access
to inexpensive electricity. The REA encouraged diversification by permitting extensive use of technologies, including
refrigeration, irrigation pumps, and storage ventilation systems. The federal government built dams and levees to control flooding. These initiatives worked to improve the
profitability of farming and raise the standard of living in
rural areas.
The goals of agricultural policy set during the New Deal
continued during World War II. As had been the case in
World War I, demand for agricultural production increased
tremendously. The federal government permitted farmers to
put more land into production temporarily to meet wartime
demand. However, at the end of the war, the government
quickly reined in production to prevent agricultural surpluses that would have lowered commodity prices and farmers’ income.
During the postwar period, efforts by the federal government to prevent overproduction became complicated due to
continued improvements in farm technology. During the
Eisenhower presidency, the administration initiated two
major adjustments to compensate for this problem. Under
the Agricultural Trade Development and Assistance Act of
1954 (PL 480), farmers could export agricultural surpluses to
developing nations to alleviate food shortages. Exports under
PL 480 projected American influence abroad while absorbing
the surplus production of American farmers. To further limit
the growing stocks of grain and cotton, the government created the Soil Bank, which permitted farmers to take land out
of production for conservation purposes. The Soil Bank initiated a long-term pattern in which overproduction was
curbed for reasons of ecological protection.
The construction of agricultural policy presented a
conundrum in the postwar era. The ideal of the family farm
permeated American culture, and the government remained
committed to creating the circumstances under which family
farms could provide a reasonable standard of living.
However, the costs of agricultural programs remained high.
As farmers made up a declining proportion of the American
population, price support systems became harder to legitimize.
During the 1960s, federal agriculture policy continued to
curtail surplus production and raise farm incomes, but it
placed greater emphasis on guaranteeing low food prices to
American consumers. The government dropped price support levels to reflect prevailing world market prices, not
domestic spending patterns. This action by the government
lowered food prices for American consumers and simultaneously pushed American farmers into more competition in
the international market. The political effort to link low food
prices and agricultural policy expanded under President
Lyndon B. Johnson’s Great Society, as the U.S. Department of
Agriculture (USDA) supervised the food stamp and free
school lunch programs.
The debate over farm subsidies intensified during the
1970s and 1980s, as American political rhetoric emphasized
the importance of lowering food prices and limiting spending on farm subsidies. The Agricultural and Consumer
Protection Act of 1973 reformulated the price support system. Under this new “deficiency payment” system, crop prices
were compared with a USDA target price, and farmers
received compensation for any shortfall. The deficiency payment system continued to form the basis for federal agricultural policy into the presidency of Bill Clinton, but it did little
to curb overproduction or raise income levels for family
farms. This failure was further complicated by increasing
public support for balancing the federal budget by cutting
spending for deficiency payments.
Dissatisfaction with the high costs resulting from federal
agriculture policy led to the passage of the Federal
Agricultural Improvement and Reform Act in 1996. The
product of conservative rhetoric supporting “freedom to
farm,” the new policy—designed to eliminate federal subsidies and encourage diversification according to international
market demands—returned American farmers to a free market system. The act marked the first legislative attempt to
abandon the direction of marketplace regulation initiated in
the 1920s.