The Obama administration invoked a 1942 Supreme Court agricultural-policy case to justify its sweeping health- care law compelling individual Americans to purchase health insurance. The role of Wickard v. Filburn in sanctifying Obamacare is a reminder of how the New Deal continues to imperil our rights and liberties. Unfortunately, few U.S. Supreme Court justices or journalists recognized the sordid path that led to the landmark decision that the Obama administration invoked.
In 1933, Franklin Roosevelt took office amid promises to revolutionize agriculture. Unfortunately, he saw the farm crisis as proof of the failure of the free market, rather than proof of the incompetence of the Farm Board. The New York Times reported on March 12, 1933, shortly after Roosevelt’s inauguration, that Agriculture Secretary Henry Wallace and farm leaders were appealing to Roosevelt for the appointment of a “farm dictator” to solve the farm crisis. Wallace and others were convinced that only by vesting vast arbitrary powers in a farm dictator could American agriculture be saved.
The 1933 Agriculture Adjustment Act (AAA) opened with a “Declaration of Emergency” and noted that the act should “cease to be in effect whenever the President finds and proclaims that the national emergency in relation to agriculture has ended.” Wallace proclaimed that the emergency justified temporary programs to pay farmers to kill 6 million baby pigs and plow up 10 million acres of cotton. The administrator of the AAA, George Peek, celebrated the cotton plow-up as “an epoch in American Agriculture…. History has been made during these days.” The USDA was ridiculed for “resolving the paradox of want amid plenty by doing away with the plenty.” The 1933 farm legislation was widely denounced as being an instrument of “class warfare” — based on the idea that the only way to help farmers was to effectively attack consumers and taxpayers.
Wrecking the market
The New Deal looked upon agriculture as though the “production problem” had already been solved and the only thing missing was proper control of farmers and consumers. Wallace denigrated the use of labor-saving devices. Assistant Secretary of Agriculture Rexford Tugwell declared in 1934, “Today our primary need is not to stimulate enterprise, but to order and plan it in the public interest.” M.L. Wilson, USDA undersecretary in 1934, declared, “Technological efficiency alone is seldom or never all-important.” Farm programs were launched with a contempt for efficiency and a neglect of productivity. The original agricultural planners had unlimited faith in their capacity as benevolent despots.
By promising farmers far more than the market value of their crops, the New Deal encouraged farmers to produce far more than could be sold at government-controlled prices. Politicians encouraged farmers to overproduce, and then cited crop surpluses as proof of the need for political management of agriculture. In 1934 the government imposed heavy taxes on all cotton and tobacco farmers who refused to limit their production as the government demanded.
The AAA set American crop prices far above world market prices. Cotton exports fell from 14 million bales in 1929 to 3.5 million in 1938. In 1931, the United States exported 131 million bushels of wheat; in 1934, after the government paid farmers to slash production, the United States was a net importer of wheat. Agricultural economist B.H. Hibbard reported in The Nation in 1934 that the AAA “put a thousand times as much effort into reduction of output at home as they put into the effort to restore foreign trade during their first year in control.” Economist (and later Nobel laureate) Theodore W. Schultz denounced New Deal farm programs for “putting a ‘Chinese Wall’ around our export farmers.”
Politicians first wrecked the agricultural export markets, and then used the loss of exports to justify taking over American farmers’ businesses. AAA administrator Chester Davis declared that “unless and until the U.S. recovers the lost export markets, the adjustments in [crop] production will have to be made.” In 1935 Roosevelt even bragged about his administration’s destruction of farm exports: “Now, with export surpluses no longer pressing down on the farmers’ welfare, with fairer prices, farmers really have a chance for the first time in this generation to benefit from improved methods.”
Roosevelt’s Brain Trust was convinced that raising farm income was the key to reviving prosperity. At a time when one-quarter of the American work force was unemployed, the federal government imposed a heavy tax on food items in order to raise revenue for farm aid. Thanks to the heavy taxes, food consumption declined in 1935 even below the levels of previous depression years.
Many of the architects of federal agricultural policy in the 1930s thought the Soviet economic system was superior to that of the United States. Tugwell himself praised the Soviet Union for its “operation of industry in the public interest rather than for profits.” (Tugwell was accused of learning all he knew about agriculture from a visit to Moscow.)
In 1936, the Supreme Court examined the 1933 Agriculture Adjustment Act and ruled it unconstitutional. The farm programs effectively imposed severe penalties on farmers who refused to obey the Roosevelt administration’s demands that they curtail their production. In a landmark 1936 case striking down farm programs as unconstitutional, the Supreme Court observed,
The regulation is not in fact voluntary. The farmer, of course, may refuse to comply, but the price of such refusal is the loss of benefits. The amount offered is intended to be sufficient to exert pressure on him to agree to the proposed regulation…. This is coercion by economic pressure. The asserted power of choice is illusory.
A few weeks after the Supreme Court struck down the Agricultural Adjustment Act, Congress reauthorized farm programs — with minor changes intended to circumvent the specific grounds of the Supreme Court’s nullification of federal farm programs.
In 1942, in Wickard v. Filburn, a more pro-government Supreme Court ruled that farm programs could legally penalize an Ohio farmer for the crime of eating the wheat that he sowed. The federal wheat program dictated how many bushels of wheat each farmer could produce; government administrators were so devoted to maintaining a stranglehold on the wheat supply that they would seize the title to a farmer’s entire wheat harvest if he planted a single acre more wheat than local farm bureaucrats permitted. The Court, in sanctioning the dictatorial power of farm bureaucrats over farmers, grossly misrepresented recent American history. The Court observed,
The wheat industry has been a problem industry for some years. Largely as a result of increased foreign production and import restrictions, annual exports of wheat and flour from the United States during the ten-year period ending in 1940 averaged less than 10 percent of total production, while during the 1920’s they averaged more than 25 percent. The decline in the export trade has left a large surplus in production which, in connection with an abnormally large supply of wheat and other grains in recent years, caused congestion in a number of markets….
Thus, because the federal government had intentionally undermined wheat exports, it automatically acquired the right to exercise unlimited power over every bushel of wheat produced in the United States. The Court also noted, “It is of the essence of regulation that it lays a restraining hand on the self-interest of the regulated…. It is hardly lack of due process for the government to regulate that which it subsidizes.”
Congress and the Agriculture Department presumed that providing aid to some farmers created a right to absolutely control all farmers. The Court concluded that the government was justified even in restricting “the amount of wheat … to which one may forestall resort to the market by producing for his own needs.” Once the federal government wrecked the market, the government became entitled to control of the livelihood of everyone who had to depend on that market.
New Deal agricultural programs were a dismal failure at returning prosperity to the farm. Ezra Taft Benson, secretary of Agriculture under Dwight Eisenhower, noted that “cash farm income, less government payments, did not reach the 1929 level until 1941, a war year.” Farmland values continued to decline throughout the 1930s and began rising only after World War II became imminent. The continuing decline of farmland value was the clearest vote of no-confidence in government agricultural controls by farmers.
The follies of New Deal-era farm policy should have provided Americans an unforgettable lesson on the danger of arbitrary power. Politicians took custody of the agriculture economy — and then wrecked it. In the name of protecting farmers against themselves, the government did dozens of things that no intelligent farmer would ever have done. The worse politicians failed, the more powerful they became. The cure for every subsidy was another subsidy; the answer for every failed control was a tighter control; and there was no problem caused by political manipulation that could not be cured by more manipulation.
There are stark parallels between federal mangling of farm markets and the pervasive distortions that the government has inflicted on health care. Unfortunately, in both areas, politicians and bureaucrats have almost never been held liable for the damage they have done.
This article originally appeared in the June 2012 edition of Future of Freedom. Subscribe to the print or email version of The Future of Freedom Foundation’s monthly journal, Future of Freedom (previously called Freedom Daily).