The Agricultural Adjustment Act is a U.S. federal act that placed restrictions in farming by giving planters subsidies for them not to farm some portions of their lands. The subsidies were also given for them to get rid of any excesses in livestock being bred. The goal was actually to bring down surplus of produce or livestock in order to increase the value of these livestock and crops. In order to raise money for such subsidies, the government imposed a tax on farm produce processing firms. The law also paved the way for the establishment of the Agricultural Adjustment Administration which would take charge of subsidy allotment. The Agricultural Adjustment Act was actually considered a pioneering farm law in the United States.
To put the law into perspective on why this law came into being, the government wanted to do something to uplift the difficult condition of the farmers especially during the early 1930s. In order to increase the prices of their crops and thus their earnings, the Act helped to eliminate excess supply. Tenant farmers thus were contracted not to plant cotton for instance in the whole area they tilled but only on a portion of the lot. The farmers got subsidies by restricting their production. There were however disadvantages to this Act. It benefitted more the big time food processors and farmers but strongly put the small tenant farmers to a disadvantage as land owners just sought wage labourers instead of full-time farmers.
There was also an Amendment to the Agricultural Adjustment Act known as the Thomas Amendment since it was initiated by Sen. Elmer Thomas. This amendment combined new economics views with that of populist views. Through the Thomas Amendment, the president would be compelled to give powers to the Federal Reserve for the buyout of federal obligations worth US$4 billion every time a currency expansion is desired. If there is a disparity for free market operations, the head of state could also opt to allow the United States treasury to produce up to US$4 billion while reducing the gold component of the dollar by up to fifty percent. The treasury could also accept US$100 million worth of silver priced at least fifty cents/ once as payments for the borrowing of some European countries from the first World War. The Agricultural Adjustment Act Amendment or the Thomas Amendment was however seldom used so that the treasury also seldom got payments from such borrowings.
The Thomas Amendment also became the basis of Pres. Roosevelt’s ratification of the Pittmann London Silver Amendment which gave marching orders to the U.S. mints to purchase the whole bulk of silver produced for 64.5 cents. Another striking application of the Amendment happened in 1934 as the president pushed to decrease the gold component of a dollar to just 40.94%. Despite this policy, bulk prices continued to rise.
Perhaps, the greatest impact that the Amendment brought was the rise in government control when it comes to monetary policies. The Thomas Amendment actually aimed to bring down the quantity of silver that are held privately and instead increase its circulation in the economy.