During World War I, American farmers enjoyed the rare luxury of high prices; the European belligerents were unable to feed their populations and U.S. production was expanded to meet the need. A rapid reversal of fortunes occurred after the war, however, when agricultural pursuits were resumed in Europe and massive new sources of supply developed, in particular the production of grains in Australia, Argentina, Canada and Russia. Prices plummeted in the U.S. in the 1920s and farmers were left holding huge surpluses; many resorted to borrowing, or mortgaging their farms in order to remain in business. The farmers’ plight was especially hard to take when so many other segments of the American economy were prospering in the Roaring Twenties. American agriculture was unable to follow an isolationist path as was the case in diplomacy and manufacturing. Farmers who produced in excess of domestic consumption tried to sell their excess on world markets where they were at the mercy of global competition. American producers lacked the will and cohesion to restrict their output in order to drive prices up. Experts in the United States began to advance the idea that some form of regulation of agricultural exports was needed. George Peek, president of the Moline Plow Company, was one of these. Reasoning that prosperous farmers would buy more plows, Peck proposed a two-tiered pricing system:
[i] Peter Zavodnyik, The Rise of the Federal Colossus: The Growth of Federal Power from Lincoln to F.D.R., Praeger, Santa Barbara, California, 2011, p. xvi.
[v] Paul D. Moreno, The American State from the Civil War to the New Deal: The Twilight of Constitutionalism and the Triumph of Progressivism, New York, Cambridge University Press, New York, 2013, p. 183.
The farm block also became a powerful faction within the Republican Party and when the Republicans took control of the federal government in the election of 1920 this faction pushed for greater government involvement in agriculture. In the aftermath of World War I the nation was faced with a severe economic downturn, the depression of 1920-1921, which was widespread.
Coolidge also described the consequence of the equalization fee as “a most dangerous nullification of one of the essential checks and balances which lie at the very foundation of our Government…”[xii] Coolidge argued that this would “certainly involve an extraordinary relinquishment of the taxing power on the part of Congress…”[xiii] Another reason why Coolidge opposed McNary-Haugen was that it depended on the actions of foreign governments, which went against the America-first policy tendencies of the Administration. As Coolidge argued:
In response to the agricultural depression of the 1920s the farm block in Congress turned to what became known as McNary-Haugenism. McNary-Haugen was sponsored by Senator Charles McNary of Oregon and Representative Gilbert Haugen of Iowa. “McNary-Haugen was a plan whereby farmers would sell their surpluses to the government, which would then market them abroad,” noted Robert Sobel.[iv] Paul Moreno wrote that “the principal farm-aid plan was to establish a Federal Farm Board to purchase certain commodities at prices equivalent to those of the prosperous pre-war period, and to ‘dump’ the surplus in foreign markets.”[v] In addition, “the loss would be offset by an ‘equalization fee’ paid by the farmers,” noted Moreno.[vi] The policy objective of McNary-Haugen was to elevate commodity prices and restore prosperity to agriculture by ending the surplus, while providing “a minimum price for their crops.”[vii]
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