Supreme Court Strikes Down Agricultural Adjustment Act in United States v. Butler, Invalidating Key New Deal Farm Program

On January 6, 1936, the Supreme Court decides United States v. Butler in a 6-3 ruling that invalidates the Agricultural Adjustment Act (AAA), striking a devastating blow to Roosevelt’s New Deal farm recovery program just eight months after the Schechter Poultry “Black Monday” decisions. Justice Owen J. Roberts, writing for the majority, acknowledges Congress possesses broad power to tax and spend for the “general welfare” but rules that the AAA’s processing tax and conditional subsidies to farmers who reduce crop acreage constitute unconstitutional federal regulation of agriculture—a domain the Court reserves to states under the Tenth Amendment. The decision condemns millions of Depression-era farmers to continued economic devastation, voiding the program that provided crop reduction subsidies funded by taxes on processors like plaintiff William M. Butler of Hoosac Mills Corporation.

Justice Roberts’ opinion characterizes the AAA’s “so-called tax” as not a true tax because payment proceeds are earmarked for farmers complying with “unlawful and oppressively-coercive contracts” to reduce production, making the entire scheme—tax collection, appropriation, and disbursement—merely “means to an unconstitutional end” that invades states’ reserved powers. The majority concludes that while the taxing power is broad, it cannot be weaponized to regulate agricultural production, an area of traditional state authority. Justice Harlan Fiske Stone’s passionate dissent warns against “judicial arrogance,” writing that “Courts are not the only agency of government that must be assumed to have capacity to govern” and that “the only check upon our own exercise of power is our own sense of self-restraint”—language widely interpreted as rebuking the conservative justices for imposing their economic ideology through constitutional interpretation.

The Butler decision represents corporate processors’ successful use of the judiciary to block New Deal reforms, following the established pattern where business interests invoke states’ rights and constitutional limitations to prevent democratic regulation. However, because Roberts focuses on the tax mechanism rather than the subsidy principle, Congress salvages the AAA by passing the Agricultural Adjustment Act of 1938, funding identical subsidies from general revenues rather than a dedicated processing tax. The Court’s subsequent reversal in cases like Steward Machine Co. v. Davis (1937, upholding Social Security taxes) and Wickard v. Filburn (1942, upholding agricultural regulation under commerce power) ultimately renders Butler a “dead letter,” but the 1936 ruling exemplifies how judicial obstruction temporarily blocks democratic reforms favoring ordinary Americans over corporate profits.