Pipe Dreams: The Evolution of the Farm Security Administration, 1935-2004
Elanor Starmer
October, 2004
Fundamentals of U.S. Agriculture
Prof. William Lockeretz
In his study of New Deal cooperatives, historian Paul Conkin describes the demoralization of a country in the throes of economic depression and industrial stagnation: “The glittering lights of the great city,” he reflects, “now only too often bared men’s aimless, hopeless wanderings in search of employment. The powerful urban magnet, which had drawn millions of farmers into its enticing fold during the [nineteen] twenties, had lost much of its attraction. As progress slowed, many men turned their eyes back to the land, to the old homestead, to security, to a memory” (Conkin, 11). For the administration of President Franklin Delano Roosevelt, and particularly for Assistant Secretary of Agriculture Rexford Tugwell, a look back at America’s rural legacy held equal promise. Watching the nation struggle against a market collapse beneath the black skies of the dust bowl, Tugwell and others began an experimental program of rural rehabilitation and resettlement whose lofty goals included, in Tugwell’s words, “end[ing] the physical abuse of our soil and the resulting erosion of our land… [and ending] what might be called human erosion—the wasting away of millions of our people in a hopeless struggle to earn a living from lands which will not support life” (as quoted in McGovern, 216). The Resettlement Administration, later the Farm Security Administration (FSA), was born into a social and economic environment so extreme that its broad reformist agenda was tolerated by individuals with widely divergent political philosophies. As economic conditions improved during the early 1940s, however, the goals and ideology of the FSA butted heads with a reemerging faith in the merits of capitalism and individualism and a distaste for government support programs. During the second half of the twentieth century, the agency that began as an experiment in social reform transformed into a credit agency increasingly divorced from its traditional mission to serve the poorest and most needy of America’s farmers.
The 1920s and early 1930s saw a surge of migration from rural to urban areas and back again, as agricultural prices and the stock market crashed to the ground. A decade of drought descended on Great Plains communities, exacerbating the environmental devastation wrought by years of land mismanagement and feverish overproduction. As another surge of migrants flooded out of the Dust Bowl in search of relief, and low-income urban residents and rural families from other areas of the country foundered, the newly inaugurated Roosevelt Administration quickly enacted several emergency measures to stem the crisis. Among them was the creation of the Federal Emergency Relief Administration (FERA), whose role was to give direct relief payments to impoverished farmers (McConnell, 85).
If the Great Depression had been a shorter blip on the radar screen of U.S. history, FERA’s stopgap approach to relief may have been enough. As it turned out, however, the nation was in for a long and difficult decade. Realizing that a longer-term plan would be needed if the growing numbers of low-income residents were to emerge on their feet, the Roosevelt Administration created a loan program to help poor farmers obtain land and equipment, also administered by FERA, in 1934 (McConnell, 85). Several other programs targeting low-income citizens emerged at the same time, among them a subsistence homesteads program championed by humanist farm leader M.L. Wilson of the Interior Department, who hoped to enable the urban poor to resettle in rural communities with government support. In addition, the Roosevelt Administration attempted to address the fragile state of the rural environment by charging the Agricultural Adjustment Administration (AAA) with the authority to purchase submarginal land for retirement or improvement (Conkin, 80, and NARA records, internet).
It quickly became clear that these early New Deal relief programs had several gaping holes through which poor farmers and rural residents soon began to fall. Landowners who took advantage of government loans realized that they could purchase a tractor on the federal dime and reduce their need for extra labor, increasing the efficiency of their operation at the expense of poor tenant or migrant farm workers with few other options (Ganzel, 4). The loan program also failed to address a fundamental issue facing rural communities during the 1930s: there were simply too many farmers trying to cultivate mediocre land. In 1935, President Roosevelt signed an executive order creating the Resettlement Administration, an agency under whose broad umbrella were brought the subsistence homestead, land retirement, and farm loan programs. The Resettlement Administration would prioritize targeted support for poor tenant farmers, sharecroppers, and migrant farm laborers and institute a government-run plan for the resettlement of families displaced by government programs or environmental disasters (NARA records; Danbom 217; and Roosevelt, EO 7027). The programs were not exclusively for farmers, but sought to address some of the problems affecting non-farm rural residents and low-income urban residents as well.
On paper, the Resettlement Administration (RA) looked to be a collection of environmental, economic, and development programs with the broad goal of alleviating some of the conditions of rural poverty and addressing the problem of poor land management in rural areas (McConnell, 87). President Roosevelt’s executive order laid out the major areas of authority for the new agency: to provide rural rehabilitation relief in stricken agricultural areas, and to resettle low-income families from rural or urban areas; to carry out environmental improvement projects, including soil erosion prevention, reforestation, flood control, and “other useful projects”; to provide loans for low-income farmers, particularly tenants, to purchase land or equipment; and to purchase or acquire submarginal land for retirement (Roosevelt, EO 7027). A significant part of the agency’s budget and manpower went to administer the rehabilitation projects inherited from FERA. Long-term, low interest loans were given to individual farmers who could not obtain credit elsewhere, allowing poor farmers to keep their land and purchase equipment, and some tenants and sharecroppers to become farm owners (Clark, 261).
Although many of the projects carried out by the RA were inherited directly from other agencies, the philosophy guiding how these projects were to be carried out, and their broader purpose, changed substantially when the RA took over. Tugwell was vocal in his belief that resettlement and rehabilitation could lead to significant social and economic change. A student of the social sciences, he saw the New Deal as an opportunity to construct “an organic nation, part linked intelligently with part, advancing to the fullest extent of its capacities” (as quoted in Conkin, 149). Conkin elaborates on his radical philosophy:
To [Tugwell], the most iniquitous institution was uncontrolled capitalism… or, in his terms, any system that permitted the ‘ganging up’ of the unscrupulous few against the many, any system that invited struggle rather than cooperation…. The depression, Tugwell believed, was caused by an inequity in income distribution, leading to a lowered purchasing power on the part of too many people. There was too much scarcity in the midst of surpluses, all of which pointed to the necessity of institutional changes (Conkin, 149).
The vague wording of the powers invested in Tugwell and the RA, and Tugwell’s close relationship with President Roosevelt, gave the agency leverage to begin a series of programs aimed not just at alleviating the immediate conditions of indigence and environmental degradation ravaging rural communities, but also at addressing what Tugwell saw as fundamental flaws in America’s social and economic order out of which the problem of poverty arose. Among the more radical programs initiated during the early years of the RA’s existence was the creation of a small number of cooperative farms. The “clients” who settled on the cooperatives were generally either refugees from land retirement projects, poor tenant farmers, or young people entering the farm business. The RA hand-picked clients to join the cooperative farm, taught new farming methods, closely monitored farm practices, and constructed and maintained public facilities. Land, equipment, and other capital were owned and operated collectively by members of the community. The RA initiated between thirty and forty cooperative community farms before these communities were curtailed by Congress in 1937. (Conkin, 180).
In addition, between 1935 and 1946, the RA and its successor agency, the FSA, sponsored cooperative health programs for rehabilitation and resettlement clients. For a small fee, farmers could buy into a low-cost prepayment health insurance plan. Mobile clinics were set up for migrant workers in Arizona and California, and statewide medical corporations helped drought victims in the Dust Bowl and the Dakotas. Medical officers administering the program expressed in public statements and internal correspondence that the purpose of these programs was both to provide immediate care for poor farmers, and to serve as an experimental model for a broader national government-run health program (Clark 258).
Tugwell also launched a project to bring the faces and stories of the rural poor into the public eye. The Historical Section of the RA/FSA, and particularly the section’s photography project, was in some ways a PR tool to cauterize public support for the programs; it helped “humanize” and expose the harsh reality of depression life for tenants, migrant workers, and impoverished rural residents who fell victim to the financial and environmental conditions of the time. Led by Columbia professor Roy Striker, the project hired well-known photographers such as Dorothea Lange and Walker Evans to document life in the Great Plains, California, and parts of the South and Midwest. It resulted in a striking documentation of depression conditions for a population that had been, and has since been, largely invisible to policymakers and America’s elite (Ganzel, 4).
Unfortunately, the Historical Section’s work had little appreciable impact on the willingness of Congress or powerful interest groups like the Farm Bureau to accept the more radical programs or their reformist goals (Young, 191). A congressional report released in 1944 says as much: “There has never been congressional sanction of the objectionable and theoretical phases of the [agency]…. The Congress did not authorize resettlement projects along communistic lines” (House Report 1430, 11). The controversy surrounding Tugwell’s more radical programs was vastly disproportionate to the percentage of the RA budget used to fund them, but nonetheless would ultimately prove to be a debilitating force for the RA and its successor, the FSA. Congressional criticism regarding the RA’s use of funds and the future of the resettlement community programs resulted in the passage of an Agriculture Appropriations Bill in 1936 that de-funded the RA’s land purchasing program. Tugwell was forced to announce the curtailment of planned community projects as a result (Conkin, 180). Hoping that a change in leadership might deflect some of the criticism of the RA’s more reformist programs, Tugwell announced his resignation at the end of 1936, and the agency was transferred into the Department of Agriculture under new leadership.
While the commotion over Tugwell’s programs continued in the background, liberals and conservatives found common ground in the late 1930s over the issue of the increasing number of tenant farmers and sharecroppers in the farm sector (Roosevelt Message on Farm Tenancy, 81). In a short period following the movement of the RA into the Department of Agriculture, President Roosevelt convened a Special Committee on Farm Tenancy, and Congress passed the Bankhead-Jones Farm Tenancy Act of 1937. The act authorized land and equipment loans for low-income farmers, tenants and sharecroppers, and continued the land retirement program of the RA. Conspicuously missing from the bill were any appropriations for new community-building experiments or government land purchase for resettlement purposes (75th Congress, 7135). Soon after the act was passed, Secretary of Agriculture Henry Wallace dissolved the Resettlement Administration and rolled its remaining programs into a new agency, called the Farm Security Administration.
The major focus of the FSA, as reflected in its budget, was the administration of the tenant loan program; by 1941, the FSA had originated more than 13,000 loans—a mere fraction of those applied for—to tenant families to purchase farms (Congressional Digest, 5). Now part of the Department of Agriculture, the FSA’s rural rehabilitation projects drew directly from the experience of the Department, also home to the Extension Service, and FSA personnel provided Extension-type supervision and education to help poor farmers increase efficiency, reduce monocropping, and farm sustainably. With a new mandate prioritizing tenants and sharecroppers, the FSA solidified its role as the government agency responsible for loans to poor farmers with no access to other means of credit. FSA administrators also ran a water facilities project to improve water access for farmers in rural areas following passage of the Water Facilities Act; these projects and the farm loans program were largely focused on the South and the Great Plains regions.
At the same time, the FSA began a project of labor camps to provide shelter and sanitary facilities for migrant farm workers (McConnell 90-92). Some work also continued to complete unfinished cooperative communities begun under Tugwell and the RA, although without Tugwell as its spokesperson, the FSA was perhaps less rooted in—or at least less public about—the radical philosophies underpinning the cooperatives. Nonetheless, criticism of this element of the agency’s work was as aggressive as it had been during the Tugwell era. Threatened by the projects, powerful interests were strong lobbyists against them: “In the West,” notes historian Thomas Clark, “especially in California, corporate farmers charged that the migrant labor camps became magnets for radical union organizers. In the south, planters and landowners saw in the rehabilitation [projects] not only an effort to assist sharecroppers and tenant farmers, but, more threateningly to white southerners, an effort to interfere with the southern racial order” (Clark, 271).
The advent of World War II brought about a political shift that would eventually spell trouble for the FSA and the RA legacy programs. Congressional elections in 1938 and 1942 brought a conservative alliance of Republicans and southern Democrats to Congress intent on counteracting a decade of “excesses” under New Deal liberalism (Clark, 268). With the controversial cooperative projects and Tugwell’s bold leadership style still ringing loudly in congressional ears, the FSA was an easy target for the new coalition. Public hearings on FSA activities were held in the House between 1943 and 1944; the committee reported that the FSA suffered under poor administration and financial mismanagement, and called the “communistic resettlement projects” begun under the RA “un-American” (House Report 1430, 2). The Committee praised only the loan program for low-income farmers who were ineligible to borrow from other sources, the tenant purchase program, and the water service projects. Otherwise, it ridiculed the work of an agency it accused of being rooted in “economic and social theories of little or questionable value.” (House Report 1430, 6).
It likely came as no surprise to FSA administrators, then, when Congress passed the Farmers Home Administration Act in August of 1946, effectively abolishing the Farm Security Administration and establishing the Farmers Home Administration (FmHA) in its stead. The Act transferred to the new agency the power to make loans to poor farmers for the purposes of purchasing land, equipment, or livestock, and it created a revolving fund for the purpose of financing tenant purchase loans. The FmHA was also instructed to “liquidate resettlement projects and rural rehabilitation projects for resettlement purposes” (House Report 1430, 24). Water facilities projects were continued, and an emergency crop and feed program previously administered by the Farm Credit Administration was rolled into the FmHA’s legion of responsibilities (Congressional Digest, 5). The elimination of the FSA and the birth of the FmHA signified the end of an era of experimental reform and attention, however frenetic and underfunded, to the poorest of the rural poor: sharecroppers, migrant laborers, and tenants. The new scope of FmHA activities did include the tenant purchase program, but the priority of the agency was to support those farmers not eligible for private credit whom the government saw as potentially economically viable and thus worth the risk (Barry 1985, 341). Over time, the FmHA would move even further away from its original role as a last-resort lending agency.
Between 1946 and 1949, FmHA responsibility was confined largely to the provision of farm loans and the supervision of farm ownership and water projects. However, agency programs steadily expanded throughout the second half of the 20th century, broadening beyond the scope of the FSA to include—and eventually prioritize—development assistance for rural nonfarm residents and rural communities. In 1949, Congress passed the Federal Housing Act and the Disaster Loan Act, which allowed the FmHA to provide housing loans for farmers and emergency loans for farm recovery after natural disasters (Herr and LaDue, 58). Amendments to the Water Facilities Act in 1954 broadened FmHA authority to allow it to serve nonfarm customers in rural areas. The Consolidated Farm and Rural Development Act and the Federal Housing Act of 1961 authorized a major expansion of USDA lending activities under the FmHA: they raised limits for farm ownership loans and operating loans, increased the amount of money communities could apply for to begin or maintain water systems programs, and made non-farm rural residents eligible for housing loan assistance. Finally, a 1962 amendment to the Farmers Home Administration Act expanded FmHA loan programs to include the development of outdoor recreational facilities, resource conservation, and farm-based nonagricultural enterprises to improve family income (Congressional Digest, 5). In 1967, loans for nonfarm activities exceeded farm loans for the first time (Herr and LaDue, 59). Starting in 1974, the FmHA could also guarantee loans made by commercial lenders (Congressional Digest, 6). The move to guaranteed lending was a major shift: since its inception, the agency had served farmers and non-farm rural residents who, by virtue of their impoverished status, could not qualify for private loans. By shifting its focus away from direct loans and toward the role of loan guarantor, the FmHA brought wealthier and more credit-worthy borrowers under its wing while benefiting commercial lenders, who experienced reduced risk (Herr, 30).
The growing role of the FmHA as a lending agency for farm and nonfarm rural residents was tested between 1970 and the late 1980s, when world market fluctuations made private lenders wary and swelled the caseload of the government agency. Between 1967 and 1979, FmHA staff increased by fifty percent, and the number of active borrowers tripled (Herr and LaDue, 60). The number of borrowers defaulting on their loans increased concomitantly; the increase in defaults in the early 1980s is most likely also due to the farm crisis that followed the boom years of the 1970s, and the emergency loans that were distributed during this time by the FmHA. Congressional legislation of the day reflected a growing uneasiness over the number of delinquent loans in the FmHA caseload. The Agricultural Credit Act of 1987 detailed the process of restructuring loans and delineated the rights of delinquent borrowers; the FACT Act of 1990 attempted to curb abuses of these borrower’s rights provisions; and the 1990 Farm Bill allowed the FmHA to deny a borrower restructuring if the borrower’s non-essential assets could be liquidated to pay off the loan (House Committee on Agriculture, internet). The 1990s brought a further tightening of FmHA restrictions on borrowing, as the Agricultural Credit Improvement Act of 1992 limited the number of years a borrower could participate in the loan programs (Lipton and Pollack, 139).
By 1994, the FmHA had managed to reduce the amount of credit given out under its loan programs, but loan losses still totaled between three and six times that of other government loan programs and private lenders. The agency had also continued its shift towards guaranteed lending rather than direct lending, reducing default risk for commercial lenders while moving further away from its traditional reputation as a lending agency for the least credit-worthy farmers (Barry, 1995, 61). Despite its attempts to scale down, the FmHA had under its purview some thirty different loan programs funding all aspects of rural and farm life (Herr and LaDue, 61). In 1994, Secretary of Agriculture Mike Epsy began a restructuring of the Department of Agriculture, consolidating farm programs, including those of the FmHA, into one agency and moving rural housing and business development loan programs to a separate rural development agency. The FmHA was effectively dissolved, and, along with Agricultural Stabilization and Conservation Service and the Federal Crop Insurance Corporation, its farm programs became part of the newly created Farm Service Agency (FSA) (Barry, 1995, 67). The FSA is responsible for administering farm income-support programs, conservation cost-sharing programs, noninsured crop assistance, and the farm loan programs inherited from the FmHA.
This final permutation of an agency that began as the Resettlement Administration in 1935 is a far cry from its reformist grandfather, and even from the Farmers Home Administration of the 1940s. Congressional concern about the agency’s penchant for attracting delinquent borrowers followed the farm loan program to its new home in the FSA, and Congress tightened lending restrictions further after 1994. The General Accounting Office issued a series of reports in the 1990s that highlighted the risk associated with the FSA’s farm loan programs; in the 1996 Farm Bill, Congress excluded risky borrowers—those who had defaulted on past loans or received debt forgiveness—from eligibility, and required borrowers to have or obtain hazard insurance on the property they financed through the loan. Emergency loan recipients must now have hazard insurance on their destroyed property in order to be eligible for a loan through the FSA (GAO, 4). Combined with a continued shift toward guaranteed lending and away from direct lending—the FSA’s 2004 budget contained some $2.5 billion in funding for guaranteed loans, as compared to $743 million for direct loans (FSA budget, internet)—congressional restrictions have reduced the government’s overall risk but have also closed off loan opportunities for the poorest and most needy farmers.
In 1935, Rexford Tugwell envisioned the Resettlement Administration as a reform-minded agency whose programs could help address the structural roots of poverty in America. Its mission was to provide assistance to the most impoverished farm families, assist non-farm rural and low-income urban residents, and address rural environmental devastation. The attention Tugwell and his peers devoted to America’s rural underclass established the RA and its successors as a last-resort lending agency for farmers who could not obtain credit from other sources, including young and beginning farmers. Over the latter half of the 20th century, the Farm Security Administration, the Farmers Home Administration, and the Farm Service Agency moved further and further away from Tugwell’s vision, first by phasing out the more radical cooperative and health programs and eventually by devoting the majority of their loan funds to guarantee loans by private lenders for more credit-worthy rural residents in order to reduce risk. These shifts took place in the context of much larger structural changes in the farm sector: as farm consolidation and market fluxes purged rural areas of many small and lower-income farmers, the FmHA and the FSA shifted their programs, allowing nonfarm residents and larger farm businesses to benefit from agency services.
Rex Tugwell’s reform agenda ultimately failed to survive much beyond his tenure because it was hobbled by two Achilles heels. The first was that it came of age during the Great Depression, an era of extreme and unusual economic circumstances for the country. These circumstances led to a greater tolerance within the Roosevelt Administration, and to some extent in Congress and the public sector, for “outside the box” thinking: things were so bad that there was little to lose from trying something new. So it was that Tugwell and his peers were given authority by the president to enact reform programs unsanctioned by Congress and unsupported by the wealthier farming class that filled the ranks of powerful groups like the Farm Bureau. Outside of the crisis context, Tugwell’s more radical programs could not find a home; economic conditions improved, powerful farm interests reasserted their authority, and a conservative Congress responded accordingly.
Congress’ response highlights the second Achilles heel, which was that Tugwell attempted to change fundamental class, race, and economic structures in American society through a government-led program that was highly vulnerable to the whim of traditional political forces, including conservative officials and agribusiness lobbyists. The programs that were allowed to remain a part of the later agencies’ agendas were the nonthreatening ones: loans to lower-income or new farmers – later rural residents more generally – for land, equipment, and homes, and loans to communities for water systems projects and rural development. “The Farm Bureau,” recalls historian Thomas Clark, “launched a systematic campaign against the FSA [in the 1940s] that has been well documented by historians of federal farm policy…. When Congress repeatedly slashed appropriations for FSA programs, the Farm Bureau happily took the credit” (Clark, 271). The people whom Tugwell hoped to help empower through his programs were largely the disenfranchised poor, who held little in the way of bargaining power with Congress.
In the face of pressure from entrenched, powerful interests, Congress and Roosevelt’s successors sought to boost prosperity by enacting rural development policies that primarily benefited the business sector, rather than by attempting to implement structural reform. These policies included infrastructure development in rural communities and, after 1996, commodity subsidies, which largely benefit the buyers of program crops. Credit programs remained a significant element of the agencies’ work, but it shifted to backstopping risk for commercial lenders. Meanwhile, the risk inherent in direct lending to borrowers without credit limited the amount that the government was able to contribute to helping the poorest of the poor through these programs. Even if Roosevelt’s successors had been willing to lend heavily, it is doubtful that the policy would have had the results Tugwell had hoped for when he began the Resettlement Administration; the successor agencies’ policies were too limited and the political arena too difficult an environment in which to push for the kind of reform Tugwell envisioned. As Peter Barry notes, “Credit programs should not be… expected to do too much. [They] are not effective means of transferring income or wealth among sectors or in serving as policy instruments for structural change” (Barry, 1985, 343).
BIBLIOGRAPHY I: Cited Sources
Barry, Peter. Needed Changes in the Farmers Home Administration Lending Programs. Washington, DC: American Agricultural Economics Association, 1985
Barry, Peter. The Effects of Credit Policies on U.S. Agriculture. Washington: American Enterprise Institute Press, 1995
Clark, Thomas. The Limits of State Autonomy: The Medical Cooperatives of the Farm Security Administration, 1935-1946. Journal of Policy History 11.3 (1999): 257-282
Conkin, Paul. Tomorrow a New World: The New Deal Community Program. Ithaca: Cornell University Press, 1959
Congressional Digest. Federal Credit Programs: Farmers Home Administration. Congressional Digest Vol. 66 No. 1. Washington: Congressional Digest Corporation (1986): 5-7
Danbom, David. Born in the Country: A History of Rural America. Baltimore: Johns Hopkins University Press, 1995
Dyckman, Lawrence, United States General Accounting Office. Farm Service Agency: Updated Status of the Multibillion-Dollar Farm Loan Portfolio [online]. Washington: Government Printing Office, 2001. Available online: HYPERLINK "http://www.gao.gov/cgi-bin/getrpt?GAO-01-202" http://www.gao.gov/cgi-bin/getrpt?GAO-01-202
Farm Security Agency. FSA Budget in Brief [online- not available in print]. Cited October 2004. Available online: HYPERLINK "http://www.fsa.usda.gov/dafl/funding.htm" http://www.fsa.usda.gov/dafl/funding.htm
Gardner, Bruce. American Agriculture in the 20th Century: How it Flourished and What it Cost. Cambridge: Harvard University Press, 2002
Herr, William. Toward an Analysis of the Farmers Home Administration’s Direct and Guaranteed Farm Loan Programs. Staff Report No. 9115, Economic Research Service, US Department of Agriculture. Washington: Government Printing Office, 1991
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BIBLIOGRAPHY II: Background
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Nixon, Richard. Special Message to the Congress Proposing Legislation and Outlining Administration Actions to Deal With Federal Housing Policy. Public Papers of the President of the United States, Richard Nixon, Containing the Public Messages, Speeches, and Statements of the President, 1973 (Washington: Government Printing Office, 1975). 800-813
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The emergency loans provided by the FmHA in the 1980s also marked a departure from the traditional role of the agency and its predecessors. Through the end of the 1970s, Herr and LaDue found that recipients of Farm Ownership and Operating Loans represented a higher proportion of tenants, part owners, young farmers, and farmers who could not obtain credit from other sources than was found in the regular farm population. On average, emergency loans during the 1980s served farms twice as large as those served under the other loan programs, and owners had considerably more equity and assets. (Herr and LaDue, 64-65).
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