Help comes for the small farmer … in theory
On Feb. 16, 1938, President Franklin D. Roosevelt signed that year’s Agricultural Adjustment Act into law. It was, in the words of The New York Times, “the most ambitious farm relief experiment the nation has ever attempted.”
The act was devised in response to the Supreme Court’s rejection of a 1933 law of the same name. In that case, the court had found it unconstitutional to tax companies processing the output of farms only to redistribute these taxes back to the farmers in the form of subsidies. The court held that agricultural regulation should be left to the states. The act of 1938 remedied this problem by making the subsidies a direct government outlay instead of a recycling of processor taxes, which at the time were anticipated to generate about $200 million in annual revenue for the federal government.
Roosevelt commented on signing that his national farm policy was “to assure to agriculture a fair share of an increasing national income, to provide consumers with abundant supplies of food and fiber, to stop waste of soil, and to reduce the gap between huge surpluses and disastrous shortages.” The act’s passage, Roosevelt said, represented the “winning of one more battle for an underlying farm policy that will endure.”
He was right. The act undergirds much of the federal government’s current agricultural policies, although in many places it has been augmented or superseded by more recent legislation. Its latest descendant, the Food, Conservation, and Energy Act of 2008 (also known as the Farm Bill), provided $284 billion over five years to various agricultural programs, including about $42 billion for commodity crop subsidies, $189 billion for nutrition programs, $24 billion for conservation, and $22 billion for crop insurance. The act was extended during the 2012 fiscal cliff talks but will expire this coming fall.
Revving those profit engines
On Feb. 16, 1989, Ford Motor Company (NYSE:F) reported what was then a record auto-industry annual profit of $5.3 billion for its 1988 fiscal year, less than a week after General Motors Company (NYSE:GM) reported a short-lived record profit of its own of $4.9 billion. Ford’s record was the more impressive, as it managed to earn more profit despite 16% less revenue for the year. Ford was also by far the most impressive grower of the Big Three automakers, as it had increased annual profit by 83% since 1984, as compared with GM’s tepid 9% five-year gain and Chrysler‘s four straight years of shrinking earnings.
Thanks to Ford’s record year, the Big Three combined for an industry record of $11.3 billion in net income, driven by strong overseas performances. This performance helped ease worries that the industry might have peaked, but it wouldn’t last long. Ford’s net income would fall throughout the early ’90s before bottoming out in negative territory in 1992. However, several years later, as the dot-com boom made everyone rich, Ford reached record net levels of net income that have yet to be surpassed. Prosperity is rarely consistent in the auto industry.
The article Cisco’s Big Debut and Ford’s Record-Breaking Performance originally appeared on Fool.com and is written by Alex Planes.
Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology.The Motley Fool recommends Cisco Systems, Ford, and General Motors and owns shares of Ford.
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