The first Agricultural Adjustment Act, in order to counter the devastating effects of the Great Depression on agricultural prices, authorized the payment of subsidies to farmers in exchange for a reduction in the production of agricultural commodities. The funding for the payments came from a processing tax levied on the processors of the commodities. William Butler and other receivers of a cotton processing company refused to pay the tax.Agricultural Adjustment Act of 1933Taxing and spending clause;Butler, United States v.[Butler, United States v.]Agricultural Adjustment Act of 1933

By a 6-3 vote, the Supreme Court ruled that the tax was unconstitutional. Speaking for the majority, Justice Owen J. RobertsRoberts, Owen J.;Butler, United States v.[Butler, United States v.] argued that the processing tax was not a true tax for raising revenue but part of a system for regulating agricultural production, which was a power reserved to the states under the Tenth Amendment. In this part of his opinion, Roberts simply reaffirmed Bailey v. Drexel Furniture Co.[case]Bailey v. Drexel Furniture Co.[Bailey v. Drexel Furniture Co.] (1922). Roberts then considered whether the subsidies could be justified by the general welfare clause. Although he found that Congress had broad authority to appropriate funds for the general welfare, he denied that Congress could impose regulations as a condition for receiving the funds.

In a famous dissent, Justice Harlan Fiske StoneStone, Harlan Fiske;Butler, United States v.[Butler, United States v.] argued that the act was a valid application of the taxing and spending power of Congress and referred to Roberts’s opinion as “a tortured construction of the Constitution.” Declaring that the Court should exercise self-restraint, Stone wrote: “Courts are not the only agencies of government that must be assumed to have the power to govern.”

Although Butler expressed a preference for limited government, its interpretation of the general welfare clause provided later justification for the Social Security Act and other federal programs. In Mulford v. Smith[case]Mulford v. Smith[Mulford v. Smith] (1939), Justice Roberts wrote the majority opinion that upheld the Agricultural Adjustment Act of 1938, despite its great similarity to the act of 1933.

Agricultural issues

Bailey v. Drexel Furniture Co.

Court-packing plan

General welfare clause

Judicial self-restraint

Mulford v. Smith

New Deal

South Dakota v. Dole

Taxing and spending clause

Tenth Amendment