The Case Against Taxpayer-Funded Crop Insurance

It's time to abolish this costly government boondoggle.

The Farm Bill, that quintessentially quinquennial congressional replenishment of the pork trough from which many of America’s farmers indulge, is now upon us. Late last month the bill, dubbed the Agriculture Reform, Food and Jobs Act of 2012, cleared what will likely be its biggest hurdle when the bipartisan Senate Agriculture Committee voted 16-5 in its favor. 

I’ll lead with the sliver of good news in the bill: Direct farm subsidies are on their way out. Subsidies are something many people—me included—have been attacking for years.

But what should be cause for celebration is instead just a case of shifting billions of taxpayer dollars from one needless federal agricultural scam to another. For as billions in direct subsidies die a worthy death, bipartisan efforts in Congress (mainly via the powerful Senate Ag Committee) could hand farmers billions of new dollars in indirect subsidies—in the form of taxpayer-funded crop insurance.

Though crop insurance isn’t new, it’s ballooned in size recently as support for subsidies has waned. Critics of this sleight of hand come from all corners, and include Joel Salatin (as stated in my Reason column from last week), Bloomberg News, and the Environmental Working Group (EWG).

“A newly released report on subsidized federal revenue insurance for industrial crop farmers shows that the government has failed to control its costs and big insurance companies and agents continue to reap billions of dollars in windfall profits,” concludes economist Bruce Babcock of Iowa State University in a recent report commissioned by EWG, longtime critics of Farm Bill excesses. (EWG also boasts an incredibly thorough, well-maintained, accessible, and depressing online database of many of those excesses.)

A Minneapolis Star-Tribune editorial recently referred to crop insurance as yet another congressional “boondoggle” that “throw[s] money at farmers, whether they need it or not.”

In additon to its cost overruns, bald waste, and corporate welfare, there's also a long history of fraud evident in the USDA crop insurance system.

So those are some of the problems with crop insurance. But what exactly is USDA crop insurance itself? Like most government schemes, it's really not just one program but is instead a boggling web of programs and offices.

According to USDA data, there are more than a dozen different types of crop insurance available for a litany of crops—from alfalfa seed to wheat. One program, Actual Production History, works like this:

The producer selects the amount of average yield to insure; from 50-75 percent (in some areas to 85 percent). The producer also selects the percent of the predicted price to insure; between 55 and 100 percent of the crop price established annually by RMA. If the harvested plus any appraised production is less than the yield insured, the producer is paid an indemnity based on the difference. Indemnities are calculated by multiplying this difference by the insured percentage of the price selected when crop insurance was purchased and by the insured share.

There are currently 15 USDA-authorized crop insurance providers around the country. The USDA refers to the subsidies it doles out to these crop insurance providers as “cooperative financial assistance agreements.”

But crop insurance doesn't end there. Even if a farmer opts not to buy USDA-subsidized insurance, that farmer might still be eligible for another form of USDA bailout. How’s that? Well, an uninsured farmer whose crops fail (or are never even planted) due to a drought, tornado, flood, or virtually any other natural disaster that leads the USDA to declare a crop disaster is eligible to receive a payout from various disaster-relief programs, including USDA’s Noninsured Crop Disaster Assistance Program.

Crop insurance has its supporters no doubt. Last fall, as they geared up for consideration of the Farm Bill, a host of crop insurance supporters gathered at what the crop insurance industry lobby called “a crop insurance pep rally” to extol the virtues and sheer wonderfulness of taxpayer-supported insurance. And the Senate Ag Committee touts the “widespread praise” of the Farm Bill it passed from a variety of groups whose no-doubt tireless lobbying ensured the bill reflects the interests of them and their members.

The correct answer to the question of direct crop subsidies or crop insurance is a resounding “neither.” After all, an earlier study by Iowa State's Babcock suggested crop insurance is only about half as efficient as the crop subsidies they look set to replace. If crop insurance is an important element of farming, then let farmers buy such insurance on the open market—without taxpayer support—and, if need be, pass the costs on to consumers. That's something worth rallying behind.

Baylen J. Linnekin, a lawyer, is executive director of Keep Food Legal, a Washington, D.C. nonprofit that advocates in favor of food freedom—the right to grow, raise, produce, buy, sell, cook, eat, and drink the foods of our own choosing.

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  • db||

    Thousands of American farmers are denied access to crop insurance every year. Why do you hate the farmers?

  • db||

    I wonder how easy it would be to get subsidized insurance on my crop of hops?

  • Bardas Phocas||

    Why do you hate America's last three "small family farm"ers? Of course the large and medium sized agri-businesses love sucking at Uncle Sugar's tit. Those Senator's don't come cheap you know.
    http://www.opensecrets.org/pac.....cycle=2012

  • ||

    If the noble independent marijuana farmer can survive without subsidies via crop insurance or indeed any other, why not a large agribusiness growing a legal product?

  • Pi Guy||

    Profit margins in the black market are very high compared to running a legit business.

  • ||

    True, but the risks are of course way higher. Wheat farmers don't have to worry about getting busted, ripped off etc.

  • thirtyandseven||

    Talk to Roscoe Filburn about that one.

  • Sevo||

    Well, that crop wasn't legal-legal....

  • Coeus||

    Anyone curious to see the sheer stupidity on display on fark in response to a Stossel article? Just make sure you place any loose objects near your monitor out of hand's reach, because you will want to throw something at it. Remember, most of these people are old enough to vote.

  • ||

    You gave fair warning, and I went there anyway, so the laptop damage is my own damn fault.

    This comment stood out for sheer detachment from reality.

    Hah, what does he think this is, the 70's? Companies haven't been willingly doing things that increase consumer safety in decades. Bean-counter mentality all but killed that off as they ever-futilely race toward zero.
  • db||

    But can't you see? Corporations are engaging in their ideal of social Darwinism by making ever more lethal products in order to kill off their weaker customers. It's all part of the master plan to do...something?

  • ||

    Killing off your customers is a time honored practice of making a profit.

    *adjusts monocle*

  • Coeus||

    Wait till you see the 4 or 5 comments about how Stossel is stupid since it was the "free market" insurance companies who lobbied for these laws.

  • C. S. P. Schofield||

    I am constantly amazed by the people who distrust the Corporations, have endless conspiracy theories about the government, and yet are prepared to believe that if you make both part of the sane overall structure this will somehow be wonderful.

    I think that the reason Communist revolutions tend to liquidate the intelligencia early is less a matter of fear than an expression of contempt.

  • nipplemancer||

    And when Billy Bob gets ejected in a rollover and he's stuck on life support for months, I have to pay for it out of my taxes once his insurance runs out which steals money from more responsible citizens for medicaid and from SS and food stamps to pay for his kids because the kinds of people who are too irresponsible to wear a seat belt to be their for their children aren't generally the kinds of people responsible enough to get life insurance.

    I elected this government and I want the government to force irresponsible people to be responsible as long as I have to pay for irresponsibility.

    Let's have an opt out policy. I'll let people sign away the regulations that require them to wear a seatbelt. They tattoo "DO NOT RESUSCITATE" on their chests. Everybody wins.

    The italics are mine to highlight my favorite part of this comment.

  • ||

    So let me get this straight...

    Government interference (medicaid, SS and food stamps) requires more government interference (seat belt laws) because you feel infringed upon for paying for services that were forced upon me in the first place?

    Perhaps the greatest debater of our time

  • nipplemancer||

    So let me get this straight...

    I don't think you can.

    We won, we're in charge. You listen to us. Fuck you that's why. Seems to be my best translation. Inside the mind that is the Tyranny of the Majority.

  • R||

    I don't think you can.

    No shit; it's like a Mobius strip made out of shear unadulterated idiocy.

    Also, WTF Reason? I can't even use simple ASCII characters now? Just what kind of harebrained bullshit character encoding are you guys using?

  • Emperor Wears No Clothes||

    The quintessential Canadian argument.
    Seriously, socialized medicine is so taken for granted, that "you should be forced to wear a seatbelt because I have to pay for your health care when you crack up" is considered the debate winner every time.
    When you try to peel it back to, "but why is anybody forced to pay anybody's else's health care costs" there are three responses:
    1. "You want America's system?"
    2. "You know where else has no RULZZ? SOMALIA!"
    3. People all leave room.

  • Brett L||

    Its Fark.

  • Coeus||

    Indeed.

  • General Butt Naked||

    Most of the comments make the argument, "Hey! If someone does something stupid I have to pay for it!"...

    Well, you voted to pay for it asshole, not I.

  • ||

    Thanks or that. No coffee required this morning.

    *pops blood pressure pill*

  • Pi Guy||

    "Hey! If someone does something stupid I have to pay for it!"

    Essentially the same argument for small farm insurance.

  • ||

    "The Farm Bill, that quintessentially quinquennial congressional replenishment of the pork trough"

    Now that there is some nice writing. I had to look up quinquennial.

  • Jerry||

    Big banks also win because they don't have to write-off their loans to farmers when crops go wrong.

  • Mike M.||

    Get a load of this garbage: the government is claiming that from out of nowhere, shazam!, there was an unexpected budget surplus in April of around $60 billion. This is after posting deficits every month for nearly four years and massive monthly deficits in February and March of this year.

    Note that this has supposedly happened in the face of a total non-"recovery" where the true U.S. labor force participation rate is the lowest it has been in thirty years and is STILL declining!

    This government is now fudging the economic numbers to an extent it has never done before in our history.

  • ichopbeef||

    Not fudging, it just requires tax time to roll around: "April has been a surplus month in 44 of the past 58 fiscal years, the Treasury Department said." And yet somehow year on year the debt keeps growing. Theft? Magic? Who stole the cookies from the coo-cookie jar?

  • Mike M.||

    Official monthly federal receipt and outlays for the last 32 fiscal years.

    Period     Receipts    Outlays    Deficit
    Apr-09     266,206    287,113    20,907
    Apr-10     245,260    327,950    82,689
    Apr-11     289,543    329,929    40,387
    Apr-12     318,807    259,690    -59,117

    (All figures are in millions of dollars).

    So basically, not only are we expected to believe that April monthly revenue has increased nearly $30 billion in the last year and over $70 billion in the last two years, we're also seriously expected to believe that federal spending was a full $70 billion less than it was last April and lower than it was three years ago! And bear in mind that this is supposedly happening during a period where the American workforce is shrinking and there are fewer real taxpayers than at any time in decades.

    No my friend, this is total bullcrap that Treasury is putting out in order to dupe people into believing that the economy is rebounding in order to try and bolster Obama's reelection chances. Anyone who would believe this number would probably believe just about anything.

  • Sevo||

    ..."No my friend, this is total bullcrap..."

    'Normal' political cherry-picking of data is expected, and (I hope) discounted by most folks. Seems you're suggesting outright lying.
    I don't doubt it's true; there's a lot of power and money involved. Is there any government agency sufficiently disinterested to call bullshit?

  • ichopbeef||

    Yeah I was going with the "cherry-picking" but Mike is right. It's just lies. *sigh*

  • General Butt Naked||

    For all of you Weigel fans out there, here is an article he wrote about the recall race in Wisconsin.

    Read the comments for the lulz, you heartless fucks.

  • Cliché Bandit||

    I will not click. I was just catching up on yesterday's articles when reading the one where coeus linked a Fark board trashing Stossel...basically daring me to not break shit. I was fine until the "all on an Internet created by government." line. I refuse to click any more links, ever. It is Mother's day after all and I have a brunch to attend.

  • Cliché Bandit||

    Oh and on topic, farm subsidies have an oft missed yet huge unintended consequence. Weeds!

    Ask any real working farmer about it sometime.

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