Feds: Why Should Taxpayers Cover Just 2/3 of Crop Insurance Premiums When They Could Pay The Whole Amount?


Just as voters at the local and state levels are signaling via the ballot box that they want government to pay less for public-sector workers' retirements, federal legislators are pushing to make taxpayers liable for more of private farmers' livelihoods.

Check it out:

Crop insurance has existed for decades, with the government now spending about $7 billion a year to pay about two-thirds of the cost of farmers' premiums. Under the federal program, farmers can buy insurance that covers poor yields, declines in prices or both.

On Tuesday, the Senate began debate on a farm bill, passed by the Senate Agriculture Committee in April, that would set up another crop insurance subsidy, costing $3 billion a year, to cover any losses farmers suffer, known as deductibles, before their crop insurance policies kick in.

Advocates, including farm interest lobbyists and lawmakers with a long history of creating and protecting benefits, argue that the new program would save Washington money by replacing a longstanding one costing $5 billion a year, known as direct payments, that pays owners of farmland a set amount regardless of whether they have planted crops.

So we're already paying $7 billion a year to cover 2/3 of farmers' premiums, plus another $5 billion in direct payments. That works out to $12 billion a year, right? If we swap out the direct payment program and toss in $3 billion in more insurance subsidies, then we'd be paying $10 billion total, for a savings of $2 billion. Why that's almost as good as just telling farmers to pay for their own goddmaned crop insurance, isn't it?

But wait, there's this:

The existing crop insurance subsidy ballooned to $7.3 billion last year from $951 million in 2000, or about $1.2 billion adjusted for inflation, according to another G.A.O. report released in April. The costs of the program have risen as the value of crops has increased. Over the next 10 years, a Congressional Budget Office study estimates that the premium subsidy for the existing program will cost about $90 billion.

"This is better than a government bailout," said Steve Ellis, vice president of the Taxpayers for Common Sense, a budget watchdog group in Washington. "A bailout is a one-time thing when something bad happens. But crop insurance keeps giving good or bad. And it's about to give even more."

Oh, and guess what else? Because the government pays most of the costs of insurance premiums, farmers buy marginal land and insure it, knowing that they'll make a return either through whatever crops they raise or whatever insurance payout they get.

By guaranteeing income, farmers say, crop insurance removes almost any financial risk for planting land where crop failure is almost certain.

"When you can remove nearly all the risk involved and guarantee yourself a profit, it's not a bad business decision," said Darwyn Bach, a farmer in St. Leo, Minn., who said that he is guaranteed about $1,000 an acre in revenue before he puts a single seed in the ground because of crop insurance. "I can farm on low-quality land that I know is not going to produce and still turn a profit."

Hand it to the feds. They've managed to improve on stupid subsidies ("direct payments") by creating (and looking to expand) a system that is even more idiotic and open-ended.

More here.

Hat Tip: World's Greatest Film Critic, Pastichist, and Blogger Alan Vanneman. If you don't believe that, read his recent entry on why the U.S. can't possibly fall behind the rest of the world.