There are many thickets of corporate welfare thriving in the federal budget jungle.
Farm subsidies are among the thickest of the thickets. Like a tough weed, they are deeply rooted, largely impenetrable, and nearly impossible to eradicate. And, they cost taxpayers billions of dollars every year.
The Senate’s Agriculture Committee took a modest step in the right direction April 26 when it waved through the latest “farm bill,” which Congress’ budget watchdog estimates would cut the deficit by $23 billion over 10 years.
Two cheers for good intentions. Not good enough, however. The committee’s bill would dump a couple of bad subsidies, but would add another and leave crop insurance subsidies mostly unreformed.
Farm subsidies, which date back to the Depression, cost a pretty penny—far more than the reviled TARP bailout for Wall Street.
The Congressional Budget Office‘s latest TARP cost estimate is a net $32 billion. Between 1995 and 2010, farm commodity, crop insurance, conservation, and disaster payments totaled nearly $262 billion—averaging more than $16 billion every year, according to the Environmental Working Group‘s subsidies database.
The current arrangement might be justifiable if most of the funds went to family farmers working the land from dawn till dark. That’s not the case, however. More than 60 percent of the payments go to commercial farms. Family farms receive less than one-fifth of the total, federal data shows.
Ten percent of U.S. farms collect nearly three-fourths of the subsidies. Most of the benefits go to growers of the “big five” commodity crops: corn, wheat, rice, cotton, and soybeans.
There’s more. Farm subsidies get the U.S. into trouble with our trading partners. Farm subsidies inflate land values, making it harder for beginning farmers to enter the business. Farm subsidies are bad for the environment because the overproduction they encourage leads to increased soil erosion, excessive fertilizer and chemical usage, and both water overuse and water pollution.
At a time of record-high farm income levels, soaring farmland values, and federal deficits stacked up as far as the eye can see, Congress nibbling around the edges of farm subsidy reform is indefensible.
What can be done? A starting point would be limiting crop insurance subsidies, which are projected to cost taxpayers nearly $9 billion annually between 2013 and 2022, according to the Government Accountability Office (GAO).
Taxpayers cover about 60 percent of the cost of crop insurance premiums. In 2010, the GAO reported, total premiums cost $11.8 billion. Farmers paid $4.45 billion and Uncle Sam’s share was nearly $7.37 billion.
In addition, taxpayers forked over $1.33 billion to insurance companies for “administrative expenses”—which in essence are handouts covering crop insurers’ overhead and commission costs.
As crop prices rise, premiums rise and so do the payouts. The U.S. Department of Agriculture projects that prices of crops that receive the lion’s share of subsidized insurance coverage will continue rising through 2016.
Unlike other farm subsidies, there are no income or payment limits for crop insurance subsidies. Even the ludicrous “direct payments” program, which pays landowners regardless of crop price and which the Senate bill, thankfully, would kill, doesn’t pay out to farms with adjusted gross incomes exceeding $750,000.
GAO estimated that if premium subsidies had been capped at $40,000 per farm last year, taxpayers would have saved $1 billion.
Going further, the conservative American Enterprise Institute has suggested restructuring crop insurance to emphasize policies purchased online and tailored to locally relevant weather risks.
How much further could we go? New Zealand phased out farm subsidies in the mid 1980s. Today, farmers in that agriculture-dependent country largely believe they’re better off—more efficient, more productive, and freed of subsidies red tape.
We’re hearing more talk of big-bang tax reform that would phase out loopholes and cut rates across the board. It’s time to start talking about big-bang farm policy reform as well.
© Copyright 2012 Jim DiPeso, distributed by Cagle Cartoons newspaper syndicate. Jim DiPeso is vice president for policy and communications at ConservAmerica. Jim can be reached at email@example.com. This column has been edited by the author. Representations of fact and opinions are solely those of the author.
- Crop Insurance in the 2012 Farm Bill (eatdrinkbetter.com)
- Fat farms (bangordailynews.com)
- Subsidizing Crop Insurance: Cheaper To Just Pay For It (alan.com)