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Presidential Issues: Agriculture


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Harvesting crop insurance profits

December 23, 2014

By Bruce A. Babcock and Vincent H. Smith

Over the past three years, proposals from the Obama administration and the House Budget Committee to reform the $80 billion-a-year federal crop-insurance program have been defeated by opposition centered in the House and Senate agricultural committees. With the new Congress, Republicans and Democrats who stand for fiscal responsibility have an opportunity to finally implement reforms.

Farmers have a sweet deal with crop insurance: Taxpayers currently cover all the administrative costs associated with marketing and managing the program and fund more than 60% of the premiums to cover anticipated crop-insurance payouts, according to annual data from the Agriculture Department’s Risk Management Agency. Farmers pay only about one-third of the real costs of their crop-insurance coverage. From 2003 to 2012, crop-insurance subsidies cost U.S. taxpayers $55.4 billion—66% of the cost of the program.

Proponents of federal crop insurance argue that roughly $6 billion a year in subsidized premiums is a small price to pay to guarantee the financial stability of the nation’s food supply. That argument is specious, not least because 85%-90% of all crop-insurance subsidies are channeled to the largest 10%-15% of farm operations, few of which would face any risk of going out of business because of short-term fluctuations in their revenues...

Read the full article at the American Enterprise Institute: Harvesting crop insurance profits


Issue Categories : Agriculture,