How? By shoveling money toward large operators at the expense of taxpayers and consumers.
The Senate approved a nearly $1 trillion farm bill Monday night that proves that Washington is still bent on catering to special interests and wasting taxpayers’ money.
Let’s count the ways.
The Senate bill perpetuates a sugar subsidy that raises the price of sweets and shuts out foreign competition. Great for the sugar industry, terrible for consumers.
The bill creates a new sweetheart deal for the dairy industry: an insurance program that will drive up prices by triggering production cuts when there’s an oversupply of product. Good for the dairy industry, terrible for consumers.
The bill perpetuates vast government subsidies for crop insurance. The government will continue to pay more than half the cost of the insurance. Farmers get subsidized and get a perverse financial incentive to take excessive risks without having to worry if their crops fail. Taxpayers get gouged.
The bill largely spurns Obama administration efforts to reform the international food aid program. Most food will still be bought in the United States and shipped abroad, rather than being purchased where it will be consumed. That’s good for U.S. growers and shippers, but it drives up the cost to taxpayers and reduces the number of people who are fed.
The bill cuts $4 billion over 10 years in the food-stamp program, but does little to deal with fraud in the program.
While the Senate bill promises $24 billion in savings, including the elimination of $5 billion a year in direct government payments to farmers, there’s so much more potential here for reform.
Lawmakers like to say agriculture policy protects family farmers, but the beneficiaries are generally large agribusiness operators. They’ve been reaping tidy profits for some time, even as the rest of the country has struggled through recession and a slow recovery.
The farm bill in many ways distorts the marketplace for food, ultimately hurting an industry that is one of America’s great competitive strengths.
The biggest culprit is crop insurance. Years ago, it helped farmers to weather drought and flood. These days, it has morphed into a giveaway that enables big, sophisticated farm operators (who receive by far the most money from the program) to lock in their annual revenues.
No business could afford that kind of insurance in an open market. Farm operators get it because the federal government covers more than half of the insurance premiums. The government also offers reinsurance protection for the private companies that write the policies. If Congress gets its way, the program would grow to at least $9 billion a year over the coming decade, and probably a lot more.
The subsidies encourage farmers to obtain so much coverage that they take risks no prudent operator would take. They plant on unsuitable land, knowing that if a crop fails, they can make a claim. They usually plant corn, the nation’s No. 1 cash crop, which is in demand partly from companies that brew it into ethanol fuel — an industry that owes its existence to more government subsidies.
With less and less risk of bearing a loss, farmers have started planting what’s known in the heartland as “corn-on-corn.” Instead of rotating the crop in each field year by year, some farmers have been planting only corn. Corn last year. Corn this year. Corn next year.
That’s poor stewardship, contrary to the critical goal of sustainability. It contributes to soil erosion and depletes nutrients. It breeds pests and crop diseases. Yet government-funded crop insurance, along with other policies favorable to corn, has made corn-on-corn a lucrative financial proposition. Midwest agriculture will pay the price eventually for this perversion of accepted practices.
Crop insurance leads to fraud: Federal agents this year busted a criminal ring involving dozens of farmers, insurance agents and adjusters in North Carolina. They were scheming to steal more than $100 million from the poorly policed, overfunded crop-insurance program. More than 40 people have pleaded or plan to plead guilty in the case so far.
U.S. Rep. Collin Peterson of Minnesota, ranking Democrat on the House Agriculture Committee and a defender of crop insurance, recently struck a nerve when he admitted, “There is five times as much fraud in crop insurance than in food stamps.”
The government should have no role in crop insurance for wealthy agribusinesses. The subsidy should be greatly scaled back to assist only those farmers who require help to obtain a reasonable level of emergency coverage.
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.