Bloated federal subsidies hurt small and beginning farmers.
Congress continues to find ways to throw money at farmers, whether they need it or not. The latest boondoggle comes from the Senate Agriculture Committee, which last week passed a farm bill, known as the Agriculture Reform, Food and Jobs Act of 2012.
The bill slashes at least $23 billion from some farm subsidies and other programs, meaning lawmakers are living up to their pledge to stop making direct payments to farmers for crops they don't grow. That's progress. However, in a political sleight of hand the senators want to pour money back into the farmers' pockets with over-the-top crop insurance subsidies.
Who loses in this scenario? Small and beginning farmers, American taxpayers and rural communities, in part because the federal subsidies are paid regardless of income. The nation's farmland would also suffer because the senators aren't requiring qualitative land stewardship practices as a condition for payment.
"High premium subsidies have hurt small and beginning farmers because the subsidies themselves have distorted the market," Sen. Tom Coburn, R-Okla., told the Washington Post. "For instance, high subsidies have artificially increased the value of land and have created other barriers to entry and expansion."
The numbers support Coburn's claim. The federal crop insurance subsidy total skyrocketed from $951 million in 2000 ($1.2 billion adjusted for inflation) to $7.3 billion last year, according to a recent report from the Government Accountability Office (GAO). Under current law, that number would jump to $8.9 billion annually through 2022.
"GAO believes that when farm income is at a record high and the nation faces severe fiscal problems, limiting premium subsidies is an appropriate area for consideration," said a statement accompanying the report.
The report makes good sense. Capping individual farmers' crop insurance premium subsidies at $40,000, which is the standard in other farm programs, would have saved the government $1 billion last year. An average of 62 percent of crop insurance premiums are now subsidized by the federal government, no matter the farmer's income, which prompts some to plant more than needed and purchase excessive insurance.
Senators want a "shallow loss" program, which helps offset farmers' losses when their income drops below historic averages, either because the price of their crops or their yields have declined. But the way the average is determined is flawed and needs closer scrutiny. Crop insurance, of course, also covers losses from natural disasters, such as flooding.
The federal program is administered by the U.S. Department of Agriculture in conjunction with private insurers. The program provided an estimated $113 billion in insurance coverage for more than a million policies last year.
Minnesota's two senators, Democrats Amy Klobuchar and Al Franken, say they will push for measures that support beginning farmers and conservation. We hope that's the case. But when asked about the crop insurance subsidies in a meeting with the Star Tribune Editorial Board recently, Franken offered a pat answer, saying they were necessary to save farms.
Congress generally takes up farm bills every five years. The current bill expires Sept. 30, and Congress expects to recess in early August. The full Senate and House will need time to consider, then reconcile, their bills. Whether that happens remains to be seen, as the House committee is still working on its bill.
Crop insurance is but one facet of the farm bill, but an important one. It's not too late for Congress to set stricter limits to help level the field for all farmers.
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