Congress Likely To Swap One Costly Farm Subsidy For Another


As Congress looks to finally wrap up the lengthy legislative battle over the farm bill in January, a central point of bipartisan consensus on agriculture policy is ending a misguided subsidy program. But if it replaces the program with beefed up crop insurance subsidies and price supports, it won’t reduce the risks taxpayers bear and could keep funneling money into undeserving pockets.

Any compromise legislation that Senate Democrats and House Republicans might manage to create would be built around a major shift in how the government helps keep individual farmers and massive farming corporations in business. For decades, taxpayers have helped farm companies make money through something called the direct payments program. That system sends billions of dollars each year to farmers and farm companies, even in years when crop prices and farm earnings are high enough that the payments are unnecessary. Flaws in the direct payments program have played a roll in funneling over 11 million taxpayer dollars to billionaires over the years. While the two sides have quarreled over the details, the broader proposal to replace direct payments with a more generous crop insurance subsidy program enjoys support from both houses of Congress and both sides of the political aisle.

But those insurance subsidies aren’t necessarily any better for taxpayers or stingier toward the gigantic companies that have reaped the benefits of the direct payments program for decades. “We’re replacing a discredited subsidy with a soon-to-be discredited subsidy,” Environmental Working Group (EWG) vice president Scott Faber told the Wall Street Journal. Faber’s left-leaning group has allied with the conservative Americans for Prosperity (AFP) in fighting for a less generous crop insurance subsidy program, and AFP’s Christine Harbin Hanson told the Journal that the revamped program “still isolates the farmer from a lot of risk.”

The crop insurance program already costs taxpayers far more than direct payments even before the sort of expansion Congress is likely to adopt. The subsidies “overwhelmingly flow to the largest and most successful farm businesses,” according to EWG. The crop insurance subsidy program overpaid Corn Belt farmers by almost $8 billion in 2012, according to EWG, and the program also lines the pockets of giant Wall Street firms. The 18 insurance companies that issue federally-subsidized crop insurance policies banked $10 billion in profit over the past 10 years, and have only failed to make a profit in two years out of the past 20. Expanding the program would benefit the biggest players in agribusiness and the insurance industry, but the size of that increase is unclear. The savings from ending direct payments are easy to calculate, but “we don’t know how much money we’re going to spend” on the new program, agricultural economist Andrew Novakovic told the Journal.

The current fight, which has been going on in one form or another since 2012, has mostly focused on the portion of the farm bill that helps feed poor people. (Food assistance programs made zero major overpayments in 2012, compared to 123 such high-dollar errors totaling $17 million in crop insurance and farm subsidy overpayments that year.) The two sides disagree sharply on those safety net programs for the poor. Republicans wanted cuts that would boot at least 4 million people off of food stamps at a time when hunger is historically high, while Democrats prefer to trim benefit levels for nearly 2 million recipients without kicking anyone out of the program. The latter proposal seems likely to feature in any compromise bill the conference committee manages to craft. If the consensus around crop insurance were to crack, however, the whole bill might fall apart, leading to another temporary extension of existing farm and food policy that would keep direct payments pumping but also shield food stamps recipients from a second major benefit cut in just three months.