The federal crop insurance system made $566 million in erroneous payments last year, giving it a total error rate of 5.23 percent, according to Department of Agriculture (USDA) data.
The farm assistance error rate was up from 4.08 percent in 2012 and far above the 3.42 percent error rate in the food stamps program. A substantial portion of those errors comes from underpayments to deserving people. Separating that out to focus on the overpayments rate, which is a better indicator of how to evaluate whether a program is too generous with taxpayer money, doesn’t look any better for crop insurance advocates. The overpayment rate for SNAP was 2.77 percent, compared to 4.84 percent for crop insurance.
And improper crop insurance payments may have been even higher in 2013, according to the USDA Inspector General. The internal audit of USDA’s error reporting systems found problems with the monitoring process, and as a result “this estimate may have been understated,” it said. Previous investigations from inside and outside the department have shown that the crop insurance system diverts billions of taxpayer dollars to Wall Street even when the system is working as it is intended to. Erroneous payments of the sort identified in the department’s own reports are separate from those structural problems with the program. Even proper crop insurance payments tend to go to large corporations with high profits rather than individual farmers struggling to get by.
The contrast between error rates in programs that help farmers and those that help the poor and hungry reinforces the illogical nature of the current federal approach to food and farm policy. Republican insistence on cutting food stamps helped delay the Farm Bill for about two years. The final compromise bill included an $8 billion cut to food stamps over the coming decade but expanded the crop insurance budget by $7 billion over that period. Because the programs are very different in size, those provisions meant that the bill cut SNAP by about 1 percent and expanded crop insurance by about 8 percent.
What rationale did farm policymakers offer for cutting food assistance to the poor while ballooning aid to farmers? Fraud. Food stamp opponents routinely exaggerate the food stamps error rate to justify trimming anti-hunger spending at a time when nearly 49 million Americans and almost 16 million children don’t have enough to eat.
In addition to being substantially more prone to error than hunger programs, crop insurance constitutes a giveaway to well-heeled financial companies even when it is working properly. Under the previous, less-generous insurance subsidies system, crop insurers that do business with the government banked $10 billion in profit over a two-decade stretch in which they saw losses in only two of those years. The expanded program will likely mean a larger windfall for those firms.