In 2000, taxpayer-funded Federal subsidies paid for (on average) 38% of crop insurance premiums and the “farmers” (typically large industrial commodity operations) paid the rest. These days those numbers are reversed. Now taxpayers pay for 68% of the insurance premiums and the farmers pay for only 32%. The subsidy levels vary between 38% and 80%. These subsidies cost taxpayers nearly $9 billion per year, making it the most expensive program for farmers in the USDA budget.
As I’ve mentioned before, government-funded insurance coupled with record high prices has led to a dramatic increase in the amount of land being planted in corn and soybeans. The combination of government insurance and price supports has created incentives to plow up marginal land, with resulting environmental damage. And since the insurance insures not only against crop loss, but also against a drop in price, then it essentially is an income guarantee (using tax dollars to guarantee 85% of the operation’s income). Most of the subsidies go to the largest operations at a time when crop prices and farmland values are at all-time highs. There are a lot of folks hurting in America these days. Industrial farmers, as a group, aren’t among them.
Some fiscal conservatives and environmentalists joined to try to bring some sanity to this. Senator Jeff Flake of Arizona, one of the most fiscally sensible members of Congress, introduced a bill (the Crop Insurance Subsidy Reduction Act of 2013) that would roll the crop insurance subsidies back to the 2000 level, but the bill never made it out of committee. The version of the Farm Bill that passed the Senate actually increases the subsidy program (which also requires taxpayers to pick up 100% of the operating costs of the so-called “insurers”). The Bill failed in the House, but not because of opposition to subsidized insurance, which will almost certainly be increased in the final version of whatever passes.
No doubt there are hundreds, if not thousands, of equally ridiculous counterproductive corporate welfare programs within the multi-trillion dollar fiasco that is government spending. Even if folks came to their senses and ended this one, the overall situation would still be an unsustainable mess. But I see no evidence that this is going to end, regardless of the fact that it’s bad policy, which we can’t afford. When we look back at 2013 in ten years or so, I’m fairly confident that the government will be using its printing presses and Chinese credit line to spend even more on industrial crop insurance subsidies than it does today. Assuming of course that the entire house of cards hasn’t collapsed by then.