Critics Attack Crop Insurance
Sep 16, 2013
Here is what Bloomberg had to say: "Taxpayers Turn U.S. Farmers into Fat Cats with Subsidies." They point their finger at crop insurance. They go on to say, "Federal crop insurance encourages farmers to gamble on risky plantings in a program that has been marred by fraud. The cost is increasing. Last year, we spent 14 billion dollars insuring farmers against the loss of crop, almost 7 times more than in 2002, according to the Congressional Budget Service."
Bloomberg and the other critics have a point. However, keep in mind the Direct Payments in the current farm bill will be gone in the next bill (if they ever pass it). The Sugar Program needs to be reformed. I don’t know if that will happen. The Dairy Program has been a problem forever. When I was Secretary of Agriculture, we tried to make it more market-oriented with modest success. The fact is, today, both sugar and dairy are supply-managed programs. I should also add that nutrition programs can expect a cutback in the new farm bill.
The one program looking for expansion is Crop Insurance. If we jettison all of the other safety nets, I think we need crop insurance. The uncertainty of weather can bankrupt some farmers. I do feel that we have to be careful when increasing the government subsidies in crop insurance. Today, the farmer pays about 40% of the cost of the insurance. The government pays 60%.
When I buy house insurance, I pay the full cost. The government doesn’t help. (Of course, if you have a house in a flood plain in Florida, the government does help pay.) But, that’s another issue. Crop insurance in the new farm bill could cost taxpayers about 9 billion dollars per year. Let’s not forget that crop insurance is all that stands between the farmer and the unpredictable forces of nature.
I have a concern that if we eliminate all the risk with heavily subsidized, inexpensive insurance, farmers will plow up land and grow crops for the insurance instead of the market.
On the other hand, if the insurance is too expensive, farmers won’t buy it, and when the drought hits, they are out of business. It is a delicate balance.
As of today, I don’t personally have a dog in this fight. With 4,000 acres of corn and soybeans, we have never bought crop insurance. Will I change my mind some day? I don’t know.
I do believe crop insurance, in the end, will be the last safety net standing.