Fighting Crop Insurance Cronyism
“I don’t have super high hopes it’ll go anywhere,” says Lori Sanders, outreach director and senior fellow for The R Street Institute.
She’s talking about the Harvest Price Subsidy Prohibition Act, a bill introduced February 12 that targets the harvest price option (HPO) crop insurance policy—known as “the Cadillac coverage option of federal crop insurance.”
The Knoxville News Sentinelexplains the bill, and why it matters:
Under traditional crop insurance, farmers buy a policy that pays if they earn less money at harvest time than they were projected to make when they planted their crop. The policy locks in a guaranteed level of revenue and provides a safety net to protect farmers from catastrophic and unanticipated losses.
But farmers who want more protection can pay a higher premium and buy a harvest price option policy. The plan differs from traditional crop insurance because it guarantees the farmer will be paid either the standard locked-in price at planting time or the market price at harvest, whichever is higher. …
For farmers, the profits can be handsome. In 2012, when corn and soybean prices jumped 32 and 23 percent from planting to harvest, the harvest price option boosted payouts to farmers of both crops by a total of $6 billion.
The American Association of Crop Insurers, the Crop Insurance and Reinsurance Bureau, and National Crop Insurance Services called the bill “just another example of agriculture opponents trying to erode the risk management tools on which farmers depend,” according to AgWeek. But in a press release, R Street argued that “This product goes above and beyond the definition of a safety net. It is the crop insurance equivalent of your auto insurer surprising you with a new Cadillac Escalade after you’ve totaled your Toyota Corolla.”
Rep. John Duncan (R-Tenn) told Taxpayers For Common Sense, “Big agro businesses and insurance corporations have a sweet deal with our crop insurance. … The largest corporate farms collect the lion’s share of the money, creating an unfair playing field for family farmers. Ninety-nine percent of the people in my district do not get subsidies from the federal government to run their businesses.”
The farm bill’s crop insurance measures inordinately help large industrial farms stay alive, giving them an unfair advantage over small to midsize farmers, who cannot afford the same coverage. As Sanders wrote in a piece for TAC last year, “The federal government pays, on average, 63 percent of producers’ crop insurance premiums, regardless of whether it is a small family farm or a large, multi-million dollar business. Twenty-six farms receive more than $1 million in premium support, while 80 percent of farms receive $5,000 or less.”
The bill has bipartisan support: it was introduced in the Senate by Sen. Jeff Flake (R-Ariz.) and Sen. Jeanne Shaheen (D-NH), and in the House by Duncan. It is also supported by a bevy of libertarian and conservative think tanks such as Heritage Action, the American Enterprise Institute, FreedomWorks, the National Taxpayers Union, Campaign for Liberty, Taxpayers Protection Alliance, Center for Individual Freedom, Coalition to Reduce Spending, Less Government, Taxpayers for Common Sense, Club for Growth, and the Environmental Working Group.
The Congressional Budget Office estimates that the bill bill could save more than $18 billion over the next decade, “with no effect on the premium subsidies farmers receive for standard crop insurance policies,” says R Street.
So why doesn’t Sanders think it’ll get past committee?
“It’s very arcane, few know about it outside the Farm Bureau,” she told me—and the Farm Bureau has developed a reputation for supporting agribusiness, to the detriment of smaller family farmers. The Farm Bureau is just one piece of the Big Ag lobbying behemoth that dominates Washington: “In addition to the American Farm Bureau Federation’s twenty-two lobbyists, no fewer than 20 of the state Farm Bureaus, including Missouri, have registered lobbyists in Washington, leading the field of agribusiness lobbyists,” Ian T. Shearn wrote for The Nation in 2012. “Over the past decade, the nation’s ten largest agribusiness interests gave $35 million to Congressional candidates—led by the Farm Bureau, which gave $16 million, or 45 percent of the total.”
Govtrack.us gives the bill a 7 percent chance of getting past committee, and a 0 percent chance of being enacted.
David Dayen of The New Republic put it thus last year: “The shift from direct payments to crop insurance ensures that those handouts can be distributed in a hidden, more politically palatable way, making it more difficult to ever dislodge them.”
Sanders believes a lot of the Farm Bill’s cronyism is indirectly supported by Americans’ ignorance. People assume that support for the farm bill equals support for the local, family-run operations they consider the backbone of American agriculture. “Mainstream America just doesn’t know,” she said.
However, Sanders does hope that this bill—as well as the AFFIRM Act, which will be reintroduced to Congress in two weeks—will help raise awareness about the cronyism the farm bill supports, and what reforms need to be made. “We need to keep the drumbeat going.”