A coalition of fiscal conservatives March 5 called for a steep cut in federal subsidies for crop insurance, setting up a clash with U.S. farm groups that see the program as their top priority in a new Farm Bill.
Growers have collected more than $15 billion in payments for 2012 losses resulting from the worst U.S. drought since the 1930s. Of that total, the cost to the government could be $10 billion.
Crop insurance is the biggest part of the farm safety net, thanks to high commodity prices and the popularity of “revenue” policies that shield farmers from low prices and poor yields. The program is expected to cost $85 billion over the next decade.
Senator Jeff Flake of Arizona and Representative John Duncan of Tennessee, both Republicans, filed bills to save $40 billion by slashing the federal subsidy for buying crop insurance. The government pays 62 cents of each $1 of the premium now.
The Flake and Duncan bills would return the subsidy to the levels of the late 1990s, when it was around 38 per cent.
“It’s a program that loses money for the taxpayers whichever way it goes,” Flake told reporters. Duncan said the biggest beneficiaries were insurance companies and big farmers.
The lawmakers were backed by 17 conservative groups, including Grover Norquist’s Americans for Tax Reform, Club for Growth, National Taxpayers Union, Taxpayers for Common Sense and FreedomWorks.
In a letter, the groups said smaller crop insurance subsidies “would provide a modest down payment on desperately needed fundamental reforms to U.S. agricultural policy.”
Many farm groups say crop insurance is essential and cuts would damage its panoramic coverage of U.S. agriculture.
The Farm Bills written in 2012 in the Senate and House expanded the scope of the program but died at the end of 2012. Farm state lawmakers say they will try again this year to pass a Farm Bill.
Groups representing corn and soybean growers, which met to discuss policy options last weekend, said insurance should retain a central role in U.S. farm supports.