One of the oldest and most entrenched boondoggles is the crop insurance program. The federal government pays the premiums for privately sold, highly profitable insurance to farmers. If crop prices fall, farmers get paid.
Why pays them? Taxpayers who live in cities.
So, if food prices are high, taxpayers lose. But if food prices fall, taxpayers lose.
What a deal! If you’re a farmer.
Why did the program get started 70 years ago? Officially, to help small farmers.
Who gets most of the money? Agribusiness giants. The percentage of Americans still on farms is about 2%.
So, the broad mass of urban voters pay high prices to very, very rich farmers, in the name of small farmers who quit farming back in 1948.
The amber waves of grain are farmed by gigantic companies. We wouldn’t want them to suffer losses, would we? Of course not.
How much money are we talking about? About $3 billion a year.
Congress says this is good news. The existing program pays $5 billion a year.
I feel so much better.
You see, the existing program pays farmers for crop land they do not plant. This new one will pay premiums on crops they plant but can’t sell at a profit.
Senator Debbie Stabenow of Michigan is the chair of the Agriculture Committee. She says this is a great improvement, because “payments are going to people who are actually farming.” What she meant was that the payments will go to incompetent people who are farming — businessmen who cannot accurately predict the price that their products will receive from customers.
Farmers need a safety net, we are told.
Where is you safety net?
Sam Willett is senior director of the National Corn Growers Association. He is an exert regarding the needs of incompetent farmers, who are represented in Washington by the National Corm Growers Association. Mr. Willett says: ““Cuts in the crop insurance program would reduce the effectiveness of the most important risk-management tool farmers have.”
It is a very effective risk-management tool. It takes away the risk.
In the good old days, the federal government paid farmers not to farm. The government paid them to take marginal land out of production as a conservation measure.
That was great for incompetent farmers who held onto marginal land.
But times have changed. Rising food prices have made it profitable to put marginal land back into production.
Now the threat is a recession. That might push down food prices and crop profits. So, all those incompetent farmers who used to get paid not to farm now need a safety net for farming.
Risks change, you see. There are new ways for incompetent farmers to lose money. So, federal bailout programs must be modified.
Then there are incompetent insurance companies. They don’t need a safety net. They need subsidies.
Crop insurance is sold to farmers by companies that then charge the government for the premium money. That subsidy was $7.3 billion in 2011.
It was under $1.2 billion in 2000, adjusted for price inflation.
This will rise to $9 billion a year over the next decade.
And the beat goes on. And the beat goes on.