WASHINGTON - Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark) plans to mark up her Healthy, Hunger-Free Kids Act of 2010 on Wednesday, March 24th. The legislation would reauthorize child nutrition programs and increase their funding by $4.5 billion over 10 years.
Although it’s a positive step toward providing healthier food to America’s children, the bill is less than half of President Obama’s proposal for a $10 billion increase over 10 years. Worse, Senator Lincoln pits conservation against kids by capping the amount of money spent on the Environmental Quality Incentives Program (EQIP) in order to pay for the nutrition increase. EQIP, which has been chronically underfunded and repeatedly targeted for cuts,
“At a time when we face record deficits, and growing burden on the environment from production agriculture and a desperate need for better nutrition to combat the obesity epidemic plaguing America’s children, it makes more sense to find savings in the lavish subsidy and crop insurance programs for commodity crops, instead of scalping proven and less costly conservation clean-water initiatives,” said EWG Senior Vice-President Craig Cox.
Subsidies for Crop Insurance
Farmers buy insurance policies that pay out if they suffer crop losses because of bad weather, just as drivers take out auto insurance to protect against an accident. In the case of crop insurance, however, it’s taxpayers who pick up most of the tab for the premiums.
Taxpayers ante up as much as 100 percent of the cost of the premiums, to the tune of $5.1 billion in 2009. That $5.1 billion is more than what was spent in 2009 on all USDA conservation programs combined, and more than five times EQIP’s funding.
The same inequity that makes direct commodity crop subsidies abusive also infects the crop insurance program. According to the Congressional Research Service (CRS), 80 percent of the insurance subsidies go to policies that protect just four crops -- corn, soybeans, wheat and cotton. In 2009, these same crops received the lion’s share, 74 percent, of crop subsidies in 2009.
Reducing the amount of the premiums taxpayers pick up by just under 6 percent would be enough to increase nutrition funding by $2.8 billion—without pitting kids against clean water. Even after that slight reduction, taxpayers would still be subsidizing $4.9 billion a year for crop insurance premiums.
Subsidies for Insurance Companies
Taxpayers not only pick up most of the tab for crop insurance, they also reimburse the insurance companies themselves for the “operating expenses” they incur when selling policies to farmers.
According to USDA’s Risk Management Agency, taxpayers sent $2.0 billion to crop insurance companies between July 1, 2007 and June 30, 2008. The latest data indicates that between July 1, 2008 and June 30, 2009, the amount was $1.6 billion. Cutting these payments to insurance companies by just 18 percent would be enough to avoid having to pit kids against conservation. The companies would still be getting $1.3 billion a year from taxpayers.
Subsidies for Farmers
USDA makes direct payments to farmers based on how much of eight major crops they grew some point in the past. Direct payments are fixed and automatic. Farmers get them whether crop prices are high or low and no matter what they plant—or even if they plant no crop at all. The subsidy spigot is wide open and taxpayers’ money flows in huge amounts to even the largest farm operations.
In 2009 USDA paid out $4.8 billion in these direct payments—more than the federal government spent on all USDA conservation programs that year and almost five times more than on EQIP.
Direct payments are also highly concentrated. The top 10 percent of recipients took in 58 percent of the money in 2009. The top 20 percent got more than three-quarters of the total.
A mere 11 percent cut in direct payments for recipients in the top ten percent would save $303 million a year, based on 2009 figures. The average recipient in the top ten percent would still be collecting more than $26,000 a year after taking a nearly imperceptible 11 percent cut, and taxpayers would still be shelling out $2.5 billion each year to the top recipients.
An even smaller 8 percent reduction in direct payments to the top 20 percent would save $303 million a year. The average recipient in this tier would still be getting more than $18,000 a year, and the public would still be sending $3.4 billion each year to the top 20 percent of recipients.
Claimed Crop Insurance Cuts in Subsidies Were a Mirage
Crop insurance supporters will argue that the program was already trimmed in the 2008 Farm Bill and should not be subject to more cutbacks. The Congressional Budget Office estimated that those reductions will save $3.9 billion over five years (FY 2008-2012) and $5.6 billion over 10 years (FY 2008-2017).
In its report, however, the Congressional Research Service calculated that in reality, $2.8 billion (72 percent) of the five-year savings “is attributable to changes in the timing of premium receipts from farmers, and payments to the participating insurance companies. None of these revisions would directly affect the final monetary amounts for participating farmers or insurers, but would still be scored as savings within the five-year horizon of the bill. Essentially, these 2008 farm bill provisions will allow USDA to collect two crop years of premiums in 2012 and delay the 2012 payment of reimbursements and underwriting gains into the next fiscal year.”
American agriculture has seen robust financial growth for much of the past decade. According to the Department of Agriculture, average farm income is well above household income. The taxpayer-funded commodity subsidies benefit the largest and wealthiest growers of corn, cotton, rice, wheat and soybeans.
There is no need to pit kids against clean water. Savings in the billions of dollars in crop insurance and farm subsidies can easily fund the increases in child nutrition that Senator Lincoln is looking for.
