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Secret Farm Bill from Secret Santa?

Wednesday, December 5, 2012

Congressional leaders in search of a compromise to avert the “fiscal cliff” are under growing pressure from advocates for subsidized agriculture to attach a $1 trillion farm bill to legislation ostensibly designed to straighten out the nation’s finances.

What a lump of coal for taxpayers!!

Only in Washington could some political leaders propose to bypass the floor of the House of Representatives and attach a $1 trillion farm bill – at a cost higher than the Affordable Care Act – to a measure designed to reduce the federal deficit.

Both of the farm bills drafted by the House and Senate would actually increase crop insurance subsidies and put the taxpayer on the hook for more spending when farm prices fall.

There’s a good reason that subsidized agriculture’s allies want to bypass the House: Their bill would lock in subsidies that will cost taxpayers more than $140 billion over the next decade. While that’s only a portion of the spending in the farm bill, it’s by any measure the least defensible – from a policy or fiscal point of view.

The other factor driving the push to pass a “secret farm bill” without hearings or debate is that the tab for the ongoing drought is about to come due. Some experts predict that taxpayers will have to pick up more than $20 billion of the crop insurance claims being paid to farmers.

It would be irresponsible for Congress to jam through a secret farm bill before we know the drought’s full cost to taxpayers– and the potential cost of the House and Senate proposals to further increase farm subsidies. If either bill had been in effect this year, the price tag would likely have been even higher.

Anyone who understands how crop insurance works will not be surprised to learn that farm groups are pressing for a secret farm bill passed before this year’s full bill comes due.

Under the current system, taxpayers shoulder roughly 60 percent of the cost of insurance premiums and separately pay more than $1 billion annually to companies that sell the policies. On top of that, taxpayers cough up most of cost of paying out claims when insured crops fail. That’s a windfall for farmers who base their claims to the “harvest” price of their crop – which naturally goes up when supplies dwindle in a drought or other disaster.

That’s like having Congress pay 60 percent of your car insurance premium, then paying a private insurer like GEICO to sell you the policy and finally picking up most of the cost when you crash your car. Under “harvest price” policies, Congress would even buy you a nicer car.

You’d be crazy to pass up such an offer, so it’s no surprise that most farmers in drought-stricken parts of Iowa and Illinois have purchased these policies. What should be a surprise is that many of these farmers will earn more from their insurance coverage than they would have earned if they had harvested a bumper crop.

No wonder advocates for subsidized agriculture are trying to lock in this deal without having to bother with the pesky House of Representatives!!

Congress should pass only a responsible one-year farm bill extension that finally ends the subsidies known as “direct payments” – and then fully examine the costs of the current crop insurance program and the potential price tag of proposals to provide new insurance subsidies and price and revenue guarantees. That would be a real gift to taxpayers.