CNBNews

Setting the Subsidy Table

November 25, 2020

Being Thanksgiving week, we’re taking this opportunity to reflect on how Washington’s agriculture policy impacts your plate.

For while the pandemic is leading many taxpayers to wrestle with how to safely celebrate the holiday, if at all, select agricultural special interests are gorging at taxpayers’ expense. If this feast of federal payments were a temporary response to the pandemic, it would have few ill effects. But the actions of industry and President Trump’s Department of Agriculture(USDA) make it clear they are looking to set their subsidy table for years to come.

Main Course – The centerpiece of Washington’s crop subsidy cornucopia is the incredibly generous federal crop insurance program. Covering everything from corn to clams, crop insurance is projected to cost taxpayers $8 billion a year, though the price is often much more -- $12.3 billion as recently as last year. Costs pile up because most policies pay out not when a farmer loses a crop, but when revenue falls short of expectations. Over the last ten years farm businesses have received $47 billion more in insurance payouts than the premiums they paid. That’s a $2.24 check for every $1 spent. It’s a safety net that would be the apple of any other industry’s eye. But for many in agriculture, it fails to satisfy their hunger.

Stuffing – In the past two farm bills (2014 and 2018) Congressional agriculture committees created new income entitlement programs to go with the crop insurance turkey. While these farm bill apologists claimed the programs would be leaner than the direct payments program they replaced, the Agriculture Risk Coverage and Price Loss Coverage programs are vastly over budget, and set to fatten the bottom lines of agricultural business some $30 billion more than originally projected. 

Gravy – No hearty meal is complete until it’s covered and smothered with gravy. At least that’s our explanation for why lawmakers have revived “emergency” ad hoc subsidies. After going 10 years without one, Congress used three “emergency” supplementals to unleash $5.4 billion in aid in response to hurricanes and other natural disasters since 2017. This despite the fact nearly all acreage (e.g. 90 percent of Georgia cotton, 90+ percent of Iowa corn) is already covered by federally subsidized crop insurance. This federal manna was used to both bail out the handful of farmers who chose to not buy crop insurance and to provide “bonus” payments to those that did.     

Side Dishes - Like any good Thanksgiving dinner, there’s plenty of attention being paid to the side dishes.