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Wednesday, October 19, 2011

Congress could swap one farm subsidy for another

Leaders of agriculture committees in Congress proposed a new system of farm subsidies last month that would end the $5 billion-a-year direct payments some farmers now get and cut a total of $23 billion from the federal deficit over 10 years. In the same package was a new form of crop insurance that would guarantee 10 to 15 percent of a farmer's revenue, "paying out not only in years of heavy losses, but also when revenue dipped less severely," The New York Times reports.

The "shallow-loss" plan was introduced as a way to "simplify and expand" the crop-insurance program, William Neuman reports. Most farmers already buy crop insurance to protect against major losses and are guaranteed about 75 to 85 percent of their income; the federal government pays over half the cost of premiums. The new approach "would help protect farmers during longer periods of depressed prices," Gary Schnitkey, a professor of farm management at the University of Illinois, told Neuman. Critics say subsidies like these don't help struggling family farmers the way they were intended, but instead go mostly to well-financed operations with large land holdings.

Neuman writes: "Vincent H. Smith, a professor of farm economics at Montana State University, called the maneuver a bait and switch. 'There’s a persistent story that farming is on the edge of catastrophe in America and that’s why they need safety nets that other people don’t get,' he said. 'And the reality is that it’s really a very healthy industry.' The subsidy swap is gaining momentum as lawmakers seek to influence the cuts in farm programs that are expected to be made by a special congressional panel charged with slashing $1.2 trillion from future budgets."

It's unclear exactly what it will cost taxpayers to fund the plan. Schnitkey thinks farmers could be paid $40 billion over 10 years, $20 billion less than the previous subsidy program, but Smith says the cost could be a lot more because recent high crop prices were used as benchmarks for the subsidy formula. Neuman says most of the $5 billion would go "straight back to the same farmers," though he probably means the same type of farmers (large ones), not specific farms. (Read more)

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