Cut Crop Insurance Before Food Stamps

At NRO, Henry Olsen explains why every argument House Republicans and conservative activists make against food stamps — they “cost too much, have grown too quickly, encourage government dependency, and discourage work” — applies even more to crop insurance, yet Republicans only seem to care about the former.

America’s crop-insurance program is obscene. Farmers receive government subsidies averaging 70 percent of their premiums to purchase insurance that protects them against declining crop value. There’s no income limit for this subsidy: The vast majority of this taxpayer money goes to farmers who make in excess of $250,000 a year. The insurance policies are sold by private companies, and the government also pays those firms about 20 percent of the premium cost to cover their expenses. The companies get to keep the profits from the policies, so taxpayer money makes crop insurance a largely risk-free investment for insurance companies. Thus, the government uses taxpayer money to pay rich farmers to buy insurance from wealthy insurance companies, whom the government also pays to sell the policies to the farmers. Talk about a “free” market.

Every problem conservatives complain about in food stamps is even worse in crop insurance. As you might expect when a program essentially offers intelligent, entrepreneurial people free money, they take it, and costs have exploded. From 2000 to 2011 — the same time period Heritage uses to analyze the growth in food-stamp expenditures — annual crop-insurance costs have also increased fourfold, from $2.2 billion to $8.6 billion. But at least with food stamps a significant portion of the cost growth since 2007 — between 30 and 50 percent, according to University of Chicago economist Casey Mulligan — occurred because the recession made more people eligible. Crop-insurance subsidies are not means-tested, so their increase is not necessarily due to falling income resulting from bad economic times.

In fact, crop-insurance subsidies are tied to crop prices, so they rise when prices rise. Crop prices, and hence farm incomes, reached record highs in 2006 and remain historically high today. Thus, the crop-insurance program is designed to give wealthy farmers more taxpayer money when they are already doing exceptionally well.

Crop insurance is even worse than food stamps at promoting dependency. Most food-stamp recipients receive only a couple of hundred dollars a month, a part of their income. Companies that sell crop insurance are 100 percent dependent on government payments for that business, and farmers are 70 percent dependent for their insurance — a rich subsidy that should strip away the idea of the farmer as a bold entrepreneur, while the welfare recipient is a burden on the public purse: The taxpayer spends more on the former than the latter. That’s why the crop-insurance lobbyists are frantically working Capitol Hill to keep feeding at the taxpayers’ trough. Crop insurance is perhaps the best example of a loosely structured government program tempting people who don’t need help to live at someone else’s expense.

As I’ve noted before, it’s things like this that make it hard to take the GOP seriously as a party of free markets and fiscal discipline.