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Feds Subsidize Risk on Farms as Well as Beaches

A Commentary By Froma Harrop

Thursday, December 06, 2012

As global warming causes more serious and frequent shoreline flooding, indignation rises over federal programs helping owners of beach properties rebuild in places the ocean wants to take back. Superstorm Sandy was a lollapalooza in terms of waterfront damage and demands on the Federal Emergency Management Agency's resources.

But while asking why taxpayers must subsidize waterfront development in areas under increasing threat from climate change, we should ask why weather-related questions stop at the shoreline. The federal government spends a fortune protecting farmers' incomes in drought-prone regions that are going to get hotter and dryer. That encourages people to grow thirsty crops where they shouldn't.

"The federal crop insurance program is far worse in many ways than the flood insurance in the incentives it gives farmers to do things that are risky," Craig Cox, who covers farm policy at the Environmental Working Group, told me.

Consider the case of Seth Baute, a farmer in Bartholomew County, Ind. Thanks largely to the taxpayers, he actually made more money after losing 60 percent of his corn crop to drought than he would have had rainfall been adequate (for growing corn, that is).

How did this happen? The story begins in 2000, when Congress replaced a more modest farm support program (paying out if drought, hail or flood substantially reduced the average yield) with an immodest program actually guaranteeing a farmer's income. Taxpayers on average pick up two-thirds of the premiums.

When the federal insurance policy is written in the spring, the crop is covered at the projected price. But if the price of corn goes up in the growing season, so magically does the insured price. Drought conditions across the heartland raised the price of corn last summer. Thanks to the revenue protection program, even farmers whose crops withered into dust were paid according to the inflated price of corn.

As explained by Marcia Zarley Taylor on The Progressive Farmer website, the Baute family combined their federally subsidized 85 percent revenue protection policy with some private insurance. The result was that the family made 110 percent of what it expected before the drought, though it lost over half the crop.

Craig Cox notes that under the old subsidy program, taxpayers would have subsidized corn crops in Bartholomew County at a cost of about $24 an acre, while helping farmers with their losses. Under the new program, the government is paying up to $39 an acre.

Interesting that in the intense budget talks in Washington so little is being said about this bizarre transfer of wealth to farmers, which will cost $90 billion over the next 10 years, according to Congressional Budget Office projections. But wait, there's more.

The agriculture committee leaders are proposing to add another layer of federal spending -- a whole new generation of farm subsidies that pick up a larger share of the deductible on federally subsidized crop insurance. Both the House and Senate versions include three such deals, tailored to specific crops. These new revenue subsidies would add between $25 billion and $35 billion to the $90 billion.

Last spring, the ranking Republican on the Senate Agriculture Committee, Pat Roberts of Kansas, expressed his determination to keep the new layer: "Anyone that wishes to offer an amendment to harm this agreed-upon product will be taken to Dodge City, Kan., and hung by the neck until they are dead."

So then, why not build your beach mansion on the shifting sands? Why not plant corn on parched land? After all, Uncle Sugar is guaranteeing you, flood or drought -- unless the taxpayers get fed up enough to stop the game.

COPYRIGHT 2012 THE PROVIDENCE JOURNAL CO.

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