Crop insurance cap could save billions — NSAC
Billions in taxpayer dollars could be saved over the next decade if the 2023 Farm Bill puts a cap on federal subsidies paid to farmers who purchase crop insurance, according to a special report published Tuesday by the National Sustainable Agriculture Coalition (NSAC).
The report says a cap would impact relatively few farmers, have little effect on total insurance use and make resources available for conservation programs and other initiatives that help farmers further reduce the risk of weather-related loss.
Currently, the U.S. government pays out more than $7 billion annually in crop insurance subsidies, with the majority going to the largest farms. “For some reason crop insurance is the only subsidized farm program which includes no caps on the money that farmers can receive from the federal government,” said Billy Hackett, a policy specialist at NSAC. “It only makes sense that caps exist, as they do in federal commodity and conservation programs, to promote equitable outcomes.”
The proposal offers a range of cap scenarios. The strictest requires the complete elimination of insurance subsidies for any farm with an adjusted gross income over $250,000, which would amount to total savings of $20.2 billion and would impact 10.66 percent of all farms. All of the other caps would provide some savings on subsidy payments and reduce the extent to which subsidy payments are concentrated on a few farms, but to a lesser extent.
The report comes ahead of Wednesday’s House Agriculture General Farm Commodities and Risk Management Subcommittee hearing on perspectives on crop insurance. The NSAC hopes such caps can become part of the 2023 Farm Bill.
Hackett said small farmers would not be adversely affected by a subsidy cap, while large commodity farms could afford to buy insurance without the subsidies. Currently, farmers and ranchers receive a roughly 60 percent premium subsidy discount on their insurance policies. A 2019 study found that the largest 10 percent of farms received over 60 percent of all subsidy benefits.
“Savings in federal expenditures could be reallocated to other high priority programs (e.g., agricultural research, conservation, beginning farmer and rancher programs, etc.), reduce burdens on taxpayers, or reduce the federal budget deficit,” wrote Eric Belasco, who authored the report and is a professor of agricultural economics at Montana State University. He also noted, “Attention should be paid to establishing these policies so that they have the intended impacts and don’t allow for a mitigated impact through legal loopholes.”
NSAC is hosting a webinar next week to present the full findings of the special report.