While the middle class incomes are falling, net farm income has exploded – from $85 billion in 2008 to $122 billion in 2012. Median farm household income increased by 5.4 percent in 2011 and is expected to increase again this year. The income of the largest farms increased by nearly 8 percent in 2011 and is expected to soar again by year’s end.
Based on the caterwauling coming from some heartland legislators, you might think drought-stricken farmers are being left to fend for themselves if Congress fails to pass a new farm bill or extend the old one. But government-subsidized crop insurance continues regardless of whether Congress passes a bill. What’s more, some farmers will earn more from their crop insurance claims than if they had harvested a crop.
Here’s how government crop insurance works: under the current system, the taxpayer pays roughly 60 percent of the cost of insurance premiums and separately pays more than $1 billion annually to companies that sell the policies. And then the taxpayer pays most of the claims when insured crops fail anyway. Some farmers can link their indemnity to the “harvest” price of their crop – which naturally goes up when supplies dwindle.
That’s like having Congress pay 60 percent of your car insurance premium, paying a private insurer like GEICO to sell you a policy, and then picking up most of the cost when you crash your car. And under “harvest price” policies, Congress would even buy you a nicer car.
Remarkably, the House bill actually expands this insurance scheme – the cost of which has already risen from $2 billion to $9 billion a year over the last decade. In addition, the committee wants higher price guarantees for major commodities like corn. If enacted, the new subsidies will, in combination, cost taxpayers more than $34 billion over the next decade.
No one would argue that farmers need a safety net. But an insurance and subsidy system that pays most of the premiums, most of the indemnities, and provides a guaranteed price sounds more like a security blanket to me.
As a former member of the House Agriculture Committee, Speaker Boehner once fought subsidies, price guarantees and, in his own words, other “Soviet-style” provisions. He knows that half of all farm subsidies flow to farmers in just 35 congressional districts and that most of those districts are represented on the committee.
So it’s easy to feel badly for the choices facing the Speaker. He could bring the worst farm bill in a generation to the floor. Or he could subvert the Constitution and bypass the House entirely by attaching a “secret” farm bill to must-pass legislation. It’s hard to say which course is worse.
It’s harder to understand why fiscal conservatives, regardless of party, would want to expand farm welfare at a time of record farm income. It’s equally hard to understand why some progressive members of the House are clamoring for a farm bill that cuts hunger and environmental programs and guts basic consumer protections. In addition to more than $20 billion in cuts to critical programs, the House bill guts reviews of genetically engineered crops, weakens pesticide regulations, and prevent states from setting their own health and safety standards.
Because the House Agriculture Committee produced a bill that could not earn the support of the full House, important programs were suspended when the current bill expired last week. It's important that Congress finish its work, one way or another. But, it should pass a good farm bill, not just any farm bill, and certainly not the terrible one produced by the committee.
Faber is the vice president for government affairs for the Environmental Working Group.