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Senate farm bill is lesser of two evils

Senate farm bill is lesser of two evils
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The 2018 farm bill has entered the final stretch before becoming law, with proponents of the House and Senate versions vying for legislative acceptance during the upcoming congressional conference process.

When it comes to agricultural subsidies, both the House and Senate farm bills are seriously flawed. The one positive thing that can be said about the Senate version is that it is not as bad as the bill put forward by the House Agriculture Committee. The House bill expands spending on farm subsidies and wastes American resources. It does nothing to mitigate the flow of billions of federal dollars to large scale farm business operations, reflecting successful lobbying efforts by prosperous farm interest groups and agribusinesses. Instead, the House bill continues subsidy programs that have for decades funneled about 70 percent of all payments to the largest 10 percent to 15 percent of farm businesses.

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Sadly, while less harmful, even the Senate bill, passed last month on an overwhelmingly bipartisan basis, does little to change that story. In the Senate bill, an amendment put forth by Chuck GrassleyCharles (Chuck) Ernest GrassleyGOP plays hardball in race to confirm Trump's court picks Trump officials ratchet up drug pricing fight Dems angered by GOP plan to hold judicial hearings in October MORE (R-Iowa) may limit the flow of funds to very large agribusiness farms. His initiative ensures that only one person on any given farm is eligible for subsidies provided under price loss coverage and the agricultural risk coverage. Thanks to Pat RobertsCharles (Pat) Patrick RobertsEvangelical leader: Not worth risking ties with Saudi Arabia over missing journalist GOP loads up lame-duck agenda as House control teeters Congress allows farm bill to lapse before reauthorization deadline MORE (R-Kansas) and Debbie StabenowDeborah (Debbie) Ann StabenowElection Countdown: Dems outraise GOP in final stretch | 2018 midterms already most expensive in history | What to watch in second Cruz-O'Rourke debate | Trump raises 0M for reelection | Why Dems fear Avenatti's approach Republican Senate candidate apologizes after swastika spotted in campaign ad Poll: Dem Stabenow has 9-point lead over Republican James in Michigan Senate race MORE (D-Mich.), respectively the chairman and ranking member of the Senate Agriculture Committee, the initiative will limit agricultural businesses to a maximum of only $125,000 from the two major subsidy programs.

The Grassley initiative is scarcely a radical and draconian proposal. It affects only a small number of very large and wealthy farm operations, and ensures that subsidy payments be given only to individuals who actually work on these farms. To put it into perspective, it is worth noting that about 80 percent of all farms in the United States receive annually no more than $10,000 from the programs that are subject to such limits. More than 50 percent of farms receive less than $2,500.

But if the past is any predictor of the future, major farm lobbies are likely to cry havoc and claim that the very foundations of our food system will be shaken by the modest Grassley proposal. If the initiative survives the forthcoming conference process between the House and Senate agriculture committees, the savings to taxpayers could reach up to $200 million a year, according to Congressional Budget Office estimates.

In contrast, the House bill ensures unlimited access to such subsidies for large farm businesses. In both the House and Senate bills, many other expensive agricultural programs have been left untouched, including the heavily subsidized federal crop insurance program. Few Americans would really believe that the federal crop insurance program is primarily a risk management program and not an income transfer program. Taxpayers cough up over 70 percent of the total cost of a crop insurance policy for a typical farm business. As a result, farm businesses receive a return of about $2.10 on every dollar they invest in premium payments.

Today, crop insurance companies make an annual average $2.5 billion in revenues funded by taxpayers, while the program hands over about $5.8 billion to farm businesses. In order to give a farm business a $1,000 premium subsidy, the federal government has to hand over an additional $400 to the insurance company selling the policy. That is an expensive way to transfer taxpayer dollars to wealthy farm businesses and land owners. Furthermore, crop insurance subsidies have no limits. The bigger the farm, the bigger the subsidy, even if it means that millions of dollars in annual government subsidies go to individual farm businesses.

What does the Senate bill do about crop insurance subsidies? Absolutely nothing. A modest amendment would have reduced premium subsidies for farm businesses owned by households with annual incomes above $700,000. While a very small number of rich farm businesses would have been affected, the amendment was killed almost immediately because of vigorous opposition from the crop insurance and farm lobbies. In the conference game between the two chambers of Congress, hopefully the Senate bill prevails. Despite all its flaws, it is still the lesser of two evils.

Vincent H. Smith is a visiting scholar and director of agricultural studies at the American Enterprise Institute. He is also a professor and director of the Agricultural Marketing Policy Center at Montana State University.