FABER: The farm bill taxpayers want

With record profits, farmers shouldn’t be reaping larger subsidies

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From 1995 to 2010, taxpayers provided nearly a quarter-trillion dollars in subsidies to farm businesses. Only one-third of America’s farmers grow crops that are even eligible for these subsidies, and the top 10 percent of these operations collected 74 percent of available funds. More and more farm payments are being delivered as premium subsidies for farm insurance policies. As more farm businesses purchased government-subsidized insurance, the cost to taxpayers has exploded: from $2.4 billion in 2001 to nearly $9 billion in 2011.

Nevertheless, some farm lobbyists have proposed extending these costly insurance subsidies - with no means-testing or payment limits - and creating new entitlement programs. In particular, some lobbyists want to guarantee up to 95 percent of the income for the same farm businesses that have absorbed the lion’s share of subsidies.

In combination with increasingly expensive insurance subsidies, the bill to the taxpayers for this new “safety net” could be atleast $120 billion over the next 10 years, according to the Congressional Budget Office.

Simply extending existing government subsidies for insurance will cost taxpayers about $90 billion over the next decade, including more than $15 billion in payments to insurance companies and agents. In the past five years, insurance companies and agents swept up more than $7 billion, including more than $3 billion for insurance companies owned by firms in places such as Bermuda and Switzerland.

With so much money flowing to farmers, insurance companies and agents, it should be no surprise that investigators continue to unearth cases of farm-insurance fraud. Since farm-insurance subsidies are not subject to means-testing, payment limits or disclosure rules, the opportunities for fraud are greater than ever.

The taxpayers have provided these unlimited subsidies even though farm businesses - especially large commercial farms - are enjoying record income. Overall, net farm income has risen from $55 billion in 2001 to $98 billion in 2011. On average, the largest commercial farms enjoyed household incomes greater than $200,000 last year.

To make matters worse, some farm lobbyists have proposed to end a 25-year conservation compact that ensures that farmers reduce soil erosion and protect wetlands in exchange for taxpayer subsidies. To help pay for subsidies to the largest farm businesses, some lobbyists have proposed deep cuts to voluntary incentives that help keep pollutants out of lakes and streams. The result is that taxpayers pay twice - once on tax day and then every time they pay their water bill.

This year, Congress must renew the farm bill. A better course than extending insurance subsidies and creating new entitlements would be to help farmers cover the “deep” losses caused by bad weather and to ask farmers to use their own resources to purchase private insurance to withstand “shallow” losses - the annual ups and downs of agriculture. The savings generated by such a system could be used to reduce the deficit - as Budget Committee Chairman Paul Ryan, Wisconsin Republican, has proposed - and to share the cost of clean water.

Scott Faber is a vice president at Environmental Working Group.

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