President Obama proved in 2010 that billions of dollars of taxpayer money can be saved by renegotiating federal contracts with private crop insurance agencies, but the new farm bill prohibits the government from doing that in the future.
Part of the farm bill, which cleared Congress on Tuesday, prevents the government from saving taxpayers money in renegotiating contracts with private crop insurance companies. The government can still renegotiate the contracts, but taxpayer watchdogs said the bill insists any savings be paid back to insurance companies rather than returned to taxpayers.
"Feel free to renegotiate, but try not to make any savings if you do it," said Joshua Sewell, a senior policy analyst at Taxpayers for Common Sense. "If you have savings, it has to go toward — and they specify — underwriting gains and the delivery subsidies for the insurance companies."
After passing the Senate on a bipartisan 68-32 vote on Tuesday, the White House said Mr. Obama will sign the farm bill on Friday during a visit to Michigan State University in East Lansing, Mich., where he'll give a speech on the importance of the legislation to the economy. The Congressional Budget Office says the bill, which passed the House last week 251-166, will spend nearly $1 trillion over the next decade — though it will be $16 billion less than if Congress had continued current farm policy.
"This bill provides certainty to America's farmers and ranchers, and contains a variety of commonsense reforms that my administration has consistently called for," Mr. Obama said in a statement praising the bill. "As with any compromise, the farm bill isn't perfect — but on the whole, it will make a positive difference not only for the rural economies that grow America's food, but for our nation."
Neither the House Agriculture Committee, run by Republicans, or the Senate Agriculture Committee, run by Democrats, returned messages seeking comment on why the negotiations limit was included.
But Mr. Sewell said Mr. Obama is being punished for his success in renegotiating contracts to find savings the last time.
He said he suspects that the Agriculture Committee leaders didn't want to surrender any money from their jurisdiction, so they made sure there wouldn't be any additional savings.
"A lot of people are looking for savings, deficits are of great concern. Chairmen don't want to lose money from their committees," Mr. Sewell said. "They're circling their wagons and protecting every dollar they have in their committees, and they're sticking it to taxpayers."
Under the terms of the program, private crop insurance companies negotiate a deal with the government, then work directly with farmers and sell them insurance plans. Farmers pay about one-third of the insurance premium, while taxpayers foot the rest of the bill. If something happens to farmers' crops, they'll get a check directly from the private company.
President Obama renegotiated the Standard Reinsurance Agreement in 2010, saving $6 billion by stripping away some unnecessary subsidies, Mr. Sewell said. Even after the renegotiation, private crop insurance companies continued to make a profit.
The new plan that limits the negotiating power of government amounts to Congress acting as a lobbyist for the crop insurance industry, said Craig Cox, senior vice president for agriculture and natural resources at the Environmental Working Group.
"It means that these payments to private crop insurance companies that several economists think are already excessive, and are really generating windfall profits and guaranteeing the crop insurance companies a rate of return that's much higher than private sector — that that's just locked in forever," he said. "The administration cannot cut a better deal for taxpayers."
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