A new study finds that a heavily subsidized federal crop insurance program has become overly bloated at the expense of taxpayers.
The study, commissioned by the non-profit Environmental Working Group and conducted by Iowa State University agriculture economist Bruce Babcock, comes just as Congress prepares to take up the next farm bill.
It shows that crop insurance has become less of a safety net for farmers facing disasters like the drought of 2012 and more like an income support system.
That’s because under the program, most farmers buy a combination of policies that cover poor crop yields and declines in revenue. But the premiums paid by farmers cover only 40 percent of the anticipated payouts, according to Babcock, while taxpayers foot the bill for the other 60 percent.
Because the program is so heavily subsidized, farmers buy more coverage than they would otherwise, while taxpayers bear an inordinate share of any losses.
After the 2012 drought, the worst in 50 years, crop insurance payouts reached a record high, said Babcock. Indemnities for the year will exceed $16 billion, an increase of almost 50 percent from the then-record $10.8 billion paid out the year before.
Without those subsidies, he said, corn and soybean crop insurance payouts, for example, would have been just over $6 billion in 2012 — less than half of the actual amounts.
In many cases, notes Babcock, the program "allows growers to make more money from insurance payouts than they would from a healthy harvest."
The EWG concludes in its release on Wednesday that the latest report "adds to the growing evidence that common sense reforms to crop insurance would save billions of dollars while still providing a solid safety net, cutting the deficit and investing in programs that improve human health and the environment."
It suggests that if either of last year’s failed Senate or House Agriculture Committee farm bill proposals expanding the crop insurance program by eliminating direct payments to farmers regardless of whether they grow crops had passed, taxpayers would be asked to pay even more.
"Congress should and could do far better as it takes up the farm bill again this year," it said.
© 2014 Newsmax. All rights reserved.