Congress Supports Proposed Cut in Farm Subsidies

zintro_farmA proposed $100 million-a-year cut in crop insurance subsidies has the support of both houses of Congress. The House of Representatives has endorsed a decrease in the amount of money the government contributes to higher-income farmers’ insurance-policy premiums. The Senate approved a similar measure in June.

Sundaresan Subramanian, known professionally as Subi, is an energy and environmental expert and founder of ConsultSubi.  He explains the purpose of insurance crop subsidies. “Subsidized insurance for crops is intended to protect farmers by partially offsetting weather-related losses. The federal program was designed to help farmers who are impacted by natural calamities such as severe flooding or drought. It sounds good in principle. However, the important point to note is that federally subsidized crop insurance is one of the largest taxpayer supports for agriculture. The disappointing part of the program is that not all parts of the agriculture industry receive the same benefits. The subsidies flow disproportionately to growers of some crops.”

Crop insurance is the most expensive farm-aid program. Most of the money for premiums, as well as insurer’s administrative cost, comes from taxpayers. It cost $14 billion after the severe droughts of 2012, the worse suffered in 50 years.  Farm-aid supporters believe the program is cheaper than spending funds on disaster relief down the line. Supporters are also concerned about the potential ripple effects cuts would cause in the rural economy.

Subi discusses the future of crop subsidies in the current economy. “In this era of shrinking budgets, rising costs and new priorities, the federal government can ill-afford to continue with the same level of subsidies especially to wealthy farmers. It makes sense to reduce subsidies to folks at the high end and let them handle risk management on their own. Instead, the government should plan to protect the hard-working family farmer with limited resources. Such a step holds the promise of encouraging the family farmer and improving rural farm productivity.”

If the program remains unchanged, the program will cost $84.1 billion over 10 years. Even if the premium subsidies are reduced, there is an overall increase of over $500 million dollars a year.

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