Farm-Insurance Plan May Raise U.S. Taxpayer Costs, Lawmaker Says

A plan to create an alternative farm subsidy in the U.S. will cost taxpayers more than the current “direct payments” made to growers regardless of crop prices, Representative Jeff Flake said.

The so-called shallow-loss insurance plan, which would pay out only when revenue falls, “could mean a huge new entitlement or expanded entitlement from where we are, which is the antithesis” of the deficit-reduction goal of lawmakers, the Arizona Republican said today at a briefing in Washington. The event was hosted by the Environmental Working Group, which urges the elimination of certain farm subsidies, including direct payments.

The insurance program may be included in recommendations that the House and Senate agriculture committees are preparing for the congressional supercommittee charged with reducing the federal deficit. The plan may be released today, Flake said. Leaders have pledged to propose $23 billion in farm-spending cuts to the deficit-reduction panel, which has been meeting behind closed doors, before a Nov. 23 deadline. Earlier, they said a plan would be ready by Nov. 1.

“This has been done without light or due process,” Flake said. The debt-reduction proposals need to be debated openly because of their long-range implications on farm spending and production, he said.

The 12-member, bipartisan supercommittee is crafting a plan to cut the federal deficit by at least $1.2 trillion over 10 years. Farm subsidies will cost about $10.2 billion this year, with almost half of that amount in direct payments, according to the U.S. Department of Agriculture.

In a study commissioned by the Environmental Working Group and released earlier this month, Iowa State University economist Bruce Babcock called the shallow-loss proposal a “boondoggle” that would compensate large agricultural businesses for crop losses on paper rather than insure against natural disasters.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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