Sept. 12 (Bloomberg) -- Critics of the U.S. crop insurance program called for cuts to it and other agribusiness subsidies as Congress revamps farm policy.
At a rally on Capitol Hill today, Wisconsin Representatives Tom Petri, a Republican, and Ron Kind, a Democrat, called for lawmakers to re-examine U.S. farm spending for the next five years and revamp the nation’s crop insurance program.
“We’re asking these crop insurance companies to put a little bit of their skin in the game too, so it’s not all on the taxpayer back,” Kind told reporters at the event.
Under the insurance program, the U.S. taxpayer subsidizes the majority of premiums paid by farmers, covers much of the administrative costs tallied by insurers to run the program, and guarantees that all losses are covered, according to a series of articles published by Bloomberg News this week.
Crop insurance covered $117 billion worth of product in 2012, including almost all the corn, soybeans, cotton and wheat produced in the country. The U.S. Department of Agriculture spent about $14 billion last year on the program as the worst drought in a half century devastated plantings.
Supporters of crop insurance are stepping up their lobbying to preserve the program’s funding levels.
Richard Gibson, founder of American Agrisurance Inc. and a business consultant, told agents of NAU Country Insurance Co. in an e-mail this week obtained by Bloomberg News to lobby their lawmakers. He said crop insurance had become a target as Congress faces a Sept. 30 deadline to pass a 2014 budget or a stopgap measure to keep the federal government operating.
“I’ve been around this business since it started, and the bottom line to it is, it’s been a political process since day one,” Gibson said in a phone interview yesterday.
At today’s rally, Kind said the existing crop insurance program guarantees companies a 14 percent profit, forces the adoption of little risk and covers administrative and operating expenses.
“There’s not a business in the world that wouldn’t sign up for that offer, so why are we doing that in crop insurance program of the farm bill?” he said.
Petri and Kind co-sponsored legislation in May to cap the total value of crop insurance subsidies to $40,000 per individual annually, and eliminate support for those with adjusted gross incomes of more than $250,000. That measure, which the lawmakers said would save $11 billion over a decade, failed in the House.
Under the program, farmers now pay only about 38 percent of their insurance premium bills, or more than $4 billion in 2012. By last year, almost 1.2 million policies covering 282 million acres of farmland were in force.
Petri said the spending cap measure needs four or five more votes of support in the House. House lawmakers need to pass the farm legislation and move to a conference committee with senators to create a final version. The Senate has already passed its version of the bill.
In e-mails to agents, Gibson criticized Bloomberg News stories that examined the program’s costs and vulnerability to fraud. Crop insurers and the USDA said subsidized insurance helps stabilize food prices and protects farmers from the vagaries of weather.
“The program is working, so why does Bloomberg put on the negative ad campaign to destroy it?” Gibson said. He told agents in a Sept. 9 e-mail “to stay engaged with our political representatives” and warned that detractors of the program “will be out in force when and if the farm bill ever reached the conference level.”
Adjustments to the farm bill are still possible as both houses of Congress reconcile separate measures in a conference to shape the final law.
New Hampshire Democratic Senator Jeanne Shaheen, who also proposed curtailing payments, said re-examining the program was a “smart way” to reduce the deficit.
“Limiting federal spending on crop insurance is a common-sense fix to some of the government’s most egregious spending and waste,” she said in a statement.
Tom Vilsack, the secretary of agriculture, said in Washington this week that the crop insurance program was a vital part of U.S. farm policy and has come in for “unfair criticism” as the farm measure is debated.
“Those who report on it don’t understand it and its importance to the food supply,” he said on Sept. 10.
The U.S. Public Interest Research Group, which organized today’s event, said it delivered tens of thousands of petitions urging members of Congress to overhaul the program.
“We’re using taxpayer money to pay big companies to buy insurance that they would buy themselves,” Dan Smith, tax and budget advocate for Washington-based U.S. PIRG, said in a phone interview.
President Barack Obama sought this year to cut almost $12 billion from the program in the next decade while Republican House Budget Committee Chairman Paul Ryan has called subsidized insurance “crony capitalism” that needs to be reduced in an effort to curtail federal spending.
Tom Zacharias, president of National Crop Insurance Services, the main lobby for crop insurers, defended spending levels in a statement that said the Bloomberg series showed an “obvious bias” against the program.
Crop insurance “forces farmers to manage risk before, not after it happens, which saves taxpayers money,” Zacharias said.
Gibson said he wasn’t authorized to speak to the press on behalf of NAU Country, a unit of QBE Insurance Group Ltd. of Sydney, Australia and was expressing his own views.
The House legislation is H.R. 2642; Senate is S.954.
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