Ag Policy Blog

Crop Insurance Cuts and the Chronic Budget Problem

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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It shouldn't surprise anyone that the crop-insurance industry came out of its annual convention over the weekend committed to fending off potential federal budget cuts.

Crop insurers see themselves as under fire because of proposals in both Congress and the Obama administration that would cut spending on crop insurance anywhere from $220 million to $1.6 billion a year.

The White House proposed $16 billion in cuts over 10 years by proposing cutting back subsidies on the harvest-price option and payouts on prevented planting. A pair of senators proposed a $50,000 cap on premium subsidies -- targeting the largest users of the program. That plan would save $2.2 billion over 10 years.

The insurance industry is going to focus on education this year to address the critics, said Tim Weber, chairman of the American Association of Crop Insurers and National Crop Insurance Services.

“Those with an agenda or an anti-agriculture bent cannot be given free rein to define our industry or the policies that underpin the rural economy,” Weber said in a news release. “No one knows the virtues of crop insurance better than the men and women in this room, and I challenge us all today to leave no attack unchallenged in 2015.”

Weber said the industry will work to keep crop insurance affordable, making sure insurance is widely available; and ensure that crop insurance remains a function of private industry.

“We have a great story to tell, and if we don’t tell it, then no one will – certainly not the way it must be told,” Weber said.

Weber's comments come after more than 30 groups wrote the congressional budget committees last week asking them to beg off proposed cuts to crop insurance. And also after, as DTN's Jerry Hagstrom reported, arguments between Agriculture Secretary Tom Vilsack and insurers over industry profitability.

While agricultural groups and the crop-insurance industry are prepping to mount an aggressive defense of crop insurance, they are challenged with a continuing drive for austerity. Crop insurers aren't alone. There is still a drive in Congress to cut, largely driven by the mindset that Congress must rein in President Obama's administration.

In a bigger picture, crop insurance and all other USDA programs are caught up in a larger trend involving Baby Boomers that the country has seen coming for three decades and failed to address.

With that in mind, let me share a nugget from my weekend. I can draw on modern political dilemmas from my weekend television choices. I have 120 channels and there is nothing on TV, you know. NBC, during prime time on Saturday, ran an episode of Saturday Night Live from 1990. The host was the late Patrick Swayze sporting an amazing hair style that could only be carried over from the 1980s. My wife and I noted at least three SNL cast members from then are now dead. One featured player is now a U.S. senator. During the Weekend Update segment, a guy named A. Whitney Brown provided some prose about the 1990 mid-term elections and frustrations because Congress just passed some spending cuts and a five-cent gas-tax increase.

A. Whitney Brown: "We're $3 trillion in debt plus interest now for all we know that's more money than there is in the world. On this budget we're trying to Nickel and Dime our way out of it. We call ourselves tightening our belts because we raise gas taxes a nickel a gallon. Maybe the president uses 100 gallons of gas to catch one scrawny bluefish, but for the average driver that adds up to 40 bucks a year. C'mon now Americans stop whining. Of course, they don't dare touch Social Security which is nice. Even though I doubt if my generation will ever get to touch it either. I think we're all going to be buying our poligrip and dog food with a shoe box and government IOU's because that's what we'll inherit when we turn 65. Our children, on the other hand, will inherit over $3 trillion dollars in debt and a voter turnout is no better than it usually is. There's a good chance they'll also inherit our congress. Or should I say inherit the wind. Anyway that's the Big Picture."

You caught that part about $3 trillion, right. 1990: $3 trillion. Today: $17 trillion and projected to be $20.3 trillion by 2025 under the president's latest budget proposal.

Robert Samuelson of the Washington Post wrote a column on Sunday highlighting how current attempts to squeeze spending out of most federal programs, including the military, stem back to higher spending for our aging population. Samuelson described it as the issue of our time that is being ignored. Most federal programs are going to continue to lose out to protect the growth rates for Social Security, Medicare and interest payments on that debt.

"From 2016 to 2025, “real” population-adjusted spending grows 27 percent for Social Security and 24 percent for Medicare, while spending drops 19 percent for defense and 17 percent for “domestic discretionary” programs. (“Domestic discretionary” spending is a catch-all that includes law enforcement, housing, education, energy, food safety and more.)," Samuelson wrote.…

Another column in the Wall Street Journal last week looked at the problem from a different angle. Within a decade, interest costs on the debt will surpass discretionary spending. "By 2021, the government will be spending more on interest than on all national defense. according to White House forecasts."…

The fight over whatever is left of that federal dollar is not going to get any easier anytime in the near future.

Follow me on Twitter @ChrisClaytonDTN.


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Raymond Simpkins
2/11/2015 | 10:13 AM CST
Chris, My two cents worth on crop insurance. First I think it is a great tool and has it's place,but it is also a big waste.Why should the federal gov. be keeping some of these guys in business?There are farmers here and everywhere that can't farm in a exellent year.The only way they survive is insurance and I am talking big farms,not your average farm.It's like the goverment bailing out the car companies, let them die somone take their place.Crop insurance should only cover direct cost and not make these poor producers richer every year.