Why Disaster Spending? Taxpayers Already Created a Generous Safety Net for Agriculture.

Disaster Funding Why Disaster Spending? Taxpayers Already Created a Generous Safety Net for Agriculture.Additional Disaster Funding for Agriculture is Unnecessary

Agriculture, Budget & Tax,  | Analysis
Mar 27, 2019  | 5 min read | Print Article

The Senate has responded to flooding in the Missouri River Valley with a deficit-financed “emergency” supplemental spending bill. Clocking in at nearly $13.5 billion, the Additional Supplemental Appropriations for Disaster Relief, 2019, includes more than $3 billion to compensate farming and ranching businesses for losses due to natural disasters. The desire to aid individuals and communities affected by this year’s floods, last year’s hurricanes, and other natural disasters is understandable. But considering the generous disaster assistance programs already in place for agriculture, the need for a good chunk of this bill is not.

Businesses involved in agriculture benefit from the most generous taxpayer-funded safety net known to man. These programs are tailored to nearly every type of agriculture (e.g. corn growers, cattle ranchers, beekeepers, cherry tree owners). The majority are permanently authorized and draw on mandatory funding. Thus like other mandatory programs, such as Social Security, Medicaid, or food stamps, anybody who qualifies for the programs is automatically entitled to benefits without any additional funding or direction by Congress. The only requirement being one fills out the right paperwork. (Click on the image below for a downloadable spreadsheet.)

These programs have provided billions in benefits to agricultural businesses annually. Each of these programs will continue to provide financial support for businesses that experience losses due to recent natural disasters.

In recent years Congress has employed disaster supplemental spending bills, the annual appropriations process, and farm bills to make these programs even more generous. In addition, the bills have at times expanded eligibility or been used to insert legislative language that benefits a small subset of special interests.

The emergency spending bills being debated by Congress continue down this path, making disaster programs even more generous and parochial.

There is also a continuous drive from some special interests to use federal funding to displace the private sector and personal responsibility in managing risks and preparing for possible disasters. The attempt to use federal money to cover the farm business portion of crop insurance premiums is a perfect example. Federal crop insurance is a cost-shared program, where farm businesses are required to cover some of the costs of crop insurance, because having skin-in-the-game reduces irresponsible risk-taking. If federal money covers the farm business’s contribution, there is less incentive for the business to reduce their risk. Similarly, businesses have ample opportunity to purchase private-sector insurance on their machinery, buildings, and crops that they harvest but then hold onto to sell at a later date. Whether that crop is stored on-farm or at a third party, it can, and often is, insured. Passing an ad hoc disaster bill to compensate producers for lost stored grain is absolutely unnecessary.

Unlike other federal disaster programs for homeowners, restaurants, factories, or other retail establishments, agricultural disaster programs too often kick into gear for events that stretch the definition of disaster. For example in the federally subsidized crop insurance program a farming business that “suffers” from producing a record crop can make an insurance claim if prices, and consequently revenue, from that crop are less than anticipated. The ARC and PLC programs compensate businesses when they “suffer” from small dips in anticipated revenue. And the fact is, declared “disasters” are becoming more frequent. Since 2012 the percentage of counties the Secretary of Agriculture has declared as suffering from at least one type of disaster (there are 24 disaster categories at US Department of Agriculture) has ranged from a low of 43 percent of all US counties in 2014 to a high of 88 percent in 2012.

There is a limit to what American taxpayers can afford. There are numerous federal programs to assist agriculture in times of need. Congress should let these programs run their course. If there are shortcomings in the federal safety net for farming and ranching businesses, Congress can make changes in this year’s regular spending bills. Doing so at that time will allow lawmakers to develop a clear understanding of need and budget for any increased spending.

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