Taxpayers for Common Sense, as well as many other budget watchdog organizations, just sent a letter to members of Congress to support bipartisan reforms to the federally subsidized crop insurance program.
Of the many taxpayer subsidies for the agriculture sector, the federal crop insurance program is routinely the most expensive. Reforming the crop insurance program has been a focus of budget requests and legislation for both President Trump and President Obama before him.
Senators Toomey (R-PA) and Shaheen (D-NH) recently introduced S. 3292, the Assisting Family Farmers through Insurance Reform Measures Act of 2020 (AFFIRM Act of 2020). The bill would end crop insurance’s uniqueness as the only open-ended farm income entitlement program by eliminating subsidies for producers with an adjusted gross income (AGI) over $250,000 as well as limiting to $40,000 the amount of premium subsidies an individual can receive per year. The AFFIRM Act also reduces to $900 million, from $1.5 billion, the amount companies are paid to sell policies and process claims while lowering the government guaranteed target rate of return for companies. Lastly, the bill increases transparency in government spending by reporting all individuals and entities that choose to receive federally subsidized crop insurance.
The federal government is projected to spend an average of $8.2 billion annually on the federal crop insurance program. Actual costs, however, can be much greater than projections. The CBO projected in its May 2019 baseline that crop insurance outlays would be $7.5 billion in 2019. Actual outlays were $9.5 billion, a 21 percent increase. In 2011 and 2012 the total bill for providing this agricultural subsidy program was $25.3 billion ($28.6 billion in 2019 dollars).
There is plenty of room to reform the federally subsidized crop insurance program into a more cost-effective, transparent program. Farm businesses can afford to shoulder a bigger share of their premiums. Insurance agents who bear no risk, and insurance companies that bear very little risk, are overcompensated. The AFFIRM Act of 2020 is a step in the right direction.
Download or read the letter below.