The Obama administration seems sure to propose cuts in the federally subsidized crop insurance program in its final budget package, which will be released on Tuesday. The White House tried for the past three years to scale back the premium subsidy for the most popular revenue insurance policy, and Agriculture Secretary Tom Vilsack hinted last week that crop insurance reductions would be on the table again. With Republicans in control of Congress, a new proposal is no more likely to succeed than its predecessors.
In a White House blog, budget director Shaun Donovan zoomed through 19 initiatives that will appear in the budget, including two at USDA — a $12 billion expansion over the next decade so the summer food program reaches all eligible school-age children, about 22 million at present, and full funding of $700 million in fiscal 2017 of the Agriculture and Food Research Initiative, a competitive grant program. The summer food expansion would establish more sites that serve meals and provide an EBT card that families could use to buy food from grocers.
Americans will elect a new president in November who would oversee federal spending for much of fiscal 2017, so Obama’s proposals may amount to a parting request, albeit with some sting to them. The summer food plan, for example, is broader than an expansion pending in a child nutrition bill in the Senate.
If the administration follows form, its chief crop insurance target would be the harvest price option, which is purchased on 80 percent of crop policies. With it, growers are indemnified for losses at the higher harvest-time price for a crop, if market prices go up, rather than the price guaranteed at planting. The insurance industry likens the harvest price option to policies that reimburse homeowners for the replacement cost of property. Reformers say the option can generate windfall payments to growers and drive up the cost to taxpayers. There are less expensive ways, such as policies that guarantee yields, to shield farmers from disastrous weather.
The government pays an average 62 cents of each $1 in premium. Last year, the administration sought a reduction of 10 percentage points in the harvest price option subsidy that it said would save roughly $16 billion over 10 years. The administration also could try to reduce the amount the government pays each year for the overhead cost of delivering crop insurance to growers, said a farm activist.
Farm-state lawmakers quickly blocked a proposal last fall by Republican leaders for a $3-billion cut in crop insurance, to be achieved by lowering the rate of return to insurers. Crop insurance is the top priority of farm groups and their allies in Congress. They made the political calculation in the 2014 farm law to accept cuts in farm subsidies in exchange for an expansion of crop-insurance funding. Crop insurance is easier to defend because growers pay a premium and don’t receive a payment unless they suffer a loss.
At the same time that Congress quashed the $3-billion cut, a bipartisan quartet of lawmakers — Sens. Jeff Flake of Arizona and Jeanne Shaheen of New Hampshire and Wisconsin Reps. Ron Kind and Jim Sensenbrenner — filed legislation calling for $24 billion in crop insurance cuts. Some $19 billion of it would come by eliminating the premium subsidy for harvest price option coverage. The policies would remain available at full premium cost to producers. The legislation has not seen action.