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Senate's new farm bill will waste billions on subsidies, critics say

Crop insurance subsidies help farmers survive tough years, all agree. But critics say they are much too generous – and Congress could increase them further in its new farm bill.

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“Almost all of them have Cadillac insurance,” he says. “If they had yield shortfalls, then they made a lot of money.”

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For years, critics of the US farm policy focused on eliminating direct payments, some of which paid farmers in both good years and bad. These payments have become increasingly difficult to justify in the face of record farm income and worry over the federal budget deficit.

“Most people have a really hard time justifying to friends and relatives why they should get a federal payment when they have had record profits,” says Mr. Taylor of the direct payments.

This year, direct payments are likely to be cut from the farm bill. But versions of the legislation in both the House and Senate would pour most of the savings – more than $4 billion a year – back into other programs, including more generous insurance subsidies. Both versions of the farm bill would also cut funding for conservation and food stamps.

Limits on subsidies, or no subsidies at all, are favored by conservative organizations, such as the Heritage Foundation and Taxpayers for Common Sense, which are looking for ways to reduce the federal budget. Liberal farm groups say unlimited subsidies favor larger operations at the expense of family farms. And environmental groups argue that some of the billions spent on insurance subsidies could be better spent on conservation and other programs.

“The expensive cost of these programs is really cutting into our ability to fund other parts of the farm program, such as research, conservation, and rural development,” says Craig Cox, senior vice president of the Environmental Working Group, a Washington-based environmental organization that has been a vigorous critic of farm subsidies. “A lot of the farm program that has substantial public benefit is being cut because of poor priorities.”

Some smaller farmers concede that in good years they could probably pay for crop insurance themselves.

“It’s a great product,” says Kevin Raun, a farmer in Minden, Neb., who received some insurance money last year for a partial loss of his corn crop. “I’m just saying that when prices are good, we can afford to pay our premiums.”

Why subsidies persist

Yet some critics of the subsidies concede that some federal support for crop insurance is probably necessary. Without subsidies, they say, many farmers would not buy insurance at all, especially in parts of the country where farming is less risky, such as the central Midwest. This would drive up premiums for farmers who live where farming is riskier, such as the Dakotas, and who need insurance more badly.

The Senate farm bill contains modest limits that would reduce insurance subsidies to farmers earning more than $750,000 a year. Advocates of still-greater restrictions, such as limiting subsidies to $40,000 per farmer, have so far been rebuffed. The House, which is expected to take up its own farm bill later this month, will be starting with a version that cuts food stamps more deeply and offers more generous support to farmers, especially cotton farmers in the South.

Attempts to reduce farm subsidies have often languished because of the influence of powerful farm groups, agribusiness interests, and farm-state representatives. Change is also difficult because of the inclusion in the farm bill of food stamps and other nutrition programs, which enjoy the support of urban constituencies.

“These are very common-sense reforms,” says Sheila Karpf, a farm policy analyst with the Washington-based Taxpayers for Common Sense and the daughter of Nebraska corn and soybean farmers. “In the end, they don’t pass. Special interests get in the way. It happens again and again.”

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