The case of crop insurance subsidies is a political disgrace and a prime example of the extent to which politicians have catered to special interests, especially mid-western, farm belt politicians. Reform of the federal crop insurance program, which is a total mess, would save approximately $5 trillion. Yes, that’s $5 trillion.
The federal crop insurance program is technically a public-private program, but the government subsidizes insurers to cushion farmers against catastrophic conditions (e.g., drought, natural disasters, floods and low market prices). Taxpayers cover 60 percent of farmers’ premiums, while insurers get federal reimbursements for all outstanding operating costs.
This program as structured is nothing more than extreme crony capitalism. There are at least two options for correcting the financial nonsense:
1) Cancel all federal crop insurance subsidies: Individual farmers would have to contract with private crop insurers to protect their assets (with no federal assistance).
2) Force farmers to contribute a fixed percent of their income to a federal insurance fund. This individual fund would be seeded with an initial federal contribution, but additional contributions would be solely dependent on individual farmer contributions. Individual farmers could draw against this fund as needed, but there would be no additional subsides provided by the government as in emergency situations.
Jonathan E. Walker, Ph.D.
Coral Reef Drive