Policy Studies Insurance

Conservation compliance: The obscure environmental provision key to protecting taxpayers and privatizing crop insurance

Author

Eli Lehrer
President

Press Release

Farm Bill needs stronger protections for taxpayers and the environment

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Introduction

The overwhelming majority of American farms receive federal subsidies of some sort. These payments are controversial and, in the opinion of many who favor smaller government, ought not to exist at all. This paper discusses some of the subsidies and argues that ongoing efforts to change crop insurance programs should maintain and expand “conservation compliance” policies in order to aid future efforts to privatize the system.

As of late 2012, agricultural subsidies provided directly to farmers include direct payments that are made whether or not crops are grown; heavily subsidized crop insurance; dozens of loan programs; and at least ten other programs that provide farmers with cash or tax credits in return for doing (or not doing) certain things. A bevy of nutritional subsidies, most importantly the Supplemental Nutrition Assistance Program, still widely known by its former name of “food stamps,” also provide indirect support that is hugely important to agricultural markets and farmers themselves.

As Congress works to renew the current Farm Bill—statutory authorization expired on Sept. 30, 2012, although some programs have been extended until Dec. 31—at least some calls for reform appear to have been heeded. One significant program, Direct Payments, appears very unlikely to survive any significant reauthorization. Bills passed by both Senate and House committees, as well as the Senate as a whole, have ended Direct Payments. Currently, Direct Payments are tied to “conservation compliance,” a policy that provides subsidies only if farmers work to conserve soil, avoid destroying wetlands and otherwise do things considered to be in the public interest.

This paper provides a brief outline of a free-market, limited-government attitude toward farm subsidies, reviews the direction of the current legislation, and, finally, makes the case for re-attaching to crop insurance programs the conservation compliance requirements currently associated with Direct Payments. The paper argues that, while the elimination of all supplier side farm subsidies would be the ideal situation, retaining conservation compliance requirements as part of any farm subsidy program—and particularly crop insurance–ought to be considered an important step toward a free market farm policy. In particular, it argues that conservation compliance programs are sensible on their own terms, could potentially help set the stage for the eventual privatization of existing programs, and ought to be expanded.

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