Old McDonald had…really expensive crop insurance: Two proposals to improve equity and efficiency of U.S. crop insurance
In a new policy paper, R Street Associate Fellow, Bruce Babcock, examines two proposals that could meet the objectives of the crop insurance program at significantly lower costs and reduce the corporate welfare and waste in the agriculture portion of the farm bill. The first is to eliminate the additional premium subsidies that flow to farmers when they choose to insure their crops with “Harvest Price Option” revenue insurance. The second is to reduce premium subsidies to wealthy farmers by means-testing crop insurance subsidies.
The primary objective of the U.S. crop insurance program is to push participation rates high enough that Congress does not need to make ad hoc disaster payments to agriculture. But currently, while the system does induce farmers into the program, it does so at too high a cost. According to the author, the paper’s two proposals “would cut taxpayer costs and increase equity without sacrificing program objectives.”