An Opportunity for Free-Market Ag Reform?

CPI Staff — Thursday, November 15, 2018

The Senate is taking up the Farm Bill this week, which provides conservatives numerous opportunities for amendments. Here are eight ideas for reform.

  1. Reduce subsidies by 15 percent the federal crop insurance subsidy for farmers with an adjusted gross income of $700,000. This amendment was offered by Sens. Coburn (R-OK) and Durbin (D-Ill.) in 2013, passing by a vote of 59 to 33. It later was removed in conference. President Trump proposed similar policies in his budget, and Sen. Jeff Flake (R-Ariz.) has introduced the policy in legislation.

  2. Fix the “actively engaged in farming” loophole. Sen. Grassley (R-Iowa) has stated his intention to introduce an amendment that would fix a current loophole governing who is “actively engaged” in farming operations. Under current law, individuals who do not work on farms can still get subsidies of $125,000 per person and $250,000 per couple. A recent GAO study found that the 50 largest farms hired 200 extra managers to collect additional subsidies. Grassley’s amendment would limit additional farm managers to one per farm, and require that they actually engage in farm operations. Conservative groups are supporting his effort.

  3. Reduce the guaranteed rate of return for crop insurance companies from 14.5 percent to 12 percent. This amendment would not impact farmers, but rather the companies that underwrite crop insurance. Capping the subsidies these companies receive ensures they still are compensated for risk, but not at the expense of the taxpayer. President Trump proposed the same policy in his Fiscal Year 2019 budget.

  4. Cap the amount of crop insurance subsidies farmers are able to receive at $125,000/year. Right now, farmers can receive an unlimited amount of money from crop insurance each year. Placing a $125,000 annual limit on crop insurance payouts matches the current cap on the amount that farmers receive in Title I commodity supports.

  5. Allow crop insurance companies to sell crop insurance online, cutting out the middleman, and direct that those savings be used to reduce premiums for farmers. Under current law, private insurance companies are subsidized to process the paperwork associated with selling crop insurance policies and managing claims. This is in addition to the underwriting subsidy they also receive. Together, these subsidies cost around $2.5 billion annually, with companies receiving almost 45 cents out of every dollar spent on crop insurance. At a very minimum, crop insurance companies should start saving farmers money by facilitating online purchasing. If legislators really want to get crazy, they could even allow companies to compete on price, or allow them to price policies for farmers based on risk!

  6. Provide transparency and accountability to the government’s commodity checkoff programs. Checkoff programs assess fees on various agricultural products to produce promotional campaigns. However, there have been allegations of anticompetitive behavior by these programs. Sens. Mike Lee (R-Utah) and Cory Booker (D-N.J.) have introduced a bill to prohibit anticompetitive practices and provide more transparency to the consumer.

  7. Eliminate the catfish inspection office. This proposal has long been a favorite of conservatives, as it is a blatant representation of duplication and protectionism. Sen. John McCain (R-Ariz.) has been a champion of this program, and it remains to be seen if someone will pick it up in his stead.

  8. End double dipping between subsidy programs. Under current law, farmers enrolled in shallow-loss insurance programs can receive up to $125,000 per year when either their crop price or revenue falls below a certain level. Those same farmers can also receive unlimited benefits from the crop insurance program. Payouts can total more than $1 million annually for some farming business. Sen. Flake (R-Ariz) has introduced a bill to require farmers to choose one or the other, saving taxpayers $60 billion per year.