Monday, September 16, 2013

Annals of American Idiocy – Federal Crop Insurance

Celebrating All The Bad Ideas in American History, Politics and Economics

[Editor’s note:  There are innumerable writings about how great America is and what wonderful things have been done in this nation.  This is one of an irregular series whose topics are all of the things America has gotten wrong.] 

Who could not want to support America’s farmers?  These are the families that work hard all year long to bring everyone the best produce and food in the world.  It’s just Pa and Ma and the kids plowing the fields.  What’s not to love?

Of course the above is pure fantasy.  Sure there are family farms, like Dick Thompson in Iowa chronicled by the great NY Times food writer Mark Bittman.

In the mid-’80s he was a co-founder of the Practical Farmers of Iowa(P.F.I.), and between then and his death, he and his wife showed more than 40,000 visitors how a relatively small farm could support a modern family while stewarding the land. Farming in Iowa is not as monolithic as most Easterners believe, but there are not many shining beacons of sustainable agriculture; Thompson was one.

. . .

He kept impeccable records, allowing him to demonstrate to anyone who cared to look that his relatively low-tech and (by Iowa standards) small farm yielded between $150 and $200 more per acre than those of his more conventional neighbors. He knew, and said, that “Every farm is different.” But he also said, “You cannot buy the answers in a bag.” The farmer, in short, has to know the land; there is no one-size-fits-all.

But most farming is done by large agricultural organization and businesses.  And to insure they make money the federal government provides them with subsidized crop insurance.  What’s wrong with this?  Plenty.  Here is Mr. Bittman again.

Take the Federal Crop Insurance program (F.C.I.C.), for example. In 2011, F.C.I.C. paid out nearly $11 billion, a record, due largely to flooding; in the 10 years before that, annual payouts were around $4 billion. In 2012, the effects of drought forced F.C.I.C. to smash the just-set record: payouts were $17.3 billion.

The program itself is flawed, of course; it rewards risky behavior like planting in flood- or drought-prone or easily eroded areas, where crop failure might not come as a surprise but is compensated anyway. Equally important, F.C.I.C. fails to encourage or even acknowledge that farmers who invest in improving their soil — as Thompson did — suffered far less damage in recent years when bad weather hit.

In almost every Midwestern state, in 2012, 80 percent of crop insurance payouts were because of drought; yet those effects can be mitigated by attention to healthy soil, which should be the farmer’s fundamental craft. A new paper by the Natural Resources Defense Council (“Soil Matters”) describes these issues and ultimately recommends that F.C.I.C. “launch a pilot program that reduces premium rates for farmers who apply low-risk/high-reward farming methods to reduce the risk of crop loss.” Think of this as an insurance policy reduction for the equivalent of nonsmokers or safe drivers.

That’s right, since the subsidized insurance program will pay for mismanagement of the land, why not mismanage the land.  And the question should also be raised, why the subsidy?  Everybody else has to pay their own way on insurance, why should tax payers subsidize farmers and encourage them to engage in bad, risky behavior.

If there was private unsubsidized insurance farmers would be forced to engage in land management practices that minimized risk.  And the private insurance companies would work with farmers to see that would happen, the same way private auto insurance companies fight to reduce accidents.

One would think that Conservatives would be leading the charge to end this wasteful and ineffective program that produces bad unintended results.  But of course Conservatives are leading the charge to expand the program and make things worse.  Maybe they can’t help it, making things worse is what modern Conservatism is all about.

Subsidized Federal crop insurance, another chapter in the Annals of American Idiocy.


  1. I presume this program followed the trajectory of many others.

    1. Government creates a subsidy to help a vital industry survive in challenging times.

    2. The industry benefits from the subsidy and grows powerful.

    3. The industry exerts its power to distort and abuse the subsidy.

    4. The subsidy becomes so entrenched that any attempt to reform it is deemed radical.