Crop insurance battle expected during House farm bill debate
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WASHINGTON, June 12, 2013- In a briefing for House legislative staff today, the Environmental Working Group (EWG) and American Enterprise Institute (AEI) criticized the crop insurance and shallow loss programs in the 2013 farm bills of both the Senate and House.
Scott Faber, vice president of government affairs at EWG, outlined the variety of amendments to reform the crop insurance program that he expects House members will offer during the farm bill debate.
He said many will mirror proposed amendments in the Senate, many of which the upper chamber did not debate on the floor. They include:
-An amendment to limit crop insurance subsidies to $50,000 for any one farmer.
-A means testing amendment to eliminate premium subsidies for farmers earning more than $250,000 in adjusted gross income. Faber said this amendment would affect less than four percent of farmers.
-A different, “far weaker,” means testing amendment that would reduce premium subsides by 15 percent for farmers with an adjusted gross income of more than $750,000. This will mirror the amendment offered by Sens. Dick Durbin, D-Il., and Tom Coburn, R-Okla., which the Senate accepted.
-An amendment to eliminate the Harvest Price Option in the crop insurance program.
-An amendment to reduce government funding to premium subsidies across the board.
-A proposal to reduce the cap of government funding for crop insurance companies from $1.3 billion to $900 million per year.
-A proposal to reduce the guaranteed rate of return for crop insurers from 14 percent to 12 percent.
-A Provision to include conservation compliance to crop insurance. Faber said the amendment, offered by Reps. Mike Thompson, D-Calif., and Jeff Fortenberry, R-Neb., will have the same language as the provision included in the Senate farm bill. However, the agreement accepted by the Senate Agriculture Committee asks that no means testing or other limits are implemented in the crop insurance program. Senator Debbie Stabenow, D-Mich., criticized the inclusion of the Durbin/Coburn amendment that calls for means testing in the Senate, saying it would “undermine” the conservation compliance agreement.
Faber also anticipated other amendments not considered in the Senate process that would strike the Supplemental Coverage Option in the House farm bill and one that would remove the Price Loss Coverage (PLC) program. He also anticipates efforts to reduce subsidies in STAX, the cotton crop insurance program.
“I have faith in the House to write a better bill on the floor,” he said, adding that he believes these amendments would provide a better opportunity to achieve 218 votes. “It's hard to imagine this bill, with its Soviet-style price guarantees, would get 218 votes. The path to a farm bill includes many of these reforms.”
The agricultural community will fight most of these proposed amendments as the House prepares to consider the farm bill. Today, a coalition of 50 commodity groups and lending organizations led by the Crop Insurance and Reinsurance Bureau sent a letter expressing support for crop insurance and opposition to means testing and other limiting amendments.
The letter said crop insurance underpins the rural economy and cites a study from University of Nebraska-Lincoln researchers that found crop insurance saved 20,900 off-farm jobs and generated $2.2 billion in off-farm economic impact in the states of Iowa, Nebraska, South Dakota, and Wyoming during 2012.
“Farm bill amendments to make crop insurance protection unaffordable would cause producers to reduce their program participation, resulting in greater financial disruption in agriculture, increased government costs, a higher risk pool of insured producers, and increased premium rates,” according to the crop insurance program supporters. “Further cuts to crop insurance delivery threaten the private sector's ability to service producers, especially those in high risk states”
Speaker of the House John Boehner, R-Ohio, said Wednesday that, despite some concerns about a new farm bill, he plans to vote for the measure. However, he noted that he expects to see changes in nutrition and farm programs through “whatever the floor might do to improve this bill.”
House Agriculture Frank Lucas, R-Okla., said Wednesday he is expecting hundreds of amendments to the bill. He added he hopes to see some kind of rule established by Tuesday that would eliminate redundancy in the process. He also said this would allow for the open process that Speaker Boehner, R-Ohio, has insisted on.
During the joint EWG/AEI briefing today, Vince Smith, an AEI scholar and Montana State University economist, also criticized the House farm bill, particularly for its Price Loss Coverage (PLC) program in the Commodity Title that he says will cause market distortions and trade problems.
Smith said both the House and Senate bills “are more distortive than current law.” Although direct payments are eliminated in both bills, Smith said that direct payments program did not pose a problem with the World Trade Organization (WTO).
“Both the Senate shallow loss program and the House Price Loss Coverage program are clearly mine fields for trade disputes,” he said.
He said the Congressional Budget Office's (CBO) estimate that the PLC program will cost $2 billion per year over ten years assumes prices stay at current record levels.
However, he said prices will moderate over the next ten years, so the program would emit “huge payouts” not accounted for by the CBO.
Smith added that “Australia already has a WTO case lined up” if Congress passed the House's target prices.
Smith completed a study for the Mercatus Center at George Mason University that analyzes the current farm bill proposal by the House Agriculture Committees. He concluded the House farm bill proposal would spend the $3.8 billion it intends to reduce annually to create the Price Loss Coverage program, the STAX program for cotton, and the Supplemental Coverage Option.
He also asserted that any money saved in the Supplemental Nutrition Assistance Program (SNAP) would be lost to the creation of the new commodity programs and crop insurance provisions.
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