Most of us expected proposed budget cuts from the Trump Administration’s proposed FY2019 budget, but the hit to the federal government’s support of crop insurance was unwelcome. As AGDAILY reported, the Trump administration suggested “reductions in the federal crop insurance program through a cap on adjusted gross income (AGI) and a reduction in premium subsidy, and elimination of the Foreign Market Development program and Market Access Program.”
If you’re not familiar with the crop insurance program, I have written about and described how it works here. In short, the federal crop insurance program creates a unique partnership between the federal government and private enterprise. Through the Risk Management Agency, the government sets which rates can be charged for coverage, determines eligibility criteria, and underwrites some of the loss. It also helps farmers by paying a portion of the annual premiums, as well as some of the insurance company’s overhead costs for administering those policies. In return, the federal government obtains a of portion of underwriting gains in years where there are not as many claims. In order to participate, farmers usually agree to abide by certain conservation practices.
Crop insurance is so important because it helps farmers manage risks from things completely outside of their control, such as the weather. Without government involvement, the premiums for these insurance policies would be prohibitively expensive. In lean years, where the profit margin is very small, those insurance proceeds can be the difference between a family farm continuing or completely going out of business.
While the United States has cut direct subsidies for farmers, the crop insurance program is a unique solution for managing risks and protecting our nation’s food supply. Cutting the program just for the sake of cutting something should not be an option.
Don’t get me wrong, I completely and fully support governmental financial responsibility. The United States is running a pretty serious debt, to the tune of some $20 trillion. While we do a pretty job ignoring it, there may come a day when we need to actually address it. However, we should not make across the board cuts to a really good program that supports our nation’s food supply simply for the sake of making cuts.
Instead, we should focus on making reforms that continue to deliver the same or higher quality services while decreasing the overall cost. For example, maybe we need to do a better job of determining when an insurance claim is payable. Maybe we need to reevaluate what types of production methods are insurable. Maybe we can find ways to streamline the process of obtaining coverage and dealing with claims that will allow us to decrease costs.
Reducing federal support for crop insurance benefits, especially when most farmers are struggling to make ends meet, is simply not a viable solution. Unfortunately, the idea of making meaningful reforms seems to be increasingly unlikely as the partisan divide in Washington, DC continues to grow. But finding innovative ways to cut spending without gutting programs is exactly what we need to accomplish.
Crop insurance is a vital tool for family farmers trying to manage all of the extraordinary risks of farming. Fully funding it protects our nation’s family farmers and our homegrown food supply.