WASHINGTON - With the U.S. Congress on the brink of passing the most sweeping farm spending cuts in a generation, critics are riled the budget axe will spare billions of dollars in federal subsidies for private companies that reap double-digit returns for insuring crops.
Two years of wrangling over the next farm bill has cut $23 billion over the coming decades from crop subsidies, conservation programs, food stamps and a range of rural economic development programs.
There would be no cuts, however, in federally subsidized crop insurance, forecast to cost the government $90 billion over the next decade. An aggressive lobbying campaign has helped protect and expand a profitable niche for about 15 private companies that deliver the insurance, including Wells Fargo and Archer Daniels Midland.
For farmers and farm belt politicians, the government-backed insurance program that protects growers from poor yields or low prices is a reliable alternative to traditional crop subsidies, which are being almost wholly eliminated in the farm bill nearing Senate passage.
"This is real reform," says Sen Debbie Stabenow of Michigan, chairwoman of the Senate Agriculture Committee, in virtually every speech about the bill. It would create an insurance-like farm program that compensates growers for small declines in revenue. Crop insurance would cover larger losses and expand its position as the premiere risk management tool in agriculture.
But an increasingly vocal contingent of critics decry the scheme for richly rewarding large financial firms, and offering a costly, highly subsidized insurance system that enriches big farmers. While slow to materialize, opponents are beginning to have an impact, forcing Republicans and Democrats to ask pointed questions.
"Crop insurance has quietly morphed from what most people would consider a safety net -- insurance against crippling losses -- to a federally guaranteed business income for some of the most profitable and financially secure enterprises in the nation," the Environmental Working Group, a critic of the program, said in a report. It sa ys insurance companies got $7.1 billion in subsidies from 2007-11 as the program grew.
NO CUTS FOR CROP INSURANCE
The farm bill under debate in the Senate would boost the cost of the program by 5 percent, estimates the Congressional Budget Office, mostly by creating two new insurance plans with higher subsidy rates than usual; 80 percent for cotton and 70 percent for grains and soybeans.
Importantly, the bill also directs the Agriculture Department not to try to save money by revising terms of business with the industry in the next few years. USDA used that route in 2010, under orders from Congress, to pare $6 billion over 10 years, a move that still rankles the industry.