Environmental Working Group proposes changes in farm program
Most of the major players in the farm bill debate this time assume that revenue insurance will be a major component of the final package. Thus a number of the specific proposals by various commodity organizations offer a wrap-around program that covers shallow losses, leaving it to revenue insurance to serve as a kind of disaster program that covers deep losses.
And in recent go-rounds, Congress has preferred to have an insurance program that can serve as a permanent disaster relief program so that they do not have to garner sufficient votes to pass an emergency disaster relief program in response to a widespread production shortfall. Likewise many farmers and bankers prefer an insurance program over emergency disaster payments because payments are predictable and are paid even in situations where the extent of damage would not be widespread enough to grab the attention of Congress.
On November 3, 2011, the Environmental Working Group (EWG) released a study by Bruce Babcock, Professor of Economics, Iowa State University, titled, “The Revenue Insurance Boondoggle: A Taxpayer-Paid Windfall for Industry” just under 3 weeks before the Congressional Super Committee’s “November 23  deadline to come up with a deficit reduction proposal” which includes farm bill baseline funding. The EWG report consists of two parts, the study by Babcock and a preface by Craig Cox, EWG Senior Vice for Agriculture and Natural Resources and Nils Bruzelius, Executive Editor, EWG.
While it serves as an introduction to the study by Babcock, the analysis in the preface is not identical to what follows in the study. To allow each part to stand on its own, we will be examining the material in the preface in this column and Babcock’s work in the one that follows.
Cox and Bruzelius begin the preface asserting that “powerful farm state legislators and agricultural industry lobbyists have moved to hijack the process of rewriting the federal farm bill and enact a new, multi-billion dollar entitlement for the largest, most profitable farming operations. Their goal is to have the 12-member committee adopt their scheme, drafted entirely behind closed doors, while shutting out everyone else with a stake in the outcome—including taxpayers and advocates for healthy food, rural revitalization, children, conservation, public health and the environment.”
In addition they argue that “at the heart of this scheme is an expansion of the federal ‘revenue insurance’ program, an already heavily subsidized program that insures business income won’t fall below a ‘revenue guarantee’—something that would be the envy of any other industry—even as it enriches the insurers.” Using Babcock’s analysis, they assert that the recent cuts to the revenue insurance will make “little more than…a trivial dent in the windfall profits that insurance companies and agents reap from the program.”