Heartland Institute Responds to House Budget Plan for Federal Crop Insurance

Published March 22, 2012

WASHINGTON, DC (MARCH 22, 2012) – The Heartland Institute’s Center on Finance, Insurance, and Real Estate today responded to the plan unveiled by House Budget Committee Chairman Paul Ryan (R-WI), who calls for $30 billion in cuts over the next decade from federal farm subsidies, which could include deep cuts to federal crop insurance supports.

The plan raises the bar for lawmakers currently in the process of drafting a new five-year Farm Bill. Leaders of the House Agriculture Committee and Senate Agriculture Committee previously had targeted $23 billion in cuts over the next ten years.

The following statement about the $9 billion-a-year crop insurance program from R.J. Lehmann of The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.

“Rep. Ryan has laid down a marker for budgetary discipline that should be welcomed, and the crop insurance program is an area in obvious need of reform. Private crop insurers that participate in the program through reinsurance agreements with the USDA’s Risk Management Agency have earned 22 percent returns over the past decade, well in excess of what they could expect in other lines of business.

“Under current law, agricultural producers pay only 40 percent of the cost of crop insurance, which covers 85 percent of their losses. Economists estimate that simply raising their contributions to 60 percent would save $1 billion a year, and similar savings could be achieved by cutting the Federal Crop Insurance Corp.’s overhead costs, which include insurance agent commissions. Combined, those cuts would add up to $20 billion in savings, and slashing or eliminating the USDA’s $5 billion in annual direct payment subsidies would yield even greater savings. We think this proves the chairman’s goals are realistic and achievable.”

R.J. Lehmann
Deputy Director, Center on Finance, Insurance, and Real Estate
The Heartland Institute
[email protected]

The Heartland Institute is a 28-year-old national nonprofit organization with offices in Chicago, Illinois and Washington, DC. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.