Latest insurance news report shows crop subsidy cap could create $1 billion in annual savings

Crop Insurance cuts

Crop insurance news update

Crop-InsuranceThe latest Congressional auditors insurance news report, which is set to be released on April 19, 2012, will show that if there is a reduction in the subsidies given to large farms to pay for most of their crop coverage, the federal government would see an annual savings of approximately $1 billion.

This report suggested that the government could cap the maximum amount to be paid to farmers every year through this subsidy at $40,000, in a similar way to the caps made by the government to payments in other farming programs. At the same time, any effort to try to place a limit on this subsidy will face opposition by rural lawmakers, who state that this program is an important agricultural safety net.

The Government Accountability Office created the soon-to-be-issued report. This is the Congress’s investigative branch. Senator Tom Coburn, Oklahoma Republican, requested the creation of the report as an element of his government spending cutback efforts.

The current federal government’s crop insurance program allows farmers to purchase policies for the coverage of price declines, poor yields, or both. These policies are sold through private companies, but approximately 62 percent of the premiums, as well as the administrative expenses, are paid by the federal government.

According to the Government Accountability Office report, this crop insurance subsidy has exploded in cost, having risen from $951 million in 2000 (adjusting for inflation, the equivalent of $1.2 billion, today), to $7.3 billion in 2011. A study performed by the Congressional Budget Office, which was cited within the G.A.O. report, forecast that the cost of the premium subsidy from 2012 through 2016 will be about $7.8 billion per year (for a total of approximately $39 billion)

Other programs for farms have already limited their incomes or payments. However, there aren’t any such restrictions to crop insurance payments, allowing farmers to receive millions in subsidies, regardless of their actual level of income. The insurance news report by the G.A.O suggested that if the cap had been implemented in 2011, there would have been an impact to approximately 4 percent of farmers. They were typically the large farms, who account for approximately 30 percent of the premium subsidies.

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