Crop insurance aid reflects budget reality

WASHINGTON -- In April, Republicans in control of Congress celebrated their agreement on a plan to save $5 trillion and balance the budget in a decade.

"We continue to get things done for the American people," said the House speaker at the time, John Boehner.

Yet as the year closes, Congress is planning to repeal one of the few spending cuts it has passed into law since approving that budget resolution: $3 billion over a decade from subsidies for crop insurers.

That $3 billion is just 0.06 percent of the promised $5 trillion total. Republican leaders agreed to hold a vote next month to delete the savings, after lawmakers from agricultural states complained that the cut would hurt farmers.

"It just highlights that no one took the budget resolution seriously or ever intended to actually produce the spending cuts necessary to balance the budget," said Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget, a center-right group in Washington.

Congressional Republicans' budget resolution in April included spending targets for broad categories of programs like agriculture and transportation, leaving the particulars to House and Senate committees.

Among the savings expected was $20 billion from total farm spending over 10 years.

Yet the agriculture committees, like most others, had no intention of turning budget-balancing numbers into policy reality by voting for cuts that would anger constituents, contributors and interest groups -- not the $20 billion that the budget resolution recommended, nor even the $3 billion reduction from crop insurers, a cut that administration officials and Republican leaders tucked into the bipartisan budget deal Congress passed in October.

That cut was a reduced version of savings that President Barack Obama has proposed in past annual budgets. But to clear a path to a vote on the budget deal, the House and Senate leaders -- Sen. Mitch McConnell, R-Ky., and Boehner, R-Ohio -- agreed to a demand by leaders of the agriculture committees that Congress would vote on a repeal of the cut in crop insurance subsidies in December, when it debated a year-end measure to finance government operations for this fiscal year.

Boehner retired from Congress days later. His successor as speaker, Rep. Paul Ryan, R-Wis., will honor the commitment for a repeal vote, his office said. While repeal is not assured, it is expected.

Sen. Jeff Flake, R-Ariz., is one of the few lawmakers who have objected to reversing course on crop insurance subsidies, which he called "a feathered nest."

"The ink hadn't even been applied here," Flake said in an interview. "We were reversing this before we even voted on it."

Federal crop insurance is a public-private program. The government subsidizes insurers, many of them subsidiaries of multinational companies, to cushion farmers against losses from drought, floods, other natural disasters and low market prices.

Taxpayers cover about 60 percent of farmers' premiums, while insurers get federal reimbursements for their operating costs. A target rate of return on their investment is set at 14.5 percent -- "higher than that of other private companies, on average," the Congressional Budget Office reported.

The provision in the October budget deal cut that rate to 8.9 percent. The outcry from farm-state lawmakers was immediate.

"If you do this, you're going to devastate crop insurance, and a lot of farmers are going to be out of business, and small banks are going to be out of business," Sen. Pat Roberts, R-Kan., chairman of the Senate Agriculture Committee, told reporters.

In a Senate speech, Sen. Steve Daines, R-Mont., noted that after a long business career, he was elected last year to "get Washington, D.C.'s, reckless spending and record debt under control" and that his first bill was for a balanced budget.

"The crop insurance program was gutted as a way to make this deal work," Daines said. "Where was the voice of Montana? Where was the voice of rural America as this backroom deal was cut?"

Rep. K. Michael Conaway, R-Texas, chairman of the House Agriculture Committee, predicted in an interview that crop insurance companies would get out of the business unless the cut was reversed. They are, he said, "a vital cog in keeping these farmers in business."

"So let's be real careful before we start automatically tossing production of agriculture under the bus in some sort of point of balancing the budget," Conaway said. "I'm as much of a spending hawk as anybody else. But at the end of the day we need to be smart about how we do it."

As for finding $3 billion in alternative savings, Conaway said that was a problem for congressional leaders.

But, he added, the cuts "are going to be found somewhere other than the ag jurisdiction."

A Section on 11/28/2015

Upcoming Events