Costly Farm Bill: New Analysis of Crop Insurance's High Price

In a just-released working paper, American Enterprise Institute (AEI) agricultural economists Vincent Smith, Bruce Babcock, and Barry Goodwin find that the Price Loss Coverage (PLC) and Supplementary Coverage Option (SCO) programs in the House version of the farm bill could cost taxpayers over $20 billion

Key findings:

  • High cost of PLC: If crop prices remain at historically high levels, program costs will be approximately $1.1 billion. However, if crop prices drop to their recent historical average levels, program costs could exceed $18 billion annually--almost four times the current cost of subsidies paid under the Direct Payments program, which the PLC would replace.
  • Crop insurance boondoggle continues: If prices remain at current high levels, the SCO will cost taxpayers $2.6 billion annually. Half a billion of those dollars would flow directly to crop insurance companies--who already receive $3 billion per year in other taxpayer subsidies. If prices drop to recent historical average levels, SCO costs would drop to $1.5 billion.
  • Skewed priorities: If crop prices moderate to recent historical average levels, the House PLC and SCO programs will cost taxpayers over $20 billion per year, more than all current spending on farm-oriented programs. This includes current programs that enhance farm incomes--like subsidized crop insurance, direct payments, disaster aid, and loan rate programs--in addition to publicly funded R&D and education programs that benefit consumers, processing companies, and farmers by improving agricultural productivity.


Read the full report here.

Vince Smith directs AEI's American Boondoggle: Fixing the 2012 Farm Bill project and is an agricultural economist at Montana State University, Bruce Babcock is an professor of economics at Iowa State University, and Barry Goodwin is the William Neil Reynolds professor of agricultural economics at North Carolina State University.

Learn more at www.AmericanBoondoggle.com

For media inquiries please contact Jesse Blumenthal at [email protected] or 202.862.4870.

Follow @AEInews

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Vincent H.
Smith

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 27
    MON
  • 28
    TUE
  • 29
    WED
  • 30
    THU
  • 31
    FRI
Monday, October 27, 2014 | 10:00 a.m. – 11:30 a.m.
State income taxes and the Supreme Court: Maryland Comptroller v. Wynne

Please join AEI for a panel discussion exploring these and other questions about this crucial case.

Tuesday, October 28, 2014 | 9:30 a.m. – 12:15 p.m.
For richer, for poorer: How family structures economic success in America

Join Lerman, Wilcox, and a group of distinguished scholars and commentators for the release of Lerman and Wilcox’s report, which examines the relationships among and policy implications of marriage, family structure, and economic success in America.

Tuesday, October 28, 2014 | 5:30 p.m. – 7:00 p.m.
The 7 deadly virtues: 18 conservative writers on why the virtuous life is funny as hell

Please join AEI for a book forum moderated by Last and featuring five of these leading conservative voices. By the time the forum is over, attendees may be on their way to discovering an entirely different — and better — moral universe.

Thursday, October 30, 2014 | 2:00 p.m. – 3:00 p.m.
A nuclear deal with Iran? Weighing the possibilities

Join us, as experts discuss their predictions for whether the United States will strike a nuclear deal with Iran ahead of the November 24 deadline, and the repercussions of the possible outcomes.

Thursday, October 30, 2014 | 5:00 p.m. – 6:15 p.m.
The forgotten depression — 1921: The crash that cured itself

Please join Author James Grant and AEI senior economists for a discussion about Grant's book, "The Forgotten Depression: 1921: The Crash That Cured Itself" (Simon & Schuster, 2014).

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.