The Corner

Farm Subsidies: Even Worse Than You Think

On the homepage on Friday, Henry Olsen criticized House Republicans for seeking to cut food stamps but not crop-insurance subsidies in the recently passed ”farm bill.” Point taken. But personally I think he is being too hard on conservative activists. To say that cutting the food-stamp budget by a small percentage is “the taking of food from the mouths of the genuinely hungry” and will “cut back on your dinner” is a bit overblown. In fact, I would guess that a randomized controlled study, were it done, would show that food stamp recipients are no healthier than non-food stamp recipients in the long run. 

Politically, conservatives are right to be concerned about a program that is making millions of people – millions of voters – feel dependent on the federal government for something as basic as groceries. The number of subsidized crop-insurance policies, though growing, is roughly 1/40 the number of people receiving food stamps, suggesting the two programs are just not in the same league when it comes to fostering the sense of dependency that generates votes for the Left.

That said, crop-insurance subsidies are definitely problematic. The federal government not only pays most of the farmers’ premiums to private insurance companies, it also reinsures those companies against large payouts to farmers. Most egregiously, the future cost to the taxpayers of the reinsurance is systematically low-balled by the government, using accounting practices that ignore the risk that payouts may be larger than expected.

Admittedly, projecting the future cost of insurance is no easy task, but voters need at least ballpark estimates to make informed decisions. Right now, the cost of almost every government credit or insurance program – from crop insurance, to student loans, to public pensions – is underestimated. The movement for “fair value” accounting is intended to fix that problem.


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