Oct 21, 2012

BRIEFS: Crop Insurance May Cost Taxpayers


A recently released working paper from the American Enterprise Institute found that future crop insurance may cost the American taxpayer dearly. Findings showed the Price Loss Coverage (PLC) and Supplementary Coverage Option (SCO) programs proposed in the House version of the 2012 farm bill could cost taxpayers over $20 billion annually (or four times the current cost of the direct payment programs which the PLC would replace). Cost depends on what crop prices do in the future. If prices remain high, program costs would be $1.1 billion per year. If they drop to historical averages, insurance costs climb to nearly $20 billion.

The study also found that the pro-grams would disproportionately subsidize certain crops, specifically rice and peanuts. With subsidies tied to farm acreage, the PLC and SCO programs would be new and potentially very lucrative entitlement programs that would provide the greatest benefits to the largest farmers. (See www.aei.org/papers/economics/field-of-schemes-mark-ii-price-loss-coverage-and-supplementary-insurance-coverage-programs/.)

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