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Why Do Taxpayers Subsidize Farmers’ Insurance?

Filed by KOSU News in Business.
August 23, 2012

This summer’s drought has hit more than half the states in the country. Crops are suffering, but farmers might not be. Most farmers have crop insurance.

U.S. taxpayers spend about $7 billion a year on crop insurance. It’s our largest farm subsidy.

And this subsidy goes in part to farmers — who will tell you themselves they aren’t so sure about the whole idea. “I have an aversion to it,” says Jim Traub, a corn and bean farmer in Fairbury, Illinois. “But you’re not going to turn it down.”

Traub is attending a workshop at the Fairbury library on how to collect on his government-subsidized crop insurance. He brought the whole male half of his family — three generations of Traub farmers — to today’s workshop. They’re all named John or Jim.

All the Traubs will file losses this year. But all of Traubs also feel uncomfortable that taxpayers will help cover those losses.

“Everyone in here is a millionaire,” John Traub says. In all, farmers assembled at the Fairbury library have “hundreds of millions dollars in equity in farmland.”

John Traub says he and his family can survive a bad year or two. He is certainly wealthier than younger farmers. But on average, farmers make more than the typical American.

Which is one reason why economists like University of California Davis professor Daniel Sumner don’t like the government giving farmers subsidies.

Sumner says ski resorts suffered last winter when there wasn’t a lot of snow. The government doesn’t say, “Sorry you didn’t have a lot of skiers. Here’s a check.”

But farmers say farming is different. Donald Bielfeldt, a crop insurance agent in Anchor Illinois, says that the government needs to pay to insure farmers.

Somebody has to raise the cattle, hogs, chicken. I mean, that’s what you live on…. We have to protect the farmer, so that they don’t all go broke. And that’s what crop insurance is all about.

But even without insurance, Traub says, most farmers would not go broke from this one bad season.

The insurance certainly helps, though. Most eligible farmers are covered. And a small number even stand to make more this year from their crop insurance than they would actually farming.

Congress is working on a new Farm Bill. One of the biggest changes being proposed is an expansion of crop insurance. [Copyright 2012 National Public Radio]

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