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Study Shows Crop Insurance’s Influence on U.S. Economy


Musser is a Senior Fellow, Thomas Jefferson Institute for Public Policy. Previously he served at Special Advisor to the Chairman of the U.S. House Budget Committee and also Vice President at the Mercatus Center at George Mason University.

The Classical Latin phrase Primum non nocere or “First, do no harm,” has long been a part of British and American medical ethics. Congress would do well to heed this maxim when making policy, especially when that policy involves our food supply.

For several years now farm incomes have been down significantly, many farmers are making less than they did in 2013, and news reports over the last six months attribute the on-going stress in the agricultural sector to an epidemic of suicide among our farmers. Given the severe economic conditions for so many of our farmers, the last thing Congress should do is make our farmers’ lives even more difficult by tinkering with public policy in a manner that could make the situation significantly worse.

During consideration of the current Farm Bill, a few loud voices have called for dramatic changes to the public-private partnership system of Federal Crop Insurance that undergirds the rural economy. While all federal programs should be scrutinized on a regular basis to root out waste, fraud, and abuse, the good news is the Federal Crop Insurance program is a high performer on that front and it provides a critical life-line to the Heartland when the farm economy is imperiled by flood, drought, or pestilence.

As a new study published by the Thomas Jefferson Institute shows, it is hard to understate the value of Federal Crop Insurance, which involves a partnership including farmers, who pay insurance premiums, private insurance companies, which bear part of the risk and perform the job of assessing damage and paying claims, and the federal government which acts as a final reinsurance backstop for the program. This partnership is a far cry from former federal policy that put the entire cost of farm policy on the taxpayer.

From the standpoint of the taxpayer, Federal Crop Insurance represents a good return on investment. Federal Crop Insurance costs approximately $9 billion per-year out of a budget of more than $4.1 trillion, which means that it constitutes roughly one-twenty-fifth of one percent of annual federal spending. In return, we are assured of a continued food supply even in the face of natural disaster and protection for economic activities that constitute more than five percent of the country’s economic output. In human terms, these big numbers translate into thousands upon thousands of jobs not just for farmers but for manufacturers, sales people, nurses, doctors, lawyers, bankers, accountants, teachers and many others across the agricultural Heartland.

Now is not the time to tinker with a program that performs so well and makes sure that we all may eat.

Source: James C. Musser, The Roanoke Times

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