In the wake of weather disasters in 1983, 1984 and 1988, U.S. agriculture was struggling, and an unparalleled farm debt crisis was only compounding the problem.
Back then, the federal government responded differently to agricultural crises. There was no overall strategy to deal with recurring farming disasters, and responses were generally reactive and after-the-fact.
So, in 1989, the U.S. Government Accountability Office (whose name has since changed from the General Accounting Office) published a report that examined the role of USDA’s three main disaster programs: Ad hoc direct payments, disaster emergency loans, and crop insurance.
GAO compared the effectiveness of these three programs, using eight different criteria that weighed the ability of the programs to deliver at the lowest possible cost, provide a disincentive to risky operations and pay farmers for actual losses, among other points.
The report concluded that “crop insurance is a more equitable and efficient way to provide disaster assistance,” than both taxpayer-funded disaster payments and emergency loans.
GAO recommended strengthening crop insurance to ultimately serve as the primary program for providing farm disaster assistance. And in 1994, President Clinton signed the Federal Crop Insurance Reform Act, which restructured crop insurance to increase farmer participation, increase the private sector’s role, and enhance provisions of the crop insurance program for farmers.
The GAO’s report and the 1994 Act set the stage for the affordable and widely available crop insurance system we have today, with modern products like revenue coverage that help farmers plan for not only weather-related disasters but the massive price fluctuations in the global market.
And, instead of ad hoc disaster relief bills, farmers now help cost-share their own farm policy, paying $50 billion out of their own pockets in the last 17 years for insurance coverage. Farmers also absorb the first 25 percent, on average, of any loss before their coverage kicks in.
The system is also much more efficient and accountable than direct government payments because private insurance companies sell policies and pay indemnities only after verifiable losses.
Fast forward 28 years and it seems the GAO has forgotten its own lesson. The GAO, in a July report, recommended effectively dismantling the same crop insurance system that has become a cornerstone of America’s modern-day farm policy. Specifically, GAO proposes changes that would weaken the very private-sector delivery system that provides aid efficiently and reduces taxpayers’ risk exposure – a plan that would ultimately lead to more government dependence.
The recent GAO report, in essence, advocates a return to a prior era, back when farmers, lawmakers and taxpayers were equally frustrated with the way rural America received needed support.
Luckily, most lawmakers aren’t giving the recent GAO report the same warm reception its counterpart received decades ago. It’s already been criticized by Senate Agriculture Committee Chairman Pat Roberts (KS), who said, “Now is not the time for additional cuts to a program that producers rely on.”
He’s exactly right. A financially stable agricultural sector is fundamental to the well-being of our economy and society, and crop insurance is fundamental to agriculture’s success.