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Taxpayers on Hook for $10B as Drought Ravages Crops

Subsidized insurance program draws criticism
By Kevin Spak,  Newser Staff
Posted Aug 14, 2012 7:41 AM CDT

(Newser) – Crop farmers are on track to record about $18 billion in losses thanks to this year's historically nasty drought—and by one expert's estimate, the federal government is on the hook for about $10 billion of that, thanks to the heavily subsidized federal crop insurance program, the Washington Post reports. Though farmers technically buy the policies from private insurers, the federal government guarantees those insurers against losses. It also pays 60% of farmers' premiums, which this year amounted to an extra $9 billion.

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The program has been criticized for encouraging farmers to till risky land they otherwise wouldn't. "If the government takes on much of the risk in farming, paradoxically, farmers adopt riskier production practices," says one American Enterprise Institute scholar. Environmentalists also say it leads to overfarming, and a report out yesterday noted that more than 23 million acres of grass and wetlands—an area the size of Indiana—were converted to farmland between 2008 and 2011. Yet Congress is currently poised to expand the program, as a consolation for cutting lump-sum farm subsidies, much to farmers' delight. (Read more farm subsidies stories.)

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