Let them eat crop insurance

The new Farm Bill that made its way out of the House Agriculture Committee this week is a particularly vicious piece of social engineering masquerading as fiscal responsibility. While Congress has taken every opportunity to pat itself on the back for cutting the absurd direct crop subsidies paid to “farmers” like Archer Daniels Midland, in practice they have simply added $9.5 billion to existing subsidies for crop insurance. The kicker – these new giveaways are being paid for by cutting up to 3 million participants from SNAP, or food stamps.

This is bad enough, but the details are particularly offensive. First, according to research by the Environmental Working Group, insurance subsidies – like the crop payoffs before them – go overwhelmingly to a very small number of very large farms. Through information gathered by a FOIA request, EWG found that the following about subsidies in 2011:

  • Crop insurance subsidies to farmers were $7.4 billion in 2011, while the total cost of the program was $11 billion.
  • The $3.6 billion difference (if I understand correctly) included incentive payments to insurance companies and brokers to write these policies, even though the federal government was already subsidizing on average 62% of the cost of the policies.
  • 26 farmers received more than $1 million in insurance subsidies each, and the top 20% of farms in size received more than 80% of the subsidy.
  • The subsidies are not means tested – there is no maximum to the subsidy – and (thanks to a change to the 2008 Farm Act) the government does not track the recipients, nor is that information made available to Congress

For more information on the study, see here.

The lack of means testing is the tell, especially given the contrast to how SNAP recipients are being treated. The SNAP program is managed at the state level based on block grants provided by the federal government, which allows for some leeway in the interpretation of the program’s rules. Eligibility is based on both income and assets of the recipient, which means that (in stark contrast to the crop subsidy for multinationals and other huge landholders) the program is heavily means tested.

These means tests were adjusted as part of the Clinton-era welfare reform to allow for some flexibility at the state level. Specifically, according to the Center for Budget and Policy Priorities,

The 1996 welfare law allowed states to align their SNAP gross income eligibility limit and asset test with the eligibility rules they use in programs financed under their Temporary Assistance for Needy Families (TANF) block grant [ed. – TANF is the new name for welfare].  Over 40 states have taken this option, known as expanded (or broad-based) categorical eligibility, to align program rules, simplify their programs, reduce administrative costs, and broaden SNAP eligibility to certain families in need, primarily low-wage working families.

The federal SNAP gross income limit of 130 percent of the poverty line excludes some low-income working families whose disposable income actually is below the poverty line, often because they must incur sizeable child care costs in order to work.  In addition, the SNAP asset limit of $2,000 has not been adjusted for inflation in 25 years and has fallen 48 percent in real (i.e., inflation-adjusted) terms since 1986.  Some states use the categorical eligibility option to enable households with gross incomes modestly above 130 percent of the poverty line but disposable incomes below the poverty line — or savings modestly above $2,000 — to qualify for SNAP assistance, in recognition of their need. (emphasis added)

In other words, the categorical eligibility made it possible for those who made the effort to work, but still didn’t have enough money to live, to participate. Apparently this is the wrong kind of self-reliance and individual responsibility for Republicans, whose move to eliminate categorical eligibility is projected account for 70% of the $16 billion in cuts to SNAP, and is likely to have the following effects (again from the CBPP):

  • The cut would push millions of low-income people off of SNAP.  CBO estimates that repealing categorical eligibility would eliminate food assistance to 1.8 million low-income people; the Administration’s estimate is 3 million.   Most of those who would lose eligibility are either low-income working families with children or seniors.

A typical working family that qualifies for SNAP benefits due to categorical eligibility is a mother with two young children who has monthly earnings just above the program’s monthly gross income limit ($2,008 for a family of three in 2012).  On average, the families above that limit who qualify for SNAP as a result of categorical eligibility have combined child care and rent costs that exceed half of their wages.  The $100 per month in SNAP benefits that they receive covers about one-fifth of their monthly food budget….In addition, of every $10 in SNAP benefits provided to households that qualify for SNAP because of categorical eligibility, more than $9 goes to working households.

  • The cut would penalize families for saving modest amounts.  If Congress repeals categorical eligibility, states will have to terminate benefits to poor families participating in SNAP who have managed to save as little as $2,100.  Building assets helps low-income families invest in their future, avert a financial crisis that can push them deeper into poverty or even to become homeless, and have a better chance of avoiding poverty (and greater reliance on government) in old age….
  • Some working households would lose benefits merely because they own a modest car.  States have used categorical eligibility to ease overly restrictive rules governing the value of a car that households may own under SNAP rules.  A working family with a modest vehicle that has a market value of $5,000 to $10,000 (regardless of how little equity the household may have in the vehicle) could lose all of its SNAP benefits under the Lucas-Peterson bill.  Such families would need to choose between owning a car they may need to get to work and receiving help feeding their children.
  • Some 280,000 low-income school children would lose free school lunches and breakfasts.  Children in households that receive SNAP are automatically eligible for free school meals.  According to CBO, 280,000 children in families whose eligibility for free school meals is tied to their receipt of SNAP would lose free school meals under the bill.

EWG also went to the effort to compile a record of the Farm Aid subsidies paid to current members of Congress over the 15 years ended 2009. Three guesses who they went to:

This entry was posted in Food markets & development, Politics, Public finance. Bookmark the permalink.

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