While much of Washington is coming around to the fact we can leave no stone unturned when tackling our deficits, some old bulls are acting more like stubborn mules. When Budget Committee Chairman Paul Ryan (R-WI) asked the bipartisan leadership of the House Agriculture Committee what they could cut from farm spending, they claimed they’d already done their part.

Agriculture in this country experiences a level of income security that would make most taxpayers green with envy. From direct payments based on a farm’s past production, disaster payments, ethanol mandates, marketing assistance, and on and on, billions of tax dollars are spent every year supporting big agribusiness. There's plenty of savings ripe for the picking. And one of the juiciest fruits is crop insurance.

The federal crop insurance program isn’t really insurance, at least not how it works for most people. The program is tasked with “striving” for actuarial soundness—taking in as much in payments for coverage as it pays out in claims. But the deck is stacked against taxpayers. In most places federal taxpayers pay 100% of the premiums for basic catastrophic coverage for producers, who can purchase additional coverage—with additional subsidies. While differences exist across crops and coverage amounts, the result is taxpayers pick up 60% of the premiums for private crop insurance (on average).

Unlike nearly all other federal agriculture programs, crop insurance will cover marginal land. So there is an incentive to plant where odds of success are slim—think places consistently flooding or steep ravines subject to erosion—when taxpayers are footing most of the bill and producers are reaping the payments.

The 16 private companies authorized to provide federal crop insurance can’t be relied on to manage costs. Taxpayers reimburse them for their operating and administrative costs. On top of this, we reinsure (insure the insurers) for the bulk of their policies. If catastrophic loss occurs, it’s not the insurance companies, but taxpayers left with the bill.

So while this is a great deal for Big Ag producers, who get additional insurance at below market prices, and a few insurance companies getting some steady, easy, nearly risk-free business, it’s a guaranteed loss for taxpayers. Excluding taxpayer paid premiums, the program has been in the red every year since 1994. And it’s projected that claims will exceed producer paid premiums by an average $6 billion annually for the next decade.

Farmers have many ways to reduce their risk. From simple time-tested measures as crop diversification and staggered plantings, to futures and forward contracts, farmers have often pioneered risk management. Even if we keep crop insurance, it can easily be improved. Simply reducing taxpayer subsidies, which would require producers to risk more of their dollars when deciding on the level of insurance coverage, not including crops on marginal land, instituting payment limitations, excluding crops covered by other taxpayer programs, streamlining the administration process, and other changes can guarantee crop insurance efficiently protects American agriculture, while saving taxpayers billions.

Fixing crop insurance is important for taxpayers and agriculture. Crop insurance is quickly becoming the most expensive part of the farm safety net; nearly outstripping the cost of all the other farm safety net programs combined. In a time of record deficits taxpayers can ill afford yet another program that privatizes profits, while socializing risks.

As Congress and the President scour the budget for savings, there can be no sacred ground. With millions of taxpayers taking a sober look at their own budgets, every part of the federal budget must be held up to the highest standard. The AG committee needs to stop digging in its heels, and instead grab the reins.

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TCS Quote of the Week:

“We got $1.3 trillion a year in tax expenditures; if we’re going to get out of trouble we have to adjust that. Part of the deal is to try to reform the tax code to where it effectively drives capital to where it should be, rather than where [lawmakers] say it should be.”

– Sen. Tom Coburn (R-OK). The Hill , Sen. Coburn Letter