Sensible Caps on Insurance and Other Farm Subsidies Make Economic and Political Sense

Key Points

• As Congress looks to reauthorize the farm bill in 2023, leaders in the Senate from both parties have signaled a desire to stick to the status quo, including maintaining an extensive system of farm subsidies.
• Most farm subsidies flow to large, financially stable farms operated by wealthy farmers. In this report, we examine the impacts of several approaches to limiting subsidy payments to these farms.
• None of these approaches to limiting payments affect the subsidies most farms receive, but all do provide significant reductions in program expenditures.

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Introduction

The dust is gradually settling around the results of the 2022 midterm elections. Now, the House and Senate Agriculture Committees are beginning to seriously consider what will and will not be included in the 2023 Farm Bill.

One approach to reducing farm bill spending has regularly been considered over the past two decades but has not yet been implemented. This approach is to limit or cap subsidy payments to individual farms or farm owners under the federal crop insurance program and other price and income support programs. Despite claims to the contrary, mostly made by farm interest groups, nearly all the proposed payment limit initiatives would affect only a few of the largest farms, but they would lead to significant cost savings for the federal government.

Nevertheless, Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR), the chair and ranking member of the Senate Agriculture Committee, who will remain in their current roles in 2023, have already stated that they work closely together on farm bill issues.¹ Further, they are likely to resist changes to the farm bill that reduce the level of support in the Senate from the overwhelming bipartisan majority (86 votes for and only 11 against) that voted for the 2018 Farm Bill. Thus, on a bipartisan basis, the Senate Agriculture Committee leadership’s preference is to stay the course with many farm bill programs and do no harm to the crop insurance program. These preferences include the continuation of current federal farm price and income supports and agricultural insurance programs to which payment limits would be applied. This approach is largely consistent with many farm lobbying groups’ preferences. As Vincent Smith recently reported, most farm groups support the current heavily subsidized federal agricultural insurance program and want price and income support programs to become more generous.² They also support increased funding for conservation programs to offset costs incurred by farms that adopt climate change mitigating practices.

However, it is less clear what the House Agriculture Committee’s approach will be, as the shift in the House majority from Democrats to Republicans has some potentially important ramifications for debates over several farm bill issues. The most obvious policy bone of contention is over the nutrition programs authorized by the farm bill (especially the Supplemental Nutrition Assistance Program), but spending on farm price and income support programs, including the federal crop insurance program, is also a concern.

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Notes

1. Jerry Hagstrom, “Boozman Not Worried About RSC Farm Bill Proposal,” Fence Post, November 16, 2022, https://www. thefencepost.com/news/boozman-not-worried-about-rsc-farm-bill-proposal.  
2. Vincent H. Smith, “Direct Farm Subsidy Programs in the 2023 Farm Bill: What Farm and Other Interest Groups Want,” American Enterprise Institute, October 4, 2022, https://www.aei.org/research-products/report/direct-farm-subsidy-programs-in-the-2023-farm-bill-what-farm-and-other-interest-groups-want.