How the budget deal harms farmers, costs jobs and kills crop insurance

The debt ceiling and budget agreement reached by the White House and congressional leadership will not be long-remembered for averting a U.S. default on its debts, or even for paving the way for completion of annual appropriations bills over the next two years.

Instead, its lasting legacy will be that it killed federal crop insurance.

I know that folks whose priorities face budget cuts are quick to cry wolf and perhaps exaggerate the repercussions. However, over the course of my nearly 20 years in Congress, hyperbole was never my reputation.

{mosads}Members of Congress who vote for this agreement must understand, then, that they also vote to kill federal crop insurance.

Crop insurance got its start in the 1930s, when a Republican candidate for president argued for it, prompting President Franklin Roosevelt to preemptively initiate the policy.

But crop insurance barely hobbled along until 1980 and was even mothballed for periods of time in between. The government had delivered crop insurance and delivered it badly. Crop insurance was not available to many farmers and was financially out of reach for most farmers it was available to.

The game-changer occurred in 1980, when the federal government finally threw in the towel and turned delivery of crop insurance over to the private sector.

Private-sector delivery — plus the introduction of revenue policies in the mid-1990s and passage of the 2000 crop insurance bill — caused crop insurance to become what it is today to both farmer and lender.

Today, 1.2 million policies are sold nationwide. Ninety percent of total U.S. acreage is covered by crop insurance. And, as of 2014, premiums totaled $10.1 billion, of which producers paid about $4 billion, which was, in turn, leveraged to cover $109.8 billion in liability. In terms of private-sector infrastructure, there are about 18,000 agents and adjusters in the field today and 18 companies underwriting policies.

Unfortunately, Washington has, on a number of occasions in recent memory, opted to jeopardize this success.

Since 2008, roughly $17 billion has been cut from federal crop insurance, either legislatively or administratively. These cuts have resulted in the sale of some companies, with media reports of more sales on the way. The reason? While the U.S. Department of Agriculture estimates company returns at about 14 percent, the actual average return from 2011 to 2013 was 3.5 percent, and even lower for pretax net income.

Now, the debt ceiling bill proposes to cut that 14 percent down to 8.9 percent, resulting in pretax net income that would be at, or below, zero. Needless to say, private businesses with payrolls to meet cannot operate at zero or negative rates of return.

Without going into palace intrigue, while at least some of those who negotiated this deal were presented with other options that might have been painful, but not utterly reckless, those privy to these options chose what they knew would inflict devastating harm.

The Agriculture Committees of Congress were never consulted, although they were tasked in the last farm bill to find $23 billion in savings and they did so successfully. Had the committees been consulted and given the option between a cut that kills federal crop insurance and manageable if still painful cuts, they would no doubt have chosen the latter.

But the committees of jurisdiction never got that choice. The fix was in. The first glimpse of the language came early Tuesday morning.

I do not ascribe this motive to all parties to the negotiation, in part because we do not know who all the parties were to a bill brokered behind closed doors and made public in the middle of the night. But, make no mistake, to those who have pressed for more cuts to private sector delivery of crop insurance, year in and year out, the proposed cuts are not about the $3 billion in savings that could be found far less recklessly, but about killing federal crop insurance.

If the bill as written becomes law, opponents of federal crop insurance will have finally achieved their goal and at a time when net farm income is down 53 percent from just two years ago.

That will be the legacy of this bill.

Combest represented the 19th Congressional District of Texas from 1985 to 2002 and chaired the Select Committee on Intelligence and the Agriculture Committee. He is now a principal at Combest Sell & Associates.