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In a just-released working paper, American Enterprise Institute (AEI) agricultural economists Vincent Smith, Bruce Babcock, and Barry Goodwin find that the Price Loss Coverage (PLC) and Supplementary Coverage Option (SCO) programs in the House version of the farm bill could cost taxpayers over $20 billion
Key findings:
If crop prices remain at historically high levels, program costs will be approximately $1.1 billion. However, if crop prices drop to their recent historical average levels,–almostthe current cost of subsidies paid under the Direct Payments program, which the PLC would replace.
If prices remain at current high levels, the SCO will cost taxpayers $2.6 billion annually. Half a billion of those dollars would flow directly to crop insurance companies–who already receive $3 billion per year in other taxpayer subsidies. If prices drop to recent historical average levels, SCO costs would drop to $1.5 billion.
If crop prices moderate to recent historical average levels, the House PLC and SCO programs will cost taxpayers overThis includes current programs that enhance farm incomes–like subsidized crop insurance, direct payments, disaster aid, and loan rate programs–in addition to publicly funded R&D and education programs that benefit consumers, processing companies, and farmers by improving agricultural productivity.
Read the full report here.
Vince Smith directs AEI’s American Boondoggle: Fixing the 2012 Farm Bill project and is an agricultural economist at Montana State University, Bruce Babcock is an professor of economics at Iowa State University, and Barry Goodwin is the William Neil Reynolds professor of agricultural economics at North Carolina State University.
Learn more at www.AmericanBoondoggle.com
For media inquiries please contact Jesse Blumenthal at jesse@aei.org or 202.862.4870.
Follow @AEInews
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