Friday, November 06, 2009

You'll catch more flies with subsidies...

Than capitalism. For those of your worried about the deficit, how about cutting back on this government boondoggle?


Arguments over the profitability of the crop insurance industry are to be expected and have occurred often. An arm of government, be it the Government Accountability Office (GAO) or the RMA, releases a report that finds excess industry profits. The industry responds with arguments about the flawed accounting standards used by government analysts and then releases its own report that allows it to argue that it cannot absorb any cuts in the taxpayer subsidies that it receives because the industry is already undercompensated.
What should Congress conclude? Should members and their staff believe the industry reports that further cuts will reduce industry profits to the point at which companies will not be willing to participate in the program? Or should they believe the GAO and RMA reports that conclude that substantial cuts can be made because the industry is overcompensated?
Although economists are often maligned for their lack of ability to be precise in offering prescriptions for what ails the economy, their concepts and analytical tools can often give insights into competing arguments. An examination of how the crop insurance industry operates and competes provides a simple and reasonably accurate measure of the amount of excess profits the industry receives. This measure estimates that industry subsidies could be reduced by more than a billion dollars without adverse impacts on program effectiveness. [More]

Of course, farm subsidies are the last thing that fiscal hawks in farm country want to see cut, but oddly that's pretty much the attitude of other lobbying sectors as well.  The problem in our case is graphs like these:



It also explains why practically ag product/service I buy comes with an automatic "You want crop insurance with that?"

3 comments:

buffalobill said...

hujyg
Well, it seems to be true that 'it's' socialism if the other guy gets the money, not when you do. Our country was based on this, right? And of course it is not socialism if 'industry' gets a bail out! These are the facts of life folks....Sorry to say...

Anonymous said...

Well stated buffalobill! Cheers

Anonymous said...

Remember those seagulls in Finding Nemo - Mine. Mine? Mine! I'd rather be an Albatross.