When House budget hawks called for deep cuts to federal farm subsidies recently, most people in Montana saw it as a ruinous assault on the state's largest industry.
But not Vince Smith, a Montana State University economist. He has long argued against subsidized agriculture, in which the government not only grants farmers levels of protections other businesses live without but also pays exorbitant administrative costs to private insurance companies that deal with crop losses.
The House Budget Committee called for $30 billion in cuts to farm programs, a savings most agree can't be realized without cuts to federally subsidized crop insurance. The cut was at least $7 billion more than leaders of the House and Senate Agriculture committees were considering.
"The House Budget Committee has put crop insurance on the table for some cuts," Smith said. "They've also made clear there's no intention to get rid of the program."
By Smith's account, crop insurance costs American taxpayers $7 billion to $8 billion annually and covers roughly two-thirds of U.S. farm crop insurance premium costs, with the largest farms getting the most coverage. Total costs for Montana crop insurance in 2009 was more than $915 million.
Smith would like to see the federal government shoulder less of the bill for that insurance, but he would also like to see the 16 private insurance companies that administer the program paid less.
Of that $7 billion to $8 billion that taxpayers pay for crop insurance, roughly half goes not to crop losses but to administrative costs. Trimming the amount by half could save the taxpayers $20 billion over the next decade without affecting the coverage offered to farmers, Smith said.
By forcing the House and Senate Agriculture committees to re-examine crop insurance, the House Budget Committee is forcing a choice to be made between cutting support to farmers or cutting smaller paychecks to insurance companies.
In explaining the deeper cuts, Rep. Paul Ryan, R-Wis., the House Budget Committee chairman, wrote that the farm economy was performing well enough to survive with less support from the federal government.
Smith said it's worth noting that Ryan's committee's proposed cuts are within a couple of billion dollars of cuts proposed by President Barack Obama. The message being delivered is that crop insurance needs to be part of the cuts to the next farm bill. Those cuts are $7 billion to $10 billion deeper than what had been agreed to by Sen. Debbie Stabenow, D-Mich., and Rep. Frank Lucas, R-Okla., who chair the Senate and House Agriculture committees. The two committee chairs have been advocating for a $23 billion cut since last fall. As recently as two weeks ago, Lucas had written Ryan stating that anything more than $23 billion would damage the U.S. farm economy, a point farm groups reiterated last week.
Federally subsidized crop insurance and market loan programs are going to have to be cut to get where Ryan wants to go, said John Youngberg, political affairs specialist for the Montana Farm Bureau Federation.
Few farm programs are more crucial. Federally subsidized marketing assistance loans are used by farmers to pay bills while waiting for best market conditions to sell their crops. Without the loans, some farms would have to sell their crops at harvest time when prices may be their lowest of the year.
Youngberg was skeptical before Ryan's announcement that a farm bill would pass in an election year, though Senate Agriculture officials were preparing to wrap up their work on the bill by March's end.
However, word was that Senate President Harry Reid, D-Nev., and Sen. Mitch McConnell Jr., R-Ky., wanted nothing to do with a controversial spending bill during an election year. Ryan's proposal made the issue that much more divisive. Now Youngberg's pretty sure it won't get done.
"I don't think so, quite truthfully," Youngberg said. "We've been told by insiders that Reid has said nothing controversial will come before the Senate this year."
The best scenario for farmers, Youngberg said, would have been an abandoned plan last fall to pass a farm bill in special committee and then present it to the House and Senate for an amendment-free, take-it-or-leave-it vote.
The fall bill was part of an attempt to trim $1.2 trillion in deficit spending over the next decade by giving the tough choices to a deficit reduction supercommittee, which included Sen. Max Baucus, D-Mont. The committee was considering $23 billion in cuts to farm programs, the least anyone had proposed.
Montanans were well represented in crafting the proposal because of Baucus' role and his seat on the Senate Agriculture Committee. Groups like the Montana Grain Growers Association took a lead role in crafting the crop insurance reforms included in the bill as they pertained to grain, Montana's biggest crop.
The supercommittee ran out of time, but because key members of the House and Senate Agriculture committees had backed the fall plan, it became the base for getting a farm bill passed this year, at least until Ryan's announcement.
Baucus said he is determined to defeat Ryan's proposal if that's what the House passes, not only because of the deep cuts to farm programs but also because it calls for deep cuts to the Supplemental Nutrition Assistance Program, or SNAP, a low-income program formally known as food stamps.
"These arbitrary cuts don't stand a chance of passing — I'll make sure of it. But they do remind us of the fight we are up against to make sure farmers and ranchers aren't used as a scapegoat for the budget crunch," Baucus said. "Montana farmers and ranchers are ready and willing to chip in their fair share, but they aren't willing to shoulder the burden for the rest of the country."