Farmers face squeeze in proposed subsidy cuts

The government chips in for an average 62 percent of the farmer's premiums, which supporters insist is different from a direct subsidy because the premiums go into a risk pool to pay for future losses.

The proposed shallow risk program would cap annual payments at $100,000 for a married couple and restricts it to farmers with adjusted gross incomes of less than $750,000. But there are no such caps on the insurance program, drawing criticism from some small government groups. The Senate bill, said Taxpayers for Common Sense, "does nothing to rein in the exploding costs of taxpayer subsidized crop insurance."

The Congressional Budget Office estimated that the government could save $1 billion a year by reducing the premium subsidy by 10 percentage points. The Government Accountability Office says it could save an additional $1 billion if individual farmer subsidies were capped at $40,000 a year.

The GAO said that in 2011 the average value of premium subsidies was $8,312 per farmer, and that one corporation that insured nursery crops in three counties in one state cost the government $2.2 million in premium subsidies and $816,000 in administrative expenses.

Agriculture Secretary Tom Vilsack has suggested lowering the premium subsidy rate, reducing insurance company returns on investment and cutting payments to farm insurance agents from $1,000 a policy to $900 to save money.

Farm groups argue that higher premiums would result in farmers insuring fewer acres and exposing taxpayers to more special disaster aid in bad times. The American Farm Bureau Federation opposes any changes in current farm bill payment limitations and means-testing provisions.

"Simply stated, payment limits bite hardest when commodity prices are lowest," the federation's president, Bob Stallman, said at a recent House hearing.