NU Online News Service, April 12, 2:44 p.m.EST

The Government Accountability Office said today in a new reportthat the government should consider capping crop-insurance-premiumsubsidies for individual farmers or reducing subsidies for allfarmers, or both.

In an example, the GAO report says that if a limit of $40,000had been applied to individual farmers' crop-insurance-premiumsubsidies, as it is for other farm programs, the federal governmentwould have saved up to $1 billion in crop-insurance-program costsin 2011.

The report also says that the U.S. Department of Agricultureshould accelerate the use of data-mining tools to prevent anddetect fraud, waste, and abuse by either farmers or insuranceagents and adjusters.

“GAO believes that when farm income is at a record high and thenation faces severe fiscal problems, limiting premium subsidies isan appropriate area for consideration,” the report concludes.

The report was requested by Sen. Tom Coburn, R-Okla. In astatement, he says, “This report shows that Congress could cappremium subsidies at $40,000 and save taxpayers $1 billion.”

He says high premium subsidies have hurt small and beginningfarmers because the subsidies themselves have distorted the market. For instance, he says, high subsidies have artificiallyincreased the value of land and have created other barriers toentry and expansion.

“I applaud GAO for providing Congress with yet another way tosave taxpayer dollars and reform government,” Coburn says.

Ironically, the report was issued as information surfaced thatinsurance agents are lobbying Congress to end caps on commissionsimposed in the contract agreed to in 2011 that cut existingsubsidies in the program by approximately 6 percent over 10years.

Officials of the National Association of Professional InsuranceAgents are trying to get the 2011 caps removed in the 2012 farmbill now being crafted by Congress.

Regarding the GAO report, Mike Becker, assistant vice presidentof PIA National, says, “We caution against additional cuts tofederal-crop insurance. The program sustained multi-billion dollarcuts during the 2008 Farm Bill and additional multi-billion-dollarcuts during the most recent Standard Reinsurance Agreement. Acontinued array of cuts would lead to a derailed program causingcatastrophic failure to America's agricultural safety net.”

Becker adds, “When it comes to budget cuts, crop insurance hasalready done much more than its fair share.”

Others in the industry sought to defend the current system. In astatement, officials of National Crop Insurance Services, OverlandPark, Kansas, which represents crop underwriters, says, “The planrecently outlined by the GAO would adversely affect many ofAmerica's full-time farmers.”

In addition, the statement says, “We fear it could proveparticularly punishing to beginning and young farmers and otheroperators who are less likely to secure essential loans withoutadequate insurance coverage.”

Moreover, the NCIS officials say, “Having already shoulderedmore than $12 billion in funding reductions since 2008, thecrop-insurance infrastructure must not be weakened further.

“As Congress writes the next farm bill, lawmakers should do noharm to crop insurance and keep rural America strong.”

Updated with PIA National comments.