Sunday, March 06, 2011

Programs Which Soar in Cost: Crop Insurance

A difference between farm programs (i.e., direct payments or counter-cyclical) and crop insurance is significant for budget purposes. Typically the basis for payment for the farm programs is set by law, and won't change until the next farm bill. For crop insurance, if I understand correctly, the basis for payment is updated each year.  So when commodity prices soar, the cost of crop insurance to the taxpayer will also rise.

When you look at other government insurance programs, like social security or unemployment insurance, the basis for payment also rises as the insuree's salary rises.  The difference here is commodity prices can rise abruptly, as in the last year, while salaries don't rise abruptly across the board.

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