Wednesday, May 21, 2008

The $16 Billion Loophole

A new provision in the farm bill could place taxpayers on the hook for an additional $16 billion.

The Average Crop Revenue Elevation (ACRE) program gives farmers aid if they lose money because of low prices or a poor crop yield. The program was added to elevate the subsidy threshold and help farmers who have a lower yield when the prices are high.

However, the triggering price for this program is tied to recent record high prices for commodities. Therefore, if prices were to stabilize and return to recent levels, it could see the baseline price for the farm bill increase beyond expectations:
"The Agriculture Department estimates that subsidy payments to corn farmers alone could reach $10 billion a year if prices -- which have been $5 to $6 a bushel -- were to drop to $3.25 a bushel, a level seen as recently as last year."

Proponents of the program and the farm bill cling to the fact that enrollment in the program will be low and commodity prices will likely remain elevated. Therefore, there is little risk of the price tag on the ACRE program increasing.

Of course, when you're gambling with the taxpayers money, who cares?

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