Will shallow-loss programs throw taxpayers in the deep end?
A discussion of shallow-loss programs in the 2012 Farm Bill

Video

Event Summary
In an engaging presentation at the Russell Senate Office Building on Wednesday, leading agricultural economists examined the budget implications of the 2012 Farm Bill's proposed shallow-loss provisions. The event coincided with the release of a paper authored by Vince Smith of Montana State University and AEI, Barry Goodwin of North Carolina State University and Bruce Babcock of Iowa State University entitled, "Field of Schemes: The Taxpayer and Economic Welfare Costs of Shallow-Loss Farming Programs."

Barry Goodwin began by describing common misconceptions about the profitability of farming and the well-being of farms in general. According to Goodwin, farming household incomes have risen more quickly and remained higher than average household incomes, particularly since 1996. Additionally, farmers are, on average, less leveraged and significantly wealthier than non-farmers.

Vince Smith then alleged that the Congressional Budget Office's scoring of shallow-loss provisions fails to examine the scenario under which crop prices fall to more historically consistent levels. In this scenario, the costs of the shallow-loss programs are likely to exceed those of the Direct Payments Program they would replace. Smith wrapped up the conversation by explaining that a shallow-loss program would guarantee farmers up to 90 percent of their average revenues over the past five years — a situation that other business sectors could only dream of.
-- Brad Wassink

Event Description
One of the main provisions of the 2012 Farm Bill is a “shallow-loss” program. Shallow-loss programs would give farmers subsidies, ensuring that farm revenues do not dip below 90 to 95 percent of the average revenues those farmers received over the past five years — even if crop prices fall.

This program is being portrayed as a safety net, but there are significant questions that must be examined before the program is enacted. How much would shallow-loss programs really cost and how are they structured? How accurate are Congressional Budget Office estimates of these costs? Are there limits on potential taxpayer liabilities in shallow-loss programs? And, finally, would large, wealthy farms benefit disproportionally from these programs?

At this event, Vince Smith and Barry Goodwin will discuss these questions and will release new research and analysis on the cost of shallow-loss programs.

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