Dusty, red-state bailout

The drought could cost $50 billion in a taxpayer-funded payout to farmers. Do we need a climate-change safety net?

Published July 22, 2012 4:00PM (EDT)


Dust bowl, here we come? The worst drought in the United States in 50 years is still looking for more records to break. On Wednesday, Agriculture Secretary Tom Vilsack declared another 39 counties in eight states disaster areas, bringing the current total to 1,297 counties in 29 states -- or one out of every three counties in the country. According to the Drought Monitor, 61 percent of the continental United States is currently experiencing "moderate to exceptional drought." The situation is most extreme in Iowa and Illinois -- two states responsible for a third of the U.S. corn production.

With each day that passes, the disaster is getting worse, and there's no imminent help to be expected from the weather gods -- the near-term forecast for much of the grain belt is "hot and dry." Corn and soybean prices are spiking to record heights, even the mighty Mississippi is drying up, and food prices are bound to rise, both in the United States and globally. Most troubling of all: If you are inclined to believe the consensus prediction of climate scientists, this is exactly the kind of extreme weather catastrophe that we can expect to see more of in the years ahead.

Never mind the wishy-washy dilly-dallying that warns us not to attribute any specific climate event to rising temperatures. The circumstantial evidence alone is broadly compelling. The last 12 months, NOAA tells us, were the warmest in North America since detailed records started being kept in 1895. In June, 2,284 temperature records were broken in the U.S. -- and lo and behold, a historically massive drought hammered the country in July. The most recent climate science suggests that rising temperatures will increase the intensity and frequency of future extreme weather events. With desiccated cornfields sending farmers into fits of gloom across the nation, now might be a good time to wonder if we ought to be doing anything to prepare for even worse climate-induced agricultural mayhem in the future.

Intriguingly, you can make a case that farmers are already prepared. Those crispy fried fields are not a total loss. Most farmers in the U.S. today enjoy the benefits of heavily government-subsidized crop insurance. As a result of the current drought, farmers are likely to receive one of the largest insurance payouts ever, possibly in the neighborhood of $30 billion to $50 billion -- about 60 percent of which will come straight out of taxpayer pockets. This is an agricultural safety net, mind you, that primarily benefits red states, or red portions of blue states (like Illinois).

There are serious problems with how crop insurance works in the United States. Special-interest lobbying has insured that taxpayers are paying too much for a system that is skewed toward boosting the bottom lines of private insurance companies and big agribusiness. But there's an important principle here that anyone concerned about climate change should take to heart. It's better -- and much cheaper -- to be prepared for disaster in advance than to be forced to respond, ad hoc, after a catastrophe hits. Insurance companies, always desiring to avoid the potential for large payouts in the future, also look for ways to mitigate risks before disaster hits. Shouldn't we be doing the same, as a nation, and a planet? Where's our climate change safety net?

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Federally subsidized crop insurance dates back to the New Deal. Before Franklin Roosevelt, farmers were left on their own to confront the perils of both overproduction and weather-induced calamity. But in the wake of the Great Depression, protecting the food supply was deemed strategically important enough to authorize government intervention when "natural forces" conspired against agriculture.

Roosevelt laid out the rationale in a letter to Agriculture Secretary Henry Wallace in 1936.

The time has come to work out permanent measures guarding farmers and consumers against disasters of both kinds. Crop insurance and a system of storage reserves should operate so that the surpluses of fat years could be carried over for use in the lean years.

Measures of this kind should make three important contributions to the general welfare of the country as a whole: First, protection of the individual farmer's income against the hazards of crop failure or price collapse; second, protection of consumers against shortages of food supplies and against extremes of prices; and third, assistance to both business and employment through providing an even flow of farm supplies and the establishing of stability in farm-buying power.

The basic rationale for federal involvement in crop insurance has to do with the fact that a calamity like a drought is a systemic event that affects everybody at the same time. Private insurers are willing to insure you against the chance that your house gets burnt down, but insuring that the entire state of Iowa will be safe from a month of 100-degree temperatures is a different order of business. Even so, the shape of federal crop insurance has evolved in a bewildering sequence of twists and turns ever since the New Deal and has repeatedly come under fire from both left and right. In 2000, Congress enacted a particularly egregious set of changes to the system that increased the burden borne by taxpayers and primarily benefited the biggest farmers and private insurance companies. If you're a small organic farmer, it's a lot harder to afford insurance than if you are a massive producer of genetically modified corn or soybeans.

Junking the system entirely ignores politically reality. When disaster hits, Congress will act, and doling out emergency aid is always more expensive than making sure everyone is properly insured beforehand. The current political dysfunction in Washington offers a useful reminder. Congress' inability to pass a new farm bill led to the expiration of a raft of farm disaster assistance programs last September. At the time there wasn't much squawking because Washington's primary focus was on deficit cutting. But with widespread agricultural calamity threatening in the short term, pressure is now very high to get a new farm bill passed. When Republican constituents need help, Republican senators are suddenly a lot friendlier to the welfare state.

Properly administered, insurance programs can do a lot to lessen the scope of a disaster. One reason the current drought isn't creating dust bowl conditions (yet) is that the original crop insurance program required farmers to adhere to soil conservation and erosion prevention guidelines that have lessened the chances that entire farms will just dry up and blow away.

That's a lesson that we should be paying attention to as we watch temperatures continue to rise. What could we do that might lower the cost of future disasters?

It's amusing, if a little bit unfair, to compare Roosevelt's comments to Wallace to a statement of profound helplessness made by the current secretary of agriculture to reporters on Wednesday, with respect to what the federal government could do for farmers above and beyond making access to emergency loans cheaper.

I get on my knees everyday and I'm saying an extra prayer right now. If I had a rain prayer or a rain dance I could do, I would do it.

As Gov. Rick Perry found out in Texas, prayer doesn't bring rain. Nor is simply hoping for the best or appealing to native spirits likely to decrease the number of extreme weather events in the future.

What might help, however, is paying the proper attention to what science can tell us about how future risks might be mitigated. Put the political and ideological battle over the earth's temperature aside: For the companies that stand to lose the most from massive weather disasters -- the reinsurance companies that backstop regular insurance companies across the planet -- the increasing frequency and intensity of extreme weather events is a very big bottom line deal.

As John Coomber, former CEO of the reinsurance giant Swiss Re wrote earlier this year, "Our business is built upon the identification of risk and measures which can mitigate its impact, the measurement (frequency and severity) of the residual risk and the use of our balance sheet to diversify it."

Mitigating the impact of risk associated with climate change means, Coombs writes, finding "ways to stop the accelerating accumulation of greenhouse gases in the atmosphere."

That's the functional equivalent of soil conservation programs designed to prevent future dust bowls. And it's likely to be a hell of a lot more effective than a rain dance.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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