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Insurance subsidy cuts could mean greater disaster payments

Veteran agriculture economist Carl Zulauf says reducing crop insurance premium subsidies will result in fewer acres being insured.  President Trump has proposed a 14-percentage point reduction in the subsidy, but a study says the number of insured acres will decrease more.

“For every percentage point reduction in the subsidy you’re getting about a 1.3-percentage point reduction in the amount of the insured acres,” Zulauf, an Ohio State university professor emeritus, told Brownfield Ag News Tuesday.  Cutting crop insurance premium subsidies will not necessarily result in fewer taxpayer dollars being spent, said Zulauf.

“If you reduce the number or share of insured acres, you will probably increase the likelihood that there would be disaster assistance and therefore spending on disaster assistance,” he said.

The president’s budget proposal calls for reducing the premium subsidy for Federal Crop Insurance from 62 percent to 48 percent.

The study was authored by Zulauf at Ohio State University and by Gary Schnitkey, Jonathan Coppess and Nick Paulson at the University of Illinois.

AUDIO: Carl Zulauf (11 min. MP3)

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