The Tale of Two Disasters

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The Tale of Two Disasters

Mother Nature pulled few punches in 2012.

By the end of June, a majority of the continental U.S. was in some stage of drought and the continued lack of rainfall, combined with historically high temperatures, conjured up images of the Dust Bowl for rural America.

The focal point of this drought was America’s breadbasket, putting the vast majority of the nation’s valuable crops, and the rural economy, in danger.

But drought wasn’t all that Americans had to contend with last year.  In late October, Hurricane Sandy struck the Mid-Atlantic, unleashing record winds and flooding in urban areas of New Jersey and New York City and other parts of the Northeast.

How rural and urban America went about rebuilding has been different.

Farmers, who deal with weather risk on a yearly basis, had high levels of crop insurance, so checks were quick to arrive.  Meanwhile, months have passed since Sandy and many of those who lost everything are still waiting for disaster assistance from the federal government.

It’s the catch-22 of federal disaster assistance:  It’s always welcome when it arrives, but it can take forever to get to you.  And in the process, it usually defies all of the laws of efficiency and fights over taxpayer costs are inevitable.

This is a lesson that farmers learned the hard way as well in past years.  Before the emergence of crop insurance, ad hoc disaster bills triggered by large farm disasters lingered for months and by the time the funds arrived – sometimes more than a year later – some farms were already lost, or underwater … literally and figuratively.

That’s why lawmakers turned to crop insurance; a public-private partnership that last year protected 86 percent of planted farmland in the United States. Crop insurance combines the affordability and universality of the public sector with the efficiency and speed of delivery of the private sector.

In the 90s – when there was only minimal participation in crop insurance – farmers often found themselves waiting for disaster assistance similar to the recently approved Sandy bill, said Dallas R. Smith, Deputy Under Secretary for Farm and Foreign Agricultural Services at USDA from 1993 to 1999.

“As the burgeoning budget became a major issue, off-budget payments, such as ad hoc disaster bills, became more of a concern,” said Smith.  And it was quickly becoming more difficult to get these bills through Congress.

Unbudgeted supplemental agricultural disaster bills cost $45 billion from FY1989 to FY2001, according to the Congressional Research Service.

“There were a lot of budget issues driving us toward a more structured program like crop insurance,” he said.   “Crop insurance would make farmers pay a premium for coverage and help shield taxpayers from a portion of the cost when disaster struck, he said.  “Furthermore, when disaster strikes, and it does all of the time in farming, you don’t have to depend on the political process to get your money.”

For victims of Hurricane Sandy, the inefficiency of the process and the time it takes to arrive to the victims is just half of the story.  The other half is the legislative maneuvering it takes to get a disaster bill approved in the first place.   These maneuvers add unrelated costs to package, which are necessary to gain the backing of lawmakers but can greatly compound the costs of a disaster package.

Unfortunately, getting relief passed through this legislative process is just the first step.   The federal government still needs to dispense aid – a process that in farmers’ cases years ago took 18 months or more.

Farmers today are in a whole different situation, noted Smith, because crop insurance companies have already paid out about two-thirds of the indemnities from 2012 so far.   “January is a critical month for farmers because they need to make their financial arrangements for the coming spring.  If they were waiting for ad hoc disaster help, they’d likely still be waiting,” he added.

“So they not only have their indemnities in the bank, but can use their 2013 crop insurance contracts to help secure financing for spring planting,” he said.   “Otherwise, they could miss the planting cycle and would have to wait yet another year to grow our food,” he said.

That doesn’t mean crop insurance is the only tool farmers need. America’s Heartland knows all to well that drought is rarely a one-year event. The drought that gripped rural America in 2012 started years before and is projected to persist in 2013, which farmers say makes all farm policies, including traditional income supports, conservation programs and research, so important.

For those waiting for relief from Hurricane Sandy, help is hopefully on the way.  Of course we’ve all been told that “patience is a virtue,” but when you’ve lost everything to a natural disaster and your bills are mounting, patience is one of the commodities that is also in short supply.

And that’s the beauty of crop insurance:  When crops are lost, funds arrive in a timely manner, and taxpayers aren’t footing the whole bill.

 

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