WASHINGTON, D.C. – U.S. Sen. Jeff Flake (R-AZ), U.S. Rep. John J. Duncan, Jr. (R-TN) and U.S. Sen. Jeanne Shaheen (D-NH) today introduced the bipartisan, bicameral Harvest Price Subsidy Prohibition Act. The bill would save taxpayers $19 billion over 10 years by eliminating subsidies for a costly but little-publicized profit guarantee known as Harvest Price Option (HPO).

Unlike traditional crop insurance plans that protect farmers from unanticipated losses, these taxpayer-subsidized harvest price plans actually guarantee that farmers don’t miss out on unanticipated profits.

The bill would not prohibit the U.S. Department of Agriculture from offering HPO profit guarantee plans, provided that individual policyholders pay the full insurance premium. The bill would do nothing to limit, reduce or alter subsidies associated with traditional crop insurance plans.

Flake first offered the Harvest Price Subsidy Prohibition Act in 2013 as an amendment to the farm bill. At the time, the nonpartisan Congressional Budget Office determined that the amendment would have saved taxpayers $9 billion over 10 years. The legislation was not brought to the floor for a vote. Not even one year after Congress enacted that same farm bill, CBO has determined that HPO’s cost to taxpayers has more than doubled to $19 billion.

“Making a living in agriculture is not easy or predictable. That's why there are safety net programs like traditional crop insurance,” said Flake. “But HPOs are not safety net programs: They put taxpayers on the hook for billions of dollars even when huge profits are being made.”

“Big agro businesses and insurance corporations have a sweet deal with our crop insurance. In an era of very few small farms, the largest corporate farms collect the lion's share of the money, creating an unfair playing field for family farmers,” said Duncan. “99 percent of the people in my District do not get subsidies from the federal government to run their businesses.”

“We’re proposing a commonsense reform with the potential to save taxpayers nearly $20 billion,” said Shaheen. “This is a smart, pragmatic bill that will provide our current crop insurance program with a much needed fix. We ought to act on it immediately to save taxpayer dollars.”

The Harvest Price Subsidy Prohibition Act is also supported by Heritage Action, the R Street Institute, the American Enterprise Institute, FreedomWorks, the National Taxpayers Union, Campaign for Liberty, Taxpayers Protection Alliance, Center for Individual Freedom, Coalition to Reduce Spending, Less Government, Taxpayers for Common Sense, Club for Growth and the Environmental Working Group.

Statements of support from several of those groups can be viewed here.

Background: Under a traditional crop insurance plan, farmers will only receive a payout if they earn less money at harvest time than they were projected to make when they planted their crop. By softening the blow of unanticipated losses, traditional crop insurance serves as a safety net, just as Congress intended.

But under an HPO, if the actual harvest price of a crop ends up higher than the insured planting price, the payout is recalculated based on the higher price. By paying out more money than the farmer ever anticipated earning, HPOs go far beyond the safety-net concept – they are a taxpayer-subsidized profit guarantee.

Additional background information on HPOs can be viewed here.

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