Two architects of the modern farm safety net — former Senators Tom Daschle and Bob Dole — have concluded that the current mix of costly farm subsidies have made some forms of agriculture about as risky as crossing at the light.

Daschle and Dole are farm state Senators and long-time farm policy leaders who have long stood behind the "three-legged stool" that combines three different subsidies — counter-cylical, loan deficiency, and direct payments — to overwhelmingly support five row crops grown primarily in eight states.

When you include subsidized crop insurance and disaster payments, the stool is actually more like a height-chair.

But as crop prices soar and farm household incomes rival those in the Senators' swanky Washington neighborhoods, even Daschle and Dole have said it time eliminate direct payments — which will cost roughly $25 billion over the next five years and be paid out regardless of market conditions — and instead invest in conservation and renewable energy.

Investing in biofuels, helping farmers profit from the coming cap on carbon emissions, renting land for hunting and fishing, and supporting other emerging markets will put a lot more food on the farm table than simply farming the treasury, according to their report, Competing and Succeeding in the 21st Century: New Markets for American Agriculture. They would replace the height-chair with a sturdy pair of crutches — a counter-cylical program and a "fair to all" marketing loan program subject to low payment limits.

In particular, Daschle and Dole would build on the 2005 Energy Bill, which included the ethanol mandate largely responsible for high corn and soybean prices, by dramatically increasing the renewable fuels mandate. They would also cap carbon emissions, and allow farmers to sell carbon reduction credits to power plants. To help farmers prepare for and profit from emerging these energy and carbon markets, they would create a no-interest revolving loan program.

Legislators should take notice when two farm state Senators who are notorious champions of farm subsidies say it's time to restructure and reduce our farm safety net.

A Stealth Safety Net?

Two safety nets are better than one.

That must be the logic driving some farmers to hang on to traditional subsidies while USDA simultaneously subsidizes the expansion of crop and revenue insurance.

Raise your hand if you knew that roughly 80 percent of the acres of subsidized corn, soybeans, wheat, cotton and rice produced in America are covered by crop and revenue insurance policies.

USDA annually spensd more than $5 billion subsidizing crop and revenue insurance – or almost as much as we are likely to spend on traditional subsidies. At last count, USDA provided nearly $50 billion of protection to farmers growing 360 different crops. Between 1998 and 2006, insured cropland increased from 182 million acres to 242 million acres. To learn more, read the testimony of USDA experts Elliot Gould and Keith Collins.

Farmers are also increasingly shifting to policies that cover lost revenues, not just lost yields. What’s more, the coverage levels purchased by farmers are increasing as well, so a larger portion of average revenue is covered by a subsidized insurance policy. Between 2000 and 2006, the share of subsidized farmers with revenue insurance policies covering more than 70 percent of average revenue increased from 31 percent to 63 percent.

So, naturally, some legislators are wondering why the government should pay twice: once to subsidize premiums for crop and revenue insurance; and a second time through annual income subsidies linked to crop prices and production.

The growth of crop and revenue insurance – and increased coverage levels in particular — might complement the transition to risk management accounts proposed by Senator Richard Lugar and Reps. Kind (D-WI), Flake (R-AZ), Crowley (D-NY, and Reichert (R-WA). Under their proposal, farmers could withdraw funds from their accounts to cover the all-too-common “shallow” losses associated with ups and downs of agriculture and purchase crop and revenue insurance to cover the “deeper” losses causes by natural disasters and other catastrophic events.

Something to ruminate over.

By any measure, farm income is reaching record levels.

In 2007, farm income is expected to be $66.6 billion, up $8.8 billion from 2006 and $9 billion higher than the ten-year average. Average farm household income – which includes both on-farm and off-farm income – is expected to be more than $81,000 – or far more than household income generally. Very large commercial farms – or those farms with annual gross sales greater than $500,000 – are expected to have farm household income of more than $200,000 in 2007.

In other words, there's never been a better time to make the transition to a farm safety as modern and entreprenuerial as our farmers.

That's why the editorial pages of both the New York Times and the Washington Post are urging legislators to give careful consideration to proposals by Senator Richard Lugar (R-IN) and Reps. Ron Kind (D-WI), Jeff Flake (R-AZ), Joe Crowley (D-NY), and David Reichert (R-WA) to make a transition to a system of farmer-held risk management accounts.

Under the Lugar plan, farmers would make a a transition from costly Depression-era subsidies to a system of farmer-held risk management accounts that would help farmers weather the ups and downs of agriculture, make investments, and plan for the future.

In particular, subsidized crop farmers would be required to put a largers and larger share of their "direct" subsidy payments into risk management accounts. Farmers could contribute some of their own funds, but a match is not required. When sales fall below 95% of a farmer's average gross sales, a farmer can withdraw funds to cover the "shallow" losses that are not covered by revenue or crop insurance policies. Farmers could also withdraw funds to purchase crop or revenue insurance or to make investments in rural enterprises.

What's left in the account would serve as a farmer's IRA.

Given agriculture's success — due in no small measure to the growth of ethanol — and the dramatic expansion of crop and revenue insurance coverage, Congress finally has a chance to restructure and reduce the outdated subsidies that help few farmers and regions and to instead invest in more urgent priorities, such as conservation, renewable energy and rural development.

America’s farmers, ranchers and forest landowners manage roughly 70 percent of the American landscape, so it should be no surprise that agriculture has a dramatic impact on the quality of our rivers, on the fate of rare species, or on the pace of sprawl.

In particular, agriculture is the leading reason 40 percent of America’s rivers, lakes and bays fail to meet water quality goals, the nation’s largest consumer of freshwater, and is a leading threat to America’s endangered and threatened wildlife species. Agriculture is also a significant source of air pollution in some regions and pesticides can drift from their intended target, posing threats to public health and wildlife.

Fortunately, farmers are eager to offer share the costs of a healthier environment. All of America's farmers already take steps to provide cleaner air and water and wildlife habitat, ranging from soil-conserving tillage systems to more precise applications of water, fertilizers, and pesticides. Our farmers are eager to do even more.

But, most farmers offering to share the cost of clean water and wildlife habitat are turned away because of our misplaced federal spending priorities.

What’s more, our federal farm policies send powerful economic signals through farm and crop insurance subsidies to plow up environmentally sensitive lands to grow crops that create new environmental challenges. The farm and ranchland commonly shifting in and out of production in response to these economic signals is far more likely to harbor rare species and pose water quality challenges. See a recent USDA paper on the subject.

Renewal of farm and food policies is a rare opportunity to reward – not reject – farmers when they offer to help meet America’s environmental challenges and to provide a farm safety net that helps farmers weather the ups and downs of agriculture without providing incentives to plow up environmentally sensitive lands. Unless we reward stewardship and reduce signals to plow up grasslands and wetlands, we will fail to meet some of America’s most pressing environmental challenges.

Restructuring our farm safety net and expanding conservation and renewable energy programs in the 2007 Farm Bill would also help many more farmers and communities, provide consumers with more energy and health choices, and boost rural prosperity.

Congressional leaders should heed the call of more than 200 of their colleagues and expand funding for stewardship incentives. Congressional leaders should also expand the use of better risk management tools.

In particular, policymakers should consider proposals by Senator Richard Lugar (R-IA) and Reps. Ron Kind (D-WI), Jeff Flake (R-AZ), Joe Crowley (D-NY) and David Reichert (R-WA) to begin a transition away from our Depression-era subsidies to a system of farmer-held risk management accounts that farmers could use to weather the ups and down of agriculture, make investments, and plan for the future. Their proposals would largely eliminate signals to plow up grasslands and provide significant new funds for USDA conservation programs.

As the Washington Post recently noted, Lugar and House leaders "are on a sensible track, and it is critical that their ideas get a fair hearing. The farm bill can be a vehicle for investing heavily in important priorities . . . without depleting the federal bank account or violating the Democrats' responsible pay-go budget rules — but only if Congress is willing to make agriculture spending more rational."

Renewal of farm and food policies in the 2007 Farm Bill provides a rare opportunity to help more farmers and the environment.

But, neither of the conservation proposals unveiled by the House and Senate Agriculture Committees last week provides nearly enough funding to meet some of America's most pressing environmental challenges. As a result, most farmers will continue to be turned away when they offer to share the cost of a healthier environment with USDA.

Both proposals would provide roughly $29 billion for conservation programs over the next five years. But, both proposals would partially rely upon "offsets" — cuts to other programs or new revenues.

Without including the "funny money," the House proposal is actually more generous than the Senate proposal — the House would provide $25 billion in "real" funds for conservation, while the Senate would provide less than $23 billion. See some recent coverage on the subject.

Here's the kicker: neither proposal would provide as much "real" money as the proposal by the Bush Administration.

Agriculture Secretary Mike Johanns would provide $27 billion over five years in "real money" for conservation programs like the Wetlands Reserve Program and the Environmental Quality Incentives Program and would have restructured traditional farm subsidies to make the math work. Johanns has made an equitable farm bill that helps more farmers, communities and the environment the primary test of the 2007 Farm Bill.

So far, House and Senate Democrats appear to be failing that test.

There's no word yet on whether House Agriculture Committee Chairman Collin Peterson (D-MN) or Senate Agriculture Committe Chairman Tom Harkin (D-IA) will restructure or reduce traditional farm subsidies to help more farmers and meet other farm and food priorities, such as conservation, health and renewable energy. Both chairmen have said that $25 billion in "direct" subsidy payments linked to the production history of crop farmers are on the chopping block, but early indications are that the Chairmen plant to use a jack-knife rather than an an ax.

The House proposal includes important reforms to USDA's two major working lands incentives programs — the Conservation Security Program (CSP) and the Environmental Quality Incentives Program (EQIP) — that would provide more environmental benefits and better reflect local environmental priorities. The House proposal also promotes the use of 'cooperative conservation' agreements to bring local farmers together to meet local environmental challenges. The Senate proposal would combine CSP and EQIP into a single program. With the right reforms, a single working lands program could reduce administrative burdens and simplify the alphabet soup facing farmers.

But while both proposals provide an interesting roadmap to the right destination — a healthier environment — neither proposal puts enough fuel in the tank. Without more funds for conservation, two out of three farmers will continue to be turned away when they offer to share the cost of clean water and wildlife habitat. And many of America's most pressing environmental challenges will not be met.