This report examines the economic effects of the principal programs authorized under the Farm Security and Rural Investment Act of 2002 that influence the U.S. dairy sector. The analytical results presented in this study were used as input to a broader study mandated by Congress, which required an evaluation of the economic impacts of Federal milk marketing orders, direct payments to producers, price supports, and export programs. This study examines the effects of dairy policies on prices, program payments, and other variables under different scenarios. The results are compared to a baseline set of estimates over the 2002-07 period. The findings show that gross income in the U.S. dairy sector would be $7.2 billion below baseline levels over the course of this period if the programs were discontinued. Over the same period, cumulative Government outlays for these programs would be approximately $5.5 billion below baseline levels.