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the population, and farm household incomes are well above the national average, making the orig?inal justification irrelevant. What modern market failure or social problem is solved by farm pro?grams today? Subsidy advocates offer five flawed justifications

1: Farmer poverty.

This is the most common and provably incorrect justification. The average farm household earns $81,420 annually (29 percent above the national average); has a net worth of $838,875 (more than eight times the national average); and is located in a rural area with a low cost of living. The farm industry's current 11.4 percent debt-to-asset ratio is the lowest ever measured and helps to explain why farms fail at only one-sixth the rate of non-farm businesses

Overall, net farm income totaled $279 billion between 2003 and 2006?the highest four-year total ever the farm economy is thriving and farmer incomes are soaring

Furthermore, farm subsidy formulas are designed to benefit large agribusinesses rather than family farmers. Most farm subsidies are distributed to commercial farmers, who have an average income of $199,975 and an average net worth of just under $2 million If farm subsidies were really about alleviating farmer poverty, lawmakers could guarantee every full-time farmer an income of 185 percent of the federal level ($38,203 for a family of four) for just over $4 billion annually one-sixth of the current cost of farm subsidies.

Disaster compensation

While farming can be very profitable, farmers are always one weather disaster away from losing their crops, but this risk can be handled with basic crop insurance rather than with expensive annual government subsidies. Washington does not address homeowners' risks by writing each family an annual check regardless of whether or not their homes have been damaged.

Giving farmers $25 billion in annual subsidies regardless of whether or not their crops have been damaged is no more logical. Crop insurance markets, as well as futures and options markets, can balance good and bad years in a way that is cost-neutral over the long run.

Maintaining a cheap and stable food supply

Some contend that food markets would fluctu?ate wildly without farm subsidies. In reality, food prices of both subsidized and unsubsidized crops are relatively stable. Given that the percentage of family budgets spent on food has dropped from 25 percent to 10 percent since 1933, any potential price instability would have an increasingly small impact on family budgets. Even if price stabiliza?tion was necessary, price support programs have largely been replaced by commodity subsidies that stimulate overproduction rather than stabi?lize prices.

Nor do farm subsidies contribute to lower food costs. Two-thirds of food production is unsubsi?dized and thus relatively unaffected by subsidies. Of the remaining one-third, price reductions caused by crop subsidies are balanced by conservation pro?grams that raise prices. Furthermore, food prices are based not only on crop prices, but also on food processing, transportation, and Marketing costs. Bruce Babcock, professor of economics at Iowa State University, has calculated that eliminating farm subsidies would have virtually no effect on food prices.

National security

Proponents contend th