Monday, October 20, 2014

Busting Rural-Subsidy Myth One Last Time

01/07/2014

USDA Economic Research Service Contrary to what you might hear -- or read in major newspapers -- in 2010 the federal government spent $683 less per person in nonmetro counties than in metro counties. The Economic Research Service is discontinuing the report on urban vs. rural spending because of federal budget cuts to USDA.  

A friend wrote the other day and as a joking aside, he listed things rural:

  • Prayer.
  • Picnics.
  • Flannel.
  • Polka.
  • Subsidies.

OK, I know plenty of people who don’t pray and plenty who do, but I wasn’t going to quibble about picnics, flannel or polka. (Around here, there’s lots of polka.)

But subsidies? Here we get into the most common of stereotypes about rural America — that the federal government spends a lot of money on those who haven’t had the good sense to move to a city.

We’ve dealt with this before at the Daily Yonder. And, just to let you know up front, it just isn’t true. The federal government spends less per person in rural America than it does in the cities.

That doesn’t keep people, such as my friend, from assuming the opposite and then stating it as fact. The Washington Post’s Ezra Klein wrote a few years ago that the federal government supplies “a raft of subsidies (devoted) to sustaining rural living.” And the New York Times’ David Leonhardt wrote that “suburbs and rural areas receive vastly more per-person federal largess than cities.” 

When Klein and Leonhardt made these declarations a few years ago, we looked for the evidence that federal spending was out of whack in rural counties. (Here’s our story from March 2012.)

We found the facts, but they told a different story than the one offered by Klein and Leonhardt. Rural residents didn’t pull in more money from the federal government than those in the cities. They received less.

The Department of Agriculture’s Economic Research Service did the hard work of tracing federal spending to every U.S. county. In 2009, federal spending per person in urban counties was $10,471. In rural America, it was $10,186.

The ERS made this calculation for every year since 2004, and in all but two years, the result was the same. The federal government spent more per person in metropolitan counties than in rural communities.

But our friend’s recent comment about “subsidies” got us thinking. What was the latest research? Had something happened that vastly increased federal spending in rural America?

So, we checked and found the results for 2010. (The data can be found here.) In 2010 federal spending per person in metro counties was $10,976. In rural counties, spending was $10,293 per person.

The only thing that had changed in the new data was that the gap between spending in rural and urban America had widened. In 2009, the federal government spent $285 more per person in urban counties compared to rural communities.

In 2010, the urban advantage was $683 per person. That is the largest gap in the seven years the Economic Research Service has made the comparison.

The ERS breaks down federal spending into narrower categories. The federal government spends more in rural counties on agriculture and natural resources than in metro areas. No surprise there.

USDA Economic Research Service Per capita spending in 2010 in nonmetro counties was higher in categories of agriculture and natural resources, human resources and income security. Rural spending was lower the categories of community resources, defense and space, and national functions. Overall per capita federal spending was higher in metro areas.  

Federal spending on “income security” (Social Security and various kinds income support) per person is much higher in rural America than in the cities. The gap in 2010 was about $1,300 per person and the reason for that difference is simple: People in rural counties are older and, on average, poorer than those living in cities.

But when total spending is added up, there is no “raft of subsidies” floating around rural America, as Ezra Klein claimed. And Leonhardt’s assertion that rural areas “receive vastly more per-person federal largess than cities” is still false.

The bad news, however, is that 2010 appears to be ERS’s last comparison of rural and urban spending. In late April, ERS announced that federal budget cuts had made their way to the Department of Agriculture and that the agency would no longer be preparing the federal funds spending report.

So that’s it, friends. The best evidence is that federal spending on the average rural resident is less than what is spent on the average urbanite. And the gap was growing.

Comments

Wait a minute...

Try calculating net spending per capita instead of gross spending. You'll see a very, very different picture. The fact is that when net spending (spending after tax generation) per capita is calculated, net spending per capita is significantly slanted toward rural areas, the very definition of subsidy. If urban communities come away from your story thinking they don't have the most to lose from misguided, ideologically driven austerity, it's an injustice. 

net per capita

The commenter is right. This isn't a calculation of net spending -- that is, amount paid out minus the amount paid in.

We wonder if that's what the commenter really wants? Poor people pay in taxes much less than they receive in benefits. Does that mean that we subsidize the poor? Old people get more than they put in. Do we reduce Social Security benefits to even things up?

Should everyone get back from government exactly what they put in?

What we've heard consistently is that rural areas receive more from the federal government than urban areas. As you can see, that's not true. 

If there's not an equal return of federal money paid out to rural areas in the amount rural areas pay in, well, that's a different story. If true, we'd be anxious to know how "rural" causes this disparity (as opposed to income or age). 

Come on...

Bill,

I agree that to have a functioning society, we shouldn't make it so people only get out of government what they put in. Subsidies are important. But you seem to be avoiding the point: Rural areas are in fact subsidized because they aren't putting as much money in to the collective bank as they are taking out. We can argue whether that's justified or not, but pmcgann is right; that's the definition of a subsidy.

Also worth noting: the numbers are about spending. Is "defence/space" a subsidy? And what the hell is "national function"? I don't know, but those seem categorically different than "income security" and probably "community resources" as well. The latter of the two are almost certainly subsidies.