Speak Your Piece: The Economic Status of Rural America in the Trump Era

The president is scheduled to release a more detailed budget proposal this week that will include major cuts in USDA Rural Development and other programs affecting rural America and rural regions. Three economists argue that the federal government can improve its work in rural America without “breaking the bank.” To do so requires moving away from an “ag-only” emphasis and devoting more resources to evaluation.

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EDITOR’S NOTE: This article is excerpted from a longer piece that was distributed via the open platform Munich Personal RePEc Archive. The full paper examines long-term economic trends in rural America, describes recent policy, and suggests a way forward. One particular concern of the authors is maintaining adequate data collection, which they say is essential for evaluating policies and holding public and private institutions accountable.

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Over the next few years, the federal government will consider many policies that affect rural economies. … Early signs are that the new administration is not supportive of current rural development programs, especially place-based policies, as indicated by initial proposals to strike key elements of the USDA Rural Development and the Department of Commerce’s Small Business Administration business financing activities, as well to entirely eliminate whole agencies such as the Economic Development Agency and the Appalachian Regional Commission.

… [T]hese proposals suggest that the administration is leaving rural America behind, instead of making the economically-based investments that could help those most distressed communities. … This could have future electoral consequences [because Trump was popular with rural voters]. …

We have suggestions for improving rural development policy without “breaking the bank.” First, while place-based policies have a mixed track record, primarily due to poor implementation, there are examples of place-based policies that have potential, including the Appalachian Regional Commission, an expanded Delta Regional Authority, and other regional initiatives. For example, the ARC provides bridge loans and seed grants for infrastructure and supports other programs such as workforce training. Yet, given their limited resources, the ARC’s main role is as a broker that can foster regional collaborations of businesses, communities, nonprofits, local development districts, and various state and federal agencies while providing small funding matches to ensure projects can be implemented. Congress could learn from this model and should create new federal-state regional development organizations so that the entire country is covered. Additionally, effective agencies cannot be expected to carry out their mission if they are insufficiently funded. Funding for many agencies is well below the authorized amount. The ARC, with a federal allocation of $90 million in FY 2015 and $146 in FY 2016 (with some temporary expenditures), is limited in what it can do for its over 25 million residents spread across 13 states. Still, the ARC is a fantastic example of what a regional organization with modest resources can accomplish. Indeed, [a 1995 study], for example, is one of many supportive studies finding that ARC counties had significantly better economic outcomes than observationally similar counties.

Another feature of the federal-state regional commissions and other effective regional programs is that they can initiate multi-county regional development districts (the ARC refers to them as local development districts). These districts are composed of functional economic regions that can help facilitate cooperation and collaboration between neighboring communities, which is especially important for rural communities who may lack capacity to tackle programs on their own. Since functional economic areas are predominantly centered on urban areas, it allows rural communities to work with their urban neighbors, which is especially important since urban-led growth is typically more sustainable because of the agglomeration advantages possessed by cities.

Rural development programs should also focus on “building from within” by stressing education and entrepreneurship/small business development. There is evidence that large firm attraction is typically unsuccessful, especially for rural areas. However, all areas have the potential to build a locally diverse business environment based on higher human capital. In addition, the type of parents that demand high-quality local schools are the types of workers a successful community needs. … There is also evidence that even distressed areas can benefit from home-grown businesses. Policymakers can assist with these efforts by providing subsidies for early childhood education in rural America and helping support the infrastructure development and technical-assistance support (including business planning) to help grow develop and grow local businesses.

Rural development needs the support of environmental laws that include cost-benefit analysis. For rural areas that have historically been dependent on resource extraction industries, environmental degradation is a threat to future growth. People are unwilling to remain in or migrate to areas that have been degraded and this impacts future economic prosperity.

Though U.S. policymakers often eagerly support various programs and policies they believe help their rural constituents, they generally have less patience for formal and systematic evaluation of such programs once implemented. It takes time for the full effects of programs and policies to play out, and it takes resources to conduct rigorous and impartial assessments. Above all, policymakers who have a genuine interest in understanding the effects of their policies, and who want to make the best possible use of taxpayer dollars, should be concerned about any efforts to scale back public data collection efforts. And, overall, there should be a more balanced approach to rural development that weighs agriculture with the much larger rural nonfarm economy.

Stephen Goetz, Ph.D., is professor of agricultural and regional economics and director of the Northeast Regional Center for Rural Development at Penn State College of Agricultural Sciences.

Mark Partridge, Ph.D., is professor and Swank Chair of Rural-Urban Policy at Ohio State University.

Heather Stephens, Ph.D., is assistant professor of agricultural and resource economics at West Virginia University.

 

Topics: Economy
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