Debt Reduction and Rural America

[imgbelt img=mp_main_wide_BowlesObamaSimpson452.jpeg]Two commissions have issued reports finding ways to cut the federal budget. Each of them would have specific impacts on rural America.


The second plan comes from the Bipartisan Policy Center. The BPC was set up in 2007 by former Majority Leaders of the Senate (Democrats Tom Daschle and George Mitchell; and Republicans Howard Baker and Robert Dole). The group’s Debt Reduction Task force was headed by Sen. Pete Domenici, a Republican, and Democratic economist Alice Rivlin.

You can find the White House draft report here and the BPC’s report here

[imgcontainer left] [img:Bowles.jpg] [source]Campaign for Free Enterprise

Former chief of staff in the Clinton White House, Erskine Bowles.
The White House Bowles/Simpson commission report is making the most waves. The recommendations in the report would achieve nearly $4 trillion in deficit reduction from 2012 through 2020. It would reduce the deficit to 2.2% of gross domestic product by 2015 and it caps federal revenues at 21% of GDP. It reduces tax rates across the board while broadening collection.

There are many big ticket suggestions in this report. But our interest is rural and here is where we see a particular impact on rural communities.

Agricultural Subsidies and Programs This is a draft proposal and so details are skimpy. Bowles and Simpson want to “achieve mandatory savings from farm subsidies.” The commission proposes to reduce subsidies by $3 billion a year by cutting direct payments, Conservation Security Program funds and funding for the Market Access Program.

Raising Retirement Age The commission notes that people are living longer and so the age when people can receive full Social Security benefits ought to rise, too.

The commission says the retirement age ought to gradually rise, reaching age 69 in 2075.

This doesn’t appear to be a rural issue at first blush. But it is.

Remember, mortality rates are not equal. Economist and columnist Paul Krugman notes that the rise in mortality rates is entirely a result of richer people living longer. The lifespan of the poor has not substantially changed.

according to the Associated Press. 

But both Krugman and the GAO have missed the geographic component of mortality rates. The gap between urban and rural mortality rates has been growing since 1990. 

People in urban areas are simply living longer than those who reside in many rural counties. The decline in longevity is particularly evident among women in the South and in Appalachia. 

An increase in retirement age is a disproportionate cut in benefits in the many rural counties where people are living shorter lives. (See map.)

Noting that poorer workers weren’t living longer, Krugman wrote, “So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.” The economist could have replaced “janitors,” with “women in Pulaski County, Virginia,” and been equally correct. 

Abandoned Mine Lands The commission would “end payments to states and tribes for abandoned mines.” There is a fund paid for by a tax on coal sales used to repair environmental damage at unreclaimed coal mines. There are nearly 5,200 abandoned coal mines  areas of unreclaimed land covered by this fund. 

There is also an abandoned mine land program for hard rock mines in the West and Alaska operated by the Bureau of Land Management. 

The document doesn’t say which fund should be scrapped, but we suspect it is the hard rock version. 

The government is now reclaiming 438 abandoned mines in western communities.

Universal Services Fund The commission would “reduce spending from Universal Services Fund.”

The Federal Communications Commission hopes to use money in the Universal Services Fund to extend broadband connections into rural communities. Reducing spending from this fund would diminish the effort to provide rural residents with high-speed Internet connections.

Earned Income Tax Credit The commission doesn’t exactly call for the end of the EITC, but it signals that the tax credit for poor workers is at least on the table.

The EITC is a refundable tax credit for low and middle income workers. It is currently one of the largest anti-poverty programs in the country.

Writer Mark Trahant notes that the “tax credit has been singularly successful on American Indian reservations and in Alaska Native villages. Pull up a map of where the tax credit is most used and you see Indian Country. In many Native communities more than 40 percent of the population now is eligible for this credit.”

recent column. “Make no mistake about this, reducing or eliminating the Earned Income Tax Credit will have a disproportionate impact on Indian Country.” 

Gas Tax The commission would raise the gas tax 15 cents a gallon. This money would be used to fund transportation spending. 

Rural Utility Service The commission would eliminate half a billion dollars of spending by the RUS, which services rural electric cooperatives.

Corps of Engineers The commission would eliminate $1 billion in projects slated to be built by the Army Corps of Engineers. 

TVA The commission would require the Tennessee Valley Authority to “impose transmission surcharge on electricity sales.”

The Bipartisan Policy Center’s report is more detailed. It, too, would index retirement age for Social Security and, therefore, would have the same impact on rural communities as the Bowles/Simpson plan.

The BPC would also reduce farm subsidy payments “by eliminating all farm payments to producers with adjusted gross income greater than $250,000, imposing limits on direct payments to producers, consolidating and capping 16 conservation programs, and reforming federal crop insurance.”