What Happens is Vegas…

One of our recurring themes at American Rural identifies the disconnect between rural communities’ idealized self-image as independent, pulling themselves up by their bootstraps and the reality that rural communities have intimate, direct links to our urban neighbors

Rural Residents Don’t Count…Themselves?

As COVID-19 continues to plague our nation, the Constitutionally mandated Census limps along. The Census matters to everyone. We use it to allocate resources. We use it to allocate political representation. Sure, statistical sampling would likely provide more accurate answers.But, the Supreme Court has ruled we cannot sample. The Census must actually count. (For more info, you can read the complicated history here.)

USDA defines nine categories of counties, ranging from major metro areas (1) to completely rural (9). We average response rates across counties by category..
Source: https://2020census.gov/en/response-rates.html data capture 6/25/2020; American Rural analysis.

Montana has a Census problem. At the end of last year, experts believed we would gain a second seat in the House. Today, the numbers aren’t looking so good. Rural Montana is not responding.

Is this a Montana problem? We should ask who responds and who doesn’t? Individual responses, either by mail or online, are particularly important this year because door-to-door Census work probably falls short due to COVID-19. So, we looked at response rates across the urban-rural continuum, by county. The results are striking: Rural America is not responding at close to the rate of urban America. The details of the categories appear in a table below. Simply put, categories 1-3 are urban, 7-9 are rural, and 4-6 fall in between.

Rural Americans are shooting themselves in their collective feet. The Census drives representation and allocation of federal resources…and we aren’t even counting ourselves.

Below are the details of the USDA categorization of counties from urban to rural:

Source: https://www.ers.usda.gov/data-products/rural-urban-continuum-codes/documentation/


Police Killings in Rural America?

In the aftermath of the tragic deaths of George Floyd, Breonna Taylor, and Ahmaud Arbery, it’s clear all of America needs to be deeply concerned about the use of deadly force by law enforcement. Surprisingly, rural and small town America may need to worry most. A recent story in FiveThirtyEight delivers a number of worrisome statistics about the increasing number of police killings in our communities.

FiveThirtyEight, Police are Killing Fewer People in Big Cities, But More in Suburban and Rural America, June 1, 2020

According to FiveThirtyEight, while there’s been a decrease in the number of people killed in the 30 most populous cities in the country, police killings in more suburban and rural areas have increased. Additionally, information from the FBI Crime Report shows that “departments that reported larger reductions in arrests from 2013 – 2018 also reported larger reductions in police shootings.”

And notably, the Vera Institute of Justice found that jail incarceration rates have been increasing in rural jurisdictions, while they’ve been declining in urban areas. Since incarceration is expensive and can be an impediment to rehabilitation, this is a data point worth keeping in mind.

Rural and small towns pride themselves on being safe spaces to live and raise families. In the aftermath of the most recent police killings, those of us living in rural and small towns might want to pay attention to law enforcement in our backyards. We often know our police personally, we also know they have super-tough jobs and most want to do them well. Ensuring that taxpayer dollars are spent effectively and all rural residents are justly protected by law enforcement should be a goal that, if met, will only serve us well.

Big Gov? Socialism? Rural America and Federal Money

After I wrote TheNewRural, I spent years traveling across America, talking about technology and rural economic development. Often as we discussed solutions for increasing prosperity off the beaten path, I’d have to remind folks that policymakers heard repeatedly from rural Americans, “We don’t want big government, we don’t believe in government assistance.” And I’d point out how damaging it might be if that wish were ever granted.

Because the truth is rural and small town America are enormously reliant on federal government programs; from USDA and farm subsidies to rural healthcare and telecommunications infrastructure. The federal Universal Service Fund, for example, pays carriers billions of dollars annually to deploy telecom infrastructure to rural and small communities. USF effectively subsidizes the price telecom carriers charge to their users in rural and small towns. Farmers received over $28B in supplemental aid from the USDA from 2018-2020 in addition to the billions of dollars they receive annually from other federal programs. Our local airport, Glacier Park International Airport, which is my favorite airport in the world, was about to spend $100M of mostly OPM (other people’s money) in an upgrade that’s been postponed due to COVID, but will likely happen within the next couple years.

As we face the ongoing challenges of the pandemic, it’s more important than ever that rural and small communities understand our reliance on federal assistance.

According to a recent study from Brookings:

Rural economies were the hardest hit by the 2008 recession and the slowest to recover. By 2017, average rural employment was still 2 percent lower than in 2007. Businesses were hit especially hard—in the first four years of the recovery, counties under 100,000 lost 17,500 businesses, while economies in counties over 1 million people added 99,000. COVID-19 will only exacerbate these pressures: The shutdown of commerce has already put small businesses, a key driver of rural economies, into an economic vise grip, and almost twice as many rural areas rely primarily on the recreation industry as urban areas.

The post-COVID future is still uncertain for rural and small town America. Our residents are hurting and we can’t afford to squander opportunities by relying on outdated mythologies regarding the role of federal, state, and local government in our success.

Social Security is at Risk. Here’s a Solution

Rural America has a big stake in the future of Social Security. Why? Well, mostly because we’re older. Take a look at this chart from the U.S. Census Bureau.

Also because so few baby boomers or GenXers have set aside enough money for a fully self-supporting retirement and many of us carry debt that will continue to be a burden in our retirement years. And now, with the COVID pandemic causing serious employment dislocation, our small and rural communities that are home to lots of elders, need to be especially mindful of the future of social security and Medicare.

Just months ago, before the COVID outbreak ground the economy to a halt, the Social Security Administration projected benefits cuts without funding changes by 2035. But since COVID, that projected date has moved to as soon as 2029.

One proposal being discussed is raising the cap for payroll tax collection. Currently, Social Security withholding stops (for both employees and their employers) after an employee reaches $137,700 in annual wages. In my long ago corporate years, my entire social security requirement was often paid in one January bonus check. That’s not uncommon in high-wage markets. But few folks in rural and small town America will ever earn over the Social Security cap, yet we rely heavily on a healthy Social Security funding. So we can probably agree that a good way to begin shoring up the Social Security we’re all depending on, is to eliminate the high wage earner cap.

(Please note: the Fox story, linked above, incorrectly reports the Social Security wage cap at $132,900. Per the Social Security Administration, the current cap is $137,700. Fox reports the 2019 limit.)

Business Loss at Great Depression Levels

According to Axios, more business were lost in the last 3 months than all of the Great Recession. This has staggering implications for rural and small towns. According to Robert Fairlie, an economist at UC Santa Cruz, at least 3.3M business shut their doors from February to April of this year. Why does this matter so much to those of us living off the beaten path?

First, rural and small towns aren’t often big economic producers. In fact, half of US GDP comes from the top 25 largest US metros. In other words, rural and small towns benefit when these large urban centers do well economically.

Second, rural America has been lagging in small business growth. According to a 2019 SBA study since 2000, the number of physical locations in which a firm operates has grown by 30.9 percent in metropolitan counties, while the number in rural counties has grown by only 7.2 percent.

Lastly, rural and small towns will face stiff winds to grow our economies following the 2020 pandemic and recession. Losing this many businesses this early on speaks to the need for strong entrepreneurship support and an awareness of the broader economics that affect our backyards.

CARES Act – Is the Money Going to Rural America?

A recent op-ed in the Pittsburgh-Post Gazette made an interesting claim that the “$3 trillion in coronavirus aid isn’t heading to hometown America, but to large municipalities.”

Is that true?  My colleague Marc has a good take on the overall numbers.  There he concludes that rural states are taking in more per capita in coronavirus aid than our urban counterparts.  However, it’s worth adding some context.  First the CARES Act limits “direct payments” to a county, municipality, or basically any unit of government with a population that exceeds 500,000.  From a political perspective, it’s plausible that this requirement was added to the CARES Act so that 1) the federal government would have greater authority over the requirements necessary for large cities to access these funds, or 2) smaller communities would have a better shot at accessing the funds if the interface was their state instead of the federal government.  Indeed, the position I so often hear among small town leaders is a preference for local governance that better understands their unique needs. 

Regardless, the op-ed feeds off a familiar theme here in rural America; that we aren’t getting our fair share of federal money.  Well, as we all know, just because it’s a familiar theme doesn’t make it correct.  So many of the services I use in northwest Montana are heavily subsidized by the feds, including our broadband, airport, two hospitals, roads, Glacier National Park, the list just goes on.  So obviously this is a much bigger topic than one op-ed and we’ll be looking at it more closely in the coming months.      

The Stock Market Has Recovered…Who Cares?

As of the close of the equity markets today, the S&P500, a broad index of stock market performance, has recovered to pre-COVID-19 levels. This is great news for America, right?

Percentage of U.S. Households owning stocks, from https://www.nber.org/papers/w24085

We only know about the details of household stock ownership from the Survey of Consumer Finances conducted by the Federal Reserve Board every three years. The most recent survey, conducted in the fourth quarter of 2019, has yet to produce any results. What do we know from the 2016 SCF?

The picture above reproduces Figure 14 from a paper written by Edward Wolff, an economist at New York University. He shows that, sure, almost half of U.S. households own stocks of any kind. This includes your IRA and 401(k) mutual funds, if you have any, not just direct share ownership. This is the MOST GENEROUS definition of owning stock we can find. Even then, barely 50% of households have any. About two third of households hold stocks valued at less than $10,000. A full 75% hold less than $25,000 in the stock market.

I guess the good news is that this means most households didn’t lose very much when the stock market plummeted due to COVID-19. The bad news is that most households don’t benefit, or benefit immaterially, when the stock market rises.

Remember, the stock market doesn’t tell us how the economy is doing. The stock market tells us how people think the economy will do in the future.

Who CARES and Who Benefits?

The CARES Act, passed by Congress to provide “fast and direct economic assistance for American workers and families, small businesses, and preserves jobs for American industries” falls squarely in the category of wealth redistribution.

Every single bill that needs to pass the Senate must, in a sense, pay off low population states. This essentially means rural states. We get more than our fair share. This is particularly poignant for the CARES Act that is suppose to help workers, families and small businesses. This is about people, not states. So, who gets the most benefit? Note, all the states in light blue, with no data are at the same $387.76 per person.

Four states, Montana, Wyoming, North Dakota and South Dakota receive a combined $5 billion, slightly more than Illinois’ $4.9 billion. Illinois’ population is 3.8x as large.

For the state level data, please see this link.


Racial Inequity Matters…Even In Montana

This has been a terrible week for America. We all mourn for George Floyd and every other person who has died at the hands of those charged with our protection. We are all shamed by bad actors amongst us. Our cities have transformed into battlegrounds as African American communities and their allies protest abusive policing.and demand change.

Here in Montana, Governor Bullock and other leaders spoke out in support of minority communities and against police violence. Too frequently, our fellow citizens think we don’t have a race problem here. Montanans are friendly and welcoming. If nothing else, much of our economy depends on tourism. We couldn’t survive without a population open to visitors from near and far.