This story was originally published by The Brookings Institution.
Editor’s Note: This article summarizes the report “Reimagining rural policy: Organizing federal assistance to maximize rural prosperity.”
As President-elect Joe Biden comes into office determined to unify the country, he will face a deeply divided electorate, one whose partisan divisions continue to reflect stark differences in geographic economic outcomes. Counties that experienced the least job growth over the last four years provided President Trump with his largest gains in 2020 from the 2016 election, and political polarization between the nation’s metros and small towns remains pronounced. A successful unity agenda will require policy responses from his new administration that give more diverse places—as well as people—the opportunity to thrive.
This must include rural areas. In a new policy brief, we make the case that improved and modernized federal policy can more effectively support economic and community development in the rural U.S., increase equity, and build America’s resilience through more evenly distributed prosperity.
The economic fallout from the Covid-19 pandemic threatens to further disrupt local economies that in 2019 were still recovering from the Great Recession and adapting to 21st century shifts in the national and global economy, demographics, and climate. Employment and prime-age labor force participation in rural areas still had not reached pre-recession levels before Covid-19 hit, while employment in urban areas had more than fully rebounded and grown by 9 percent.
The current crisis has further exposed rural areas’ vulnerabilities. Just recently, Covid-19 prevalence in nonmetro U.S. areas surpassed those in metro areas for the first time; Rural residents are now almost 2.5 times more likely than urban residents to die from the virus. This is compounded by the decreasing access to health care that many rural communities face: Half of rural hospitals operated at a loss pre-pandemic, and 17 have already closed this year—just one off an all-time annual high set in 2019—maintaining the negative momentum that has shuttered 176 rural hospitals since 2005.
Now, rural communities must navigate a virtual world of work with intermittent broadband access and adapt to additional shocks to manufacturing and agriculture supply chains. According to analysis from the Center on Rural Innovation, the four industries at highest risk of being impacted by Covid-19 account for 56 percent of jobs in rural areas, compared to 43 percent in metro areas.
Despite these challenges, rural communities are diverse—both demographically and economically—and entrepreneurial. They help power, feed, and protect America at rates disproportionate to other geographies. They house 99 percent of wind power capacity and will play a key role in national climate strategies that require investments in clean energy infrastructure.
Rural areas have higher self-employment rates than urban counterparts and are increasingly economically diverse, with a significant and growing proportion of service industries including education, health, trade, transportation, and hospitality. They are also demographically diverse; people of color make up 21 percent of the rural population and are responsible for 83 percent of the population growth that has occurred in rural areas between 2000 and 2010, with immigration partially the source.
The federal programs and tools now in place to support community and economic development serve as a reminder of the important role the federal government played in helping rural communities thrive in the 20th century. Yet they are outdated, fragmented, and constrained, and the resulting incoherence and complexity is not producing deep enough results fast enough. We find that:
- Over 400 programs—spanning 13 departments, 10 independent agencies, and over 50 offices and sub-agencies (Figure 1) and with a bewildering array of development objectives —are available to assist rural communities.
- A total of 14 legislative committees have jurisdiction over the authorizing legislation for rural-eligible development programs, compounding this complexity.
- The 93 programs targeted specifically to rural areas are heavily weighted toward debt financing In fiscal year 2019, they administered $2.58 billion in grants—just 0.2 percent of federal discretionary spending—versus $38 billion in loan authority.
- Rural communities lack access to flexible grant funding and are often disadvantaged by eligibility requirements, per capita spending formulas, and allocation formulas that privilege densely populated urban areas.
Modernizing Federal Assistance to Maximize Rural Prosperity
We recommend modernizing and reforming federal assistance for the 21st century, to better serve the diversity of rural America and improve the geographic distribution of prosperity across the country. Improved federal policy and practice can help these areas—and the nation as a whole—recover stronger, more quickly, and more equitably than after 2008. A “development effectiveness” mindset, inspired by successful reforms to U.S. foreign assistance over the past two decades, can ensure that policy reforms increase coherence and maintain an unwavering focus on results. To maximize the return on federal investment, our recommendations include:
1. Launch a domestic development corporation, modernizing technical capabilities and financing tools
A new corporation would competitively award large, flexible block grants that invest in local vision, accompanied by cutting-edge technical assistance, rigorous analysis and measurement of results, and support to strengthen local leadership and civic capacity. Its policies should empower local residents and community leaders, and support what they need to succeed. It would integrate and expand the breadth of domestic development financing tools, bringing strategy and improved impact to the set of narrowly defined and siloed tools that currently exist. The U.S. government has done this successfully for its international development investments by creating the Millennium Challenge Corporation and the International Development Finance Corporation; it should apply this experience to the development challenges facing rural communities in the U.S.
2. Create a national rural strategy and undertake associated reforms to improve coherence, regional integration, and transparency
As early as the 1970s, officials in the Carter administration noted that “the federal rural development effort consisted of programs, rather than policy.” A national rural strategy will strengthen coordination by providing clear policy direction to the agencies and stakeholders involved in rural development.
To ensure that strategy implementation responds to rural realities, we recommend elevating White House leadership by (1) establishing high-ranking positions responsible for rural and tribal development and (2) creating an office to facilitate interagency coordination and provide consistency and convening power across presidential administrations.
To be successful, a national rural strategy must embrace diverse rural perspectives while breaking down urban-rural divides by incentivizing regional approaches. An analysis of the impact, constraints, and successes of the seven regional commissions and authorities previously authorized would be a start. Special attention should be paid to addressing power dynamics that have historically excluded groups based on race and ethnicity and to promoting collaboration with a wide range of partners and intermediaries.
To complement the national strategy and ensure that rural areas have fair access to the federal assistance that can help advance their priorities, we suggest a federal rural audit—a close examination of eligibility, funding formulas, and spending criteria of community and economic development programs, identifying those that disadvantage or create barriers to entry for rural areas.
Coherent strategy requires a rigorous focus on transparency and results. To increase transparency, we recommend an easy-to-use web tool that tracks federal funding flows to rural people and places. We also recommend a congressional commitment to mandate and provide 5 percent of program funding for evaluation.
3. Appoint a bipartisan congressional commission to undertake a top-to-bottom review and build bipartisan momentum for improving the effectiveness of federal rural policy
We recommend a bipartisan, congressionally appointed commission undertake a top-to-bottom review of the effectiveness of federal assistance for rural community and economic development. The Office of Management and Budget is also well-positioned to analyze the extent to which existing policies and regulations disadvantage rural communities.
“Rural” is no longer synonymous with “agricultural,” and policy solutions must keep pace with reality to do right by the 1in 5 citizens who call rural places home. The perceived rural-urban political divide masks growing economic interdependencies, ignores the significant presence and unique priorities of communities of color in rural areas, and stifles opportunities to strengthen America’s social and economic health through smart regional policy.
In a nation grappling with deep polarization, systemic racism, and recession, President-elect Biden has an opportunity to build bipartisan interest in a long-term equity agenda by including solutions that address geographic divergence. Intentional and ambitious federal leadership can create the conditions for success in rural areas by embracing their diversity, knowledge, and local assets. It is time to meet the urgency of the moment.
Natalie Geismar is a Project Coordinator and Research Assistant – Global Economy and Development, Center for Sustainable Development