By CLARA HENDRICKSON
October 23, 2019
Clara Hendrickson is a research analyst in governance studies at the Brookings Institution.
During the primary campaign, Democratic presidential contenders have put forward a number of bold plans — from “Medicare for All” to free college.
But when it comes to an area pivotal to their political fortunes — providing a large-scale economic program for suffering small towns and rural areas — their plans are comparatively subdued and vague, from Joe Biden’s call for connecting executive agency leaders with organizations in rural America to Elizabeth Warren’s vow to develop a “National Jobs Strategy” focused on the unique challenges confronting places that lack the density and draw of large cities.
There’s a reason why Democrats appear stranded on this issue: For years, the liberal-leaning economists that the party relies on to fuel its domestic agenda failed to reckon with the stark economic disparities between parts of the country. Many of them dismissed proposals to create economic opportunity outside the handful of “knowledge economy” hubs in the nation’s largest metropolitan areas as inefficient transfers to lagging places.
At the same time, Democrats’ long-standing hold on urban America meant the party came to represent the winners of the “knowledge economy” — the largest, richest metropolitan areas — and the party’s leadership hailed from states home to the nation’s most successful “superstar” cities. Many of the party’s political strategists encouraged a blindness to the economic and social problems confronting much of the country by urging candidates to spend their time and energy mobilizing their urban base rather than courting hard-to-reach and hard-to-get rural voters. Campaigning outside the country’s cities has not been a priority for Democratic candidates and their strategists, let alone having something to say to these communities.
But while few prominent Democrats demanded solutions to address regional inequality, the party’s intellectual infrastructure also didn’t provide them for a long time.
“Until recently, there has been a faith among economists and other policy wonks that ignoring place, and investing in people’s skills and encouraging mobility, would be enough to solve regional inequality problems,” observes Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research, who says the 2016 election provided a wake-up call.
Now, center-left and left-leaning think tanks and policy minds are only just beginning to formulate a response to the decadeslong economic divergence between America’s communities.
“There are now numerous proposals on the table, but for years policy wonks did not recognize that regional inequality had practical solutions,” Bartik says.
In a manner unlike any election before it, the map produced by the 2016 presidential vote reflected the geography of economic growth and decline and has since forced the Democratic Party to have something to offer the places that have been “left behind.” While Hillary Clinton ran up wide margins in large, thriving cities in 2016, Donald Trump strengthened the Republican Party’s hold on declining rural areas.
And the places that proved decisive were united by a stark economic reality. Many of the counties that voted for Barack Obama twice and then Trump in 2016 experienced economic stagnation and decline during the recovery from the Great Recession. In 2016, Adams County, a distressed rural area in central Wisconsin that has seen incomes fall relative to the rest of the state and lost jobs in recent years, voted for the Republican presidential candidate for the first time since 1984.
Meanwhile, the places that went for Clinton were characterized by their shared economic success. The counties that voted for her accounted for 64 percent of the nation’s total economic output in 2015.
Rural areas experiencing economic decline fueled Trump’s victory. However, the rural counties that voted for Trump in 2016 have seen little business or job growth in recent years. In fact, nearly half of these rural counties have seen businesses and jobs disappear since they voted for Trump. Their continued plight under his presidency provides the Democratic nominee an opportunity to win over parts of the country that flocked to Trump. If the nominee succeeds, the 2020 election could push back against the disconcerting friendship between economic and political polarization fused in 2016.
Rural voices within the party — from President Barack Obama’s secretary of Agriculture, Tom Vilsack, to Representative Cheri Bustos of Illinois, who hails from a congressional district that voted for Trump — have urged Democratic candidates to expand their geographic reach beyond the party’s urban base.
But Democratic candidates don’t have a comprehensive plan to match the scale of economic pain felt in small-town and rural America.
The current 2020 frontrunners — Biden, Warren and Bernie Sanders — have all put forward proposals to ensure access to reliable, high-speed broadband in rural America as well as improve access to capital for rural entrepreneurs. Such programs represent a welcome change from the status quo, but they deliver only the basic inputs needed for any place to survive without promising to turn around declining local and regional economies.
“We’ve typically emphasized investment in hard infrastructure and expansion of services. These are necessary but not sufficient,” says Katharine Ferguson, director of regional and rural development initiatives at The Aspen Institute.
It’s not that Democratic candidates aren’t interested in proposals to alter the trajectory of distressed rural communities. Rather, an underinvestment in research and institutions focused on studying and developing proposals to tackle place-based inequality means that big ideas to help boost local and regional economies are not “baked and ready, tried and true when policymakers and political candidates need them,” Ferguson says.
The problem of rising regional inequality was not taken up because for a long time it wasn’t perceived to be a problem. In papers published in the early 1990s, Harvard economist Robert Barro argued that the economic performance of U.S. states was converging. In fact, his work at the time found that among states, “poor economies tend[ed] to grow faster than rich ones.”
For decades, a similar trend played out in country’s cities as the wage gap between poorer and richer urban areas shrank. And smaller communities, for their part, once led the national economy out from recession to recovery. This is no longer the case. The gains from the most recent economic recovery were concentrated in America’s largest cities while the historical trend of economic convergence between places has reversed.
While much of the country once benefited from a steady flow of investment and human capital that reached a greater number and variety of communities, today, just a handful of the nation’s largest cities are thriving while a significant portion of the country languishes. “Superstar” metro areas with populations over 1 million — such as San Francisco, New York and Boston — have accounted for 72 percent of the nation’s employment growth since the financial crisis. In small towns with populations under 50,000, employment levels remain below what they were before the Great Recession.
What explains the shift? The “knowledge economy” — with its increased economic rewards lavished onto highly educated, highly skilled workers and firms that generate ideas rather than stuff — has concentrated talent and investment in just a few big cities. In these hubs, “knowledge” workers earn the highest salaries and the firms they work for are their most innovative and productive, creating a self-perpetuating “winner-take-all” dynamic where the most successful places pull further ahead while everywhere else falls further behind.
But when local and regional economies stopped growing together and began growing apart, the response was either unhelpful or harmful.
Many economists argued that Americans stuck in declining communities should simply pack up and move to prosperous cities. But this line of thinking sounded patronizing to those attached to their local communities, and for many, abandoning their hometowns and leaving behind networks that could help an unemployed worker land a job or a new parent rely on family members for free child care didn’t make sense either. And for less educated Americans today, the idea that they should “move to opportunity” no longer holds as the economic advantages of working in densely populated labor markets have eroded for them. MIT labor economist David Autor finds that the relatively higher wages noncollege workers once found in urban areas have largely disappeared.
While economists failed to reckon with the growing economic disparities between places, Washington began to push a deregulatory agenda that exacerbated them. Airline deregulation reduced the number of airlines and routes servicing smaller communities. Lax antitrust enforcement enabled big box stores like Walmart to wipe out main streets across the country. And when new technologies — such as broadband — were introduced, lawmakers did not intervene to ensure all places would benefit in the same way that the Rural Electrification Act brought electricity to every corner of the country.
Unfortunately, for those interested in pushing back against today’s troubling winner-take-all dynamic, there are few successful models tried outside the U.S. they can embrace.
One of the boldest experiments in place-based policies — the European Union’s Cohesion Fund, which accounts for a third of the EU’s budget — has not produced its desired outcome. The EU has spent nearly $1 trillion on “cohesion funding” since the bloc’s founding. But money meant to reduce poverty and improve the economic performance of new member states has gone to funding the construction of thousands of miles of cycling trails, highways and bridges, costly infrastructure projects that have not necessarily delivered an economic boon for the continent’s lagging regions. While the fund may represent the level of commitment needed to tackle rising regional inequality, extensive investment has brought neither economic nor political cohesion. In fact, anti-EU populist insurgents have found their primary political support in the “left-behind” places that have received the largest subsidies from the EU.
In Lapy, Poland, where cohesion funding has gone into renovating a local kindergarten, improving the town’s sewage system and paving roads, locals have voted enthusiastically for the nationalist, far-right Law and Justice party. For those interested in adopting place-based policies in the U.S., the EU’s experiment provides a note of caution.
But Europe’s massive policy experiment is not a reason to dismiss place-based policies in the U.S. “The EU experience has flaws but it also should prod us to recognize that major actors in Europe have long recognized the gravity of the problem and been willing to act at scale,” says Mark Muro, a senior fellow at the Brookings Institution’s Metropolitan Policy Program.
Many are now thinking through what such a meaningful public response to regional inequality might look like.
Muro is currently developing a proposal along with Robert Atkinson from the Information Technology and Innovation Foundation and Jacob Whiton of Brookings urging the federal government to launch a set of major investments in select heartland metros aimed at accelerating their emergence as tech hubs, with benefits for nearby small-town and rural communities.
A 100 percent federal tax on incentives and subsidies directed toward a single employer — like those offered to Amazon by cities and towns that could barely afford them — could finance a “Main Street Fund” to support economic development programs that will actually revitalize local economies. A hiring tax credit for economically distressed areas would give employers an incentive to expand opportunities in areas of high unemployment.
Even something as simple as evaluating the impact of people-based policies on places can help inform efforts to address regional inequality. While the earned-income and child-care tax credits, for instance, benefit all places, they benefit left-behind communities in particular by helping to level the playing field between places. Democratic candidates could vow that their administrations will measure the gains that accrue to local communities and regions as the result of existing and future universal programs.
There may not be a consensus on a transformative approach to addressing regional inequality, but a growing chorus now understands the severity of the problem and calls on policymakers to solve it.
The conversation on adopting place-based policies in the United States, however, is in its nascent stages, leaving Democratic candidates poorly positioned to call for the kinds of bold, expensive experiments needed to push back against the alarming regional inequality the winner-take-all knowledge economy has produced. But in the meantime, Democratic presidential candidates can build the political will needed to support such proposals in the future by rejecting the temptation to mobilize and speak exclusively to their urban base.
The Democratic Party’s historic hold on urban areas means it now represents highly compensated “knowledge economy” professionals concentrated in the nation’s glossiest metros. “No one has quite grasped yet that the Democratic Party’s base is increasingly high income,” observes Jonathan Rodden, author of Why Cities Lose and director of the Spatial Social Science Lab at Stanford University. This reality is one that Hillary Clinton embraced in the wake of her 2016 defeat when she remarked, “I won the places that represent two-thirds of America’s gross domestic product,” but it is a reality Democratic candidates running in 2020 should find troubling. The party prides itself on being attuned to rising inequality between people — and actually won the voters with the lowest incomes in 2016 — but it has so far struggled to extend this concern to rising inequality between places.
No doubt, breaching the urban-rural divide to make cross-regional appeals will be hard work given the economic and political polarization pulling the country’s urban and rural communities apart. Democrats can begin by making the case that economic growth that is more geographically inclusive will promote the welfare of the entire country and not just the places that have been “left behind.” Kenan Fikri, who directs research and policy development at the Economic Innovation Group, a public policy organization focused on geographic inequality, finds that “the fastest way to increase the nation’s GDP growth is to help underperforming places.” This can help voters “embrace the idea that we’re all in this together,” he says.
As evidenced by Trump’s Twitter attacks on Baltimore, entering the battle between two warring geographies might prove politically expedient. But, if Democratic candidates can expand their geographic appeal, they will put themselves in a position to speak to a greater number of Americans in a greater number of places. As Ferguson, of The Aspen Institute, notes, “the president—regardless of who that is—must govern the entire country, not just a portion of it.”
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