A Roadmap to Revitalizing Rural America

The Pitch: Economic Update for March 30th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

I wanted to call your attention to a new piece by Civic Ventures founder Nick Hanauer in the American Prospect with the provocative title “Democrats Need to Fix Rural Economies — and Get the Credit for It.” Nick points out that rural American communities have for decades had their wealth extracted while our cities boomed. Pretty much anyone with eyes has seen the hollowing-out of American rural counties. When I visit the area where I grew up in rural Wisconsin, the atrophy is impossible to miss: the opportunities and vitality that we used to take for granted when I was a kid seems to be disappearing — along with the hope for a better future that accompanied it.

In the piece, Nick unveils some startling data that I hadn’t seen up until now, including the fact that “the U.S. workforce grew by 68 percent since 1975 while rural employment actually shrank by nearly a third,” and the statistic that in the years between 2007 and 2018, just “11 percent of counties captured 9 out of every 10 new jobs.” Democrats haven’t only been bad about offering solutions to this rural decay — they have failed at comprehending the problem at all. Democratic candidates in the last two decades or so would gesture toward policies that benefit farmers when asked about rural issues, but the truth is that agriculture is only a tiny portion of the rural economy, affecting less than a tenth of rural populations. Republican leaders, too, were often the first in a state to acknowledge the opioid crisis that has ravaged small towns — even as they exacerbated the problem by promoting economic policies that airlifted wealth away from rural America, suppressing wages and favoring enormous corporate agricultural firms and retailers over small businesses.

Nick suggests that the Biden Administration should appoint a director of rural economic revitalization, and he offers plenty of policy prescriptions for that director to adopt, so you should read the piece in full to get the whole picture. But I’m especially interested in his suggestion that the government should prioritize rural areas for “anchor institutions like public hospitals, libraries, research centers — and most famously, land-grant universities and their extension programs.” Corporations increasingly choose major hubs for their headquarters because cities are by definition more efficient when it comes to distribution, large employee pools, and the allocation of resources. But one of government’s most underrated superpowers is the fact that it doesn’t have to be ruthlessly efficient — it’s strategically sound to spend a little more money to open a research facility outside of a major city, because that facility represents an investment in an area that needs the kind of long-term economic support that only government can provide. Government is always at its best when it strategizes, operates, and behaves like a government, not a profit-seeking corporation.

The Latest Economic News and Updates

The high cost of being a woman in America

March 15th marked this year’s Equal Pay Day — the day on which American women finally have earned as much as their male counterparts did the year before. It’s a complicated idea, so I’ll restate: It takes almost 15 months for the average American woman to earn as much as the average American man earns in 12 months. This is a fact that should enrage every American — not just women. Elise Gould at EPI writes that, “Women were paid 22.1% less on average than men in 2021, after controlling for race and ethnicity, education, age, and geographic division.” That gap declined at a fast pace from the late seventies to 1994, when the gender pay gap seemingly froze in place:

This remarkably consistent freeze seems to pinpoint the year that America stopped committing itself to creating gender equality in the workplace. The stubborn pay gap that persists is likely due to a lack of paid maternity leave, paid family leave, and other policies that every major nation but America has embraced over the last 50 or so years. The Center for American Progress estimates that women lose about $9 billion a year in wages due to our national lack of paid family and maternity leave. That’s billions in economic activity that we don’t see in our communities every year — investments that would otherwise lift up families and improve conditions for children. It’s a regressive system that hurts us all economically.

Part of the problem is that jobs that have traditionally been considered to be “women’s work” are treated as low-paying callings performed out of passion, not highly compensated professions. There’s a sexist assumption, too, that women aren’t the breadwinners of a household, and that assumption justifies the low pay in industries like teaching and carework. These institutional prejudices are relics of a dark and unfair past, and they’re difficult to overcome without regulations and laws in place to level the playing field.

And the inequality doesn’t end at wages. CAP also explores the hidden costs that women pay due to gender inequality. Women save less for retirement on average than men do, they pay more for health care costs than men do, and they pay a “pink tax” in which corporations charge more for razors, hygiene products, and other commodities marketed for women. Further, women are the prime targets for predatory lenders, and they pay more for loans across the board.

Specifically, The Nation’s Vivek Kakar writes that “women hold over two-thirds of America’s trillion-dollar student debt,” which means that American women will experience a lion’s share of the impact if the student loan payment moratorium ends as planned on May 1st of this year.

And when you see the costs of the gender wage gap added up over the course of a lifetime for white women, Black women, and Latina women, you really begin to understand the importance of finally closing that gap once and for all.

The job market is still tipped in favor of workers

If you were concerned that inflation would dampen America’s bustling labor market, the latest Bureau of Labor Statistics data should ease your anxiety: The Washington Post’s Abha Bhattarai and Andrew Van Dam report that 4.4 million American workers quit or changed their jobs in February. Turnover is still very high and employers reported more than 11 million job openings, which means the Great Reassessment is continuing.

In short, it’s a workers’ market. If you’re an American worker who’s not happy at your job, odds are good that some other employer is desperate for help and offering more money than you’re making right now. The Post reports that workers who switch jobs are making considerably more than their peers who stay where they are:

The Post also reports that unemployment is currently at the bottom of American economic concerns, with inflation dominating the list of concerns. It’s because of those high prices that, despite the generationally strong job market, three-quarters of Americans now say the economy is getting worse.

We can still do more to empower workers

While we’re talking about jobs, I also wanted to highlight several interesting recent pieces exploring policies that benefit workers:

• Raymond Kleunder crunched the numbers in states that ended pandemic-era federal unemployment payments early, and he found that cutting jobless aid isn’t the answer to worker shortages. Cutting unemployment payments early forced a small number of workers back into the workforce, but it also drained the economy of a huge amount of consumer spending: “Earnings generated by the 1.1 million new jobs that were created in early-withdrawal states totaled roughly $900 million. Yet some 3 million workers lost $7.6 billion in benefits — cash that no longer flowed into state economies,” writes Rachel Layne at Harvard Business School.
• Ron Hira, Daniel Costa, and Hal Saltzman at Jacobin note that President Biden can fix the H-1B immigration visa system on his own. As it is, the system is a lottery that welcomes a small number of immigrant workers into the United States and locks them into exploitative working conditions. The authors propose that Biden follow through on his campaign promises to reform the system by raising wages for H-1B workers so they match their American counterparts, investigating the wage theft that plagues the workers, and eliminating the lottery aspect of the visa system so that skilled workers can compete for jobs, the same way American citizens do.
• Justin Wiltshire published an issues brief exploring how policymakers can curb Walmart’s monopsonist power, which allows the corporation to lower wages across the retail sector and depress competition in areas where they open Supercenters. Unsurprisingly, Wiltshire finds that minimum-wage laws and policies which make it easier to collectively bargain would be among the most effective ways to bring Walmart to heel.
• Even though I’m not a Californian, I appreciated Capital and Main’s conversation with CA legislator María Elena Durazo, who discusses how lawmakers are making California a better place for workers in general, and undocumented workers in specific. It’s a great wonky policy conversation, and Durazo also gets some nice hits on the California Chamber of Commerce’s befuddling trickle-down argument that a law which allows workers to leave the workplace without penalty during crises like earthquakes, mass shootings, or wildfires is somehow a job killer.

What’s in President Biden’s Budget?

This week, President Biden issued his 2023 budget, and reporters have already found some surprises while scouring the details. In addition to a proposed wealth tax — which we’ll talk more about soon — and higher taxes on corporations, Biden proposes increases on military and law enforcement spending and he establishes some revenue to pay for programs that were originally proposed as part of the Build Back Better legislation. It also aims to reduce the deficit by a trillion dollars over the next decade, which seems aimed directly at assuaging Senator Joe Manchin’s deficit fears.

Some of the other significant increases in spending include for the Commerce Department, with the specific intent of ending supply chain woes that have increased inflation, and for the Department of Veterans Affairs to shore up “VA medical care, health-care training programs, suicide prevention and mental health services.” This graphic from the Washington Post helps show where Biden’s biggest budgetary priorities really are:

There’s a lot to parse in this budget, and no doubt we’ll be seeing stories digging into the document over the next few weeks. But for The New Republic, Abdul El-Sayed (who guest-starred in an excellent episode of the Pitchfork Economics podcast) explains the real challenge that President Biden and Democrats will have to surmount if they want the American people to vote for them in 2022 and 2024: What he calls “the Epidemic of Insecurity.”

“Insecurity offers a unifying frame for how each of our ongoing crises — the pandemic, inflation, the war, schools, racial injustice — compound on one another in people’s lives,” El-Sayed writes. It’s as good a frame as any to describe the overlapping crises that our nation is facing, and it’s probably the central concern that will decide the midterms.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this week, we’ll be sifting through President Biden’s budget, talking about the proposed wealth tax that would target the wealthiest .001 percent of Americans, examining the latest numbers showing a strong market for workers, and talking about the policies that would most help American workers continue that momentum to gain back some of the power — and money — that they’ve lost over the last few decades. Join us at 10:30 am (Seattle time) this Friday.
• On this week’s Pitchfork Economics podcast, economist Dean Baker joins Nick and Goldy to talk about what the federal minimum wage would be had worker pay marched in lock step with productivity, as it did when the American economy was at its strongest. The number Baker lands at is way more than $15 — take a guess before you listen and see if you can predict the true cost of labor in America today.
• In his Business Insider column, Paul talks about why the Federal Reserve’s recent move to raise interest rates is based on a 1970s understanding of inflation and doesn’t reflect the dual causes of our current inflationary crisis — supply chain woes and unchained corporate greed.

Closing Thoughts

It got lost in the media frenzy over President Biden’s comments on Vladimir Putin, but in their 2023 budget the Biden Administration proposed a tax that actually addresses the way America’s wealthiest people make money. The Roosevelt Institute praised the tax, which would require people with over $100,000,000 in wealth — that’s the top .001 percent — to pay 20 percent on their income and in unrealized capital gains.

Roosevelt also praised an underreported part of the Biden Administration’s proposal: It specifically targeted the profits earned by stock buybacks, which transfer tens of billions in corporate profits directly to shareholders and executives every year, by “calling for a three-year freeze on executives selling their shares after a share repurchase, and a buyback excise tax.” Of course, Senator Joe Manchin almost immediately said he wouldn’t support such a tax, and Timothy Noah at The New Republic was quick to throw shade on proposal, dismissing it as “not a real revenue proposal; it’s a campaign document for the midterms.”

With all due respect to Noah, this cynical framing fails to recognize the importance of the moment. Unless you’re at or nearing 100 years of age, at no point in your lifetime has an American president proposed a tax like this — one which recognizes the reality of how the modern super-rich actually accumulate their wealth, and which seriously proposes ways to ensure that wealthy people pay at least as much of their wealth as the rest of us.

Given the current conditions of Washington DC right now, it’s definitely unlikely that such a tax would ever pass through Congress. But polling indicates that the American people are fed up with growing income inequality and they’re warming up to taxes on the wealthy as a tool to recapture some of that wealth that has been funneled away from the working class. Plenty of presidential candidates have proposed ideas like this, but when the President of the United States endorses a tax on the wealthy, that tax crosses over from a wild idea into the realm of the possible. So, no — President Biden will not be signing a tax on the super-rich into law anytime soon. But this is how you transform big ideas into actionable policy in politics: You chart out a destination and you hope that your plans capture enough of the public’s imagination that one day a new generation of leaders will complete the journey that you started. Personally, I think this is a journey well worth taking. How about you?

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach