The Subsidization of Rural Life

Wil Truman’s blog entry about rural medicine and Russell Saunders’ subsequent comment about “the need to subsidize medical care in rural and underserved communities” led me to wonder whether the U.S. has too large a rural population due to such subsidies. Then I read a student paper writing about whether the U.S. Post Office should be privatized, and the only justification he found for keeping it as a government operation was to ensure mail delivery to rural areas, which he recognizes is subsidized by other users of the USPS. And that has me thinking further…

Clearly we subsidized rural life with the Rural Electrification Act, and we subsidize it by paving lightly traveled roads (although there are also many rural roads that are just dirt or gravel). So how much do we subsidize rural life in total, and is that a bad public policy because it improperly obscures the real cost or rural life? Should urban residents be asked to subsidize rural living?

But conversely, what kind of subsidies exist to support urban life? Are rural residents effectively subsidizing urban living in some ways?

Any thoughts on this, folks?

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About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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15 Responses to The Subsidization of Rural Life

  1. D. C. Sessions says:

    A clue on this is the relative tax flow comparison between predominantly rural red states and predominantly urban blue states: the blue states in general pay more in federal taxes than the Federal government spends in them, and the opposite is true for the red states.

    A similar comparison within states might be interesting, although there are some obvious methodological landmines such as infrastructure spending in rural areas which primarily serve urban ones.

    To your larger point, one might argue that rural-area subsidies are effectively subsidies to urban food prices.

    On the other hand, rural residents don’t necessarily benefit from some of the money spent on their areas nearly as much as urban residents who use them as vacation properties — and thus drive up rural prices beyond the reach of the people who live there year-round.

  2. Here is one guess, but I would need more evidence before I go out on a limb and claim it as true:

    In Chicago, at least, I have heard the claim that the mass transit is subsidized to a large degree by county dollars. If that claim is true, then it means suburban (although not necessarily rural) folk are subsidizing the urban area. Even if it is true, however, one would also have to point out that the suburbs have their own mass transit, which is affiliated in some ways with the Chicago Transit Authority, and that a large number of suburbanites depend to some degree on the Chicago based mass-transit.

  3. trumwill says:

    Pierre beat me to it. Urban transit receives federal subsidies on things, such as rail, that don’t apply as much to rural areas.

    With regard to DC Secession’s comment, while it is generally true that rural states are going to be pulling in more than they take out, I always have to point out the donor/beneficiary map can be quite misleading. Having said, that, I thought DC’s comment was exceedingly fair-minded. I would add to it that a fair amount of rural state spending is actually on stuff and federal government priorities rather than specifically for the benefit of residents (for instance, geological studies in the Grand Teton).

  4. trumwill says:

    Oops, sorry for getting your name wrong, DCS.

  5. D. C. Sessions says:

    More funny than anything — after all, the Session side of the family is Southern, so we’re familiar with the rule of “If at first you don’t secede, “

  6. James Hanley says:

    How much of the urban/suburban (and perhaps its crucial to distinguish between those?) subsidization is subsidization by the urban folks themselves? There’s no doubt that things like mass transit are subsidized, but what’s the net in transfers between urban and rural?

    (And are urban Chicagoans, suburban Chicagoans, or rural Illinoisans/Indianans most on the hook for subsidizing suburban rail lines to the city, like the Metra and the South Shore Line?)

  7. trumwill says:

    James, I think a lot of it is, but not all. I know that in Colosse (the large southern city where I hail from) the federal funding for light rail is considered a big deal. The Republicans who oppose rail are derided for leaving federal dollars on the table by opposing it. The Democrats who support it tout it as bringing federal dollars into the city. I think it’s matching funds, and if I am right about that, it means 50% local and 50% federal. Now, most of that federal is going to come from other cities (if we don’t distinguish between urban/suburban) as that’s where most people live and most tax dollars are paid. However, it’s still all a common pot and if we do disentangle suburbs and urbs, a lot of that money is going to be coming from suburbanites, nation-wide.

    Now, if we want to talk about net transfers, then ultimately it doesn’t matter whether the money is being spent on urban-specific and rural-specific things. It only matters what we count and how much is put into the pot from which everything is taken. Given the increased costs of offering the same services to rural residents as to urban (mail, electricity, roads, etc.), and given the lower wages, I think it’s generally fair to assume that either (a) urban/suburban subsidizes rural or (b) both urban/suburban and rural are donors to other projects, but the former moreso than the latter.

    Separating urban and suburban is difficult. There is so much interaction between the two. For example, a lot of people believe that commuter interstates are suburban subsidies. This may be so, but it may instead be the case that without these subsidies the businesses would relocate out of the cities and so rather than subsidizing suburban employees it is subsidizing urban employers.

  8. D. C. Sessions says:

    For example, a lot of people believe that commuter interstates are suburban subsidies. This may be so, but it may instead be the case that without these subsidies the businesses would relocate out of the cities and so rather than subsidizing suburban employees it is subsidizing urban employers.

    I’m having a hard time imagining Countrywide moving their huge office center in Chandler out to Quartzite if there weren’t freeways. For a long time before freeways we had businesses locate labor-intensive operations in cities because … that’s where the labor is.

    In contrast, living in Arizona provides constant examples of bedroom communities springing up alongside any chunk of highway leading to Phoenix, but no large businesses following. I mean, Maricopa? For crying out loud, Maricopa? And Anthem isn’t much better.

    Back to point: the money for major roads across the desert between Los Angeles and Los Vegas was overwhelmingly spent in rural areas. I don’t think anyone would count those roads as a subsidy for the people living along their routes. Look at the traffic on the Grapevine and tell me whether that traffic is dependent more on business conditions in Los Angeles County or in Antelope Valley. That, I propose, is a key test of the beneficiary of that infrastructure.

    These issues are not trivial, because economic relationships are so interconnected. As noted above, reductions in the cost of rural living show up in lower costs for commodities throughout the economy, be they grown, mined, or crafted.

  9. trumwill says:

    DC,

    For a long time before freeways we had businesses locate labor-intensive operations in cities because … that’s where the labor is.

    Now, though, the labor is in the suburbs. Which is why I think the business would follow them out. If you want to make the case that the labor wouldn’t be in the suburbs if it were not for Interstate system, I’d largely agree (or, at least, I’d agree that the suburbs would be way different than they are now and more of an outgrowth of the city and less of their own thing). But whereas once the urban Interstates were subsidizing the suburbs, I think now it is at least arguably the other way around.

    I can’t speak for Maricopa, but employers have been following employees out of town in Colosse forever. The only major suburban area without as much in the way of employers has experienced really rapid growth in the last ten years or so (I remember driving through it and saying “these fields can’t last”… and they didn’t) and the employers haven’t caught up.

  10. Matty says:

    If people have moved to the suburbs so they don’t have to live next to the noisy, smelly factory they work in, aren’t they going to move again if that factory follows them out?

  11. Trumwill says:

    Matty, it’s a problem if it’s a chemical plant or something. I used to work in an industrial park. Immediately surrounding the area tended to be the blue collar workers (many of whom had to walk to work). It wasn’t hard for white collar folks (the kind that can afford to move due to noise) to get far enough away. With industrial parks, as well as chemical plants, they tend to be concentrated even in sprawling cities. Chemical plants more than industrial parks, I think. But industrial parks have negative externalities that don’t extend as far (or at least mine did).

  12. D. C. Sessions says:

    Now, though, the labor is in the suburbs. Which is why I think the business would follow them out.

    Except by moving to lower-density locations they reduce the available labor pool. That’s not a big deal if the labor pool they want is unskilled, but for skilled work you’re by definition looking at only a fraction of the total population — which often clusters around existing employers (your competitors.) The net result is that the ability to attract the people you want is often maximized by being near the middle of your MSA.

    You can see this at work with major law firms. I don’t know of a single one which has moved its offices out of town to make it easier for the partners to live close to the office while also living in the burbs. Maybe because everyone prefers different burbs or something, not clear.

    I do know that a lot of engineers have learned to live where there are plenty of potential employers — being close to a place you don’t work for any more is not really helpful. So business attracts employees which attracts business which … Pretty soon it’s an employment hub with all the properties of a city even if it didn’t start that way. Anyone besides me remember when San Jose was a sleepy little town that grew a lot of onions? Humans seem to do that.

  13. Troublesome Frog says:

    My wife grew up in San Jose and is now an electrical engineer at Intel. We’re both tech people, so I figured we’d end up living in the valley and spending most of our cash on housing. Her Intel office is in Folsom, though, which way out past Sacramento. Seems that the bigger companies can create their own ecosystems by drawing in the skilled labor. As for major law offices, I suspect that proximity to customers has at least as much to do with it.

    Anyway, I’m consistently amazed by how deeply we Americans have embedded in our psyche the idea that the only True Americans are farmers or ranchers, and that those of us who are not farmers or ranchers should feel bad about it. Politicians play dress up and pretend to be cowboys, pay lip service to “real” rural America, and try to paint each other as being associated with the “out of touch” urban regions that actually contain most of our population. The worst part is that we eat it up. Is it a reflection of our primary system, or is our primary system a reflection of this mental disorder?

  14. James Hanley says:

    D.C.,
    Look at the traffic on the Grapevine and tell me whether that traffic is dependent more on business conditions in Los Angeles County or in Antelope Valley

    Who takes the Grapevine to the Antelope Valley? The 14 is a much more direct route. But your point is well-taken. The 5 goes through more rural territory than you’d think a state of 30 million would have, but its primary purpose is to connect Sacramento and San Francisco to L.A., not to serve Shafter, Wasco and Delano. (Sorry, I’m a former daily commuter across the Grapevine.)

  15. Dr X says:

    No breakdown, but here’s a little history on CTA ownership and funding.

    http://encyclopedia.chicagohistory.org/pages/274.html

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