Political Thoughts – Rural Revival

The economy is, by most measures, continually improving. The real GDP has seen quarterly increases for the past 2 years (http://bea.gov/newsreleases/glance.htm), new jobless claims are at a 42 year low (http://www.bloomberg.com/news/articles/2016-10-13/jobless-claims-at-42-year-low-as-u-s-employers-shun-firings), and the Dow Jones has increased year over year continuously since 2008 (http://money.cnn.com/data/markets/dow/). But, when surveyed, Americans think the economy is the number one problem facing our country (http://www.gallup.com/poll/1675/most-important-problem.aspx). What’s with the discrepancy?

There are a few explanations that include mixed messaging from government leaders (the challenging party, in this case the GOP, is always going to say the economy is a problem, because the incumbent party tends to lose when this is the case). However, there are plenty of people that are actually struggling with bills. Their struggles are real, no matter what the numbers about the economy say.

Low wage jobs

Unemployment rates only report on the people that aren’t working. However, they don’t account for the Americans that earn less than a living wage. In 2014, the National Employment Law Project found 42% of all workers earned less than $15 / hour (http://fortune.com/2015/04/13/who-makes-15-per-hour/). Lifelong jobs in manufacturing have been replaced by minimum wage jobs at fast food restaurants or Wal-Mart. That’s why people are so quick to flock to Donald Trump and his message that he’ll bring manufacturing jobs back to America. But before we dig into that… a story:

For years, the message to Americans has been “Work hard and pull yourselves up by your bootstraps and you can do and have anything you want.” And now the voters are realizing that they did work hard and they aren’t any better off than they were twenty years ago. During the Reagan, Bush Sr, and Clinton presidencies they were in a good place. Middle class Americans had homes in the suburbs and two cars and weeklong vacations once a year. A lot of the middle class didn’t save for retirement, because they didn’t see the need. Why save when you can sell your house for exponentially more than you paid for it and live comfortably off those profits? But then something happened. Houses stopped growing in value the way they always had. A number of Americans can’t even afford a house to begin with. And people started getting, justifiably, scared. As our population gets older (http://www.denverpost.com/2015/10/08/chart-compare-the-average-age-in-each-u-s-state-2005-2014/) and when faced with the reality of no retirement savings, our population gets scared. But remember those good ol’ days?

Anyway, it’s tempting to believe that manufacturing jobs will bring us back to those good ol’ days. But the very harsh reality of it is: They’re not coming back.

Ever.

It’s not even a matter of losing those jobs to China. We’re actually producing at a higher rate than ever before but with less workers (http://fivethirtyeight.com/features/manufacturing-jobs-are-never-coming-back/).

Blame automation. Robots are taking the jobs that were previously held by people. And it’s not going to stop at manufacturing. Video stores went out of business when RedBox and Netflix offered the same product without having to pay for staff or real estate. Stores are hiring less cashiers thanks to U-Scan. Automated tellers and mobile banking are removing the need for bank staff. Truck drivers, all of them, are going to lose their jobs in the near future as self-driving trucks do the same job safer and significantly cheaper (http://www.businessinsider.com/why-driverless-trucks-will-come-before-self-driving-cars-2016-9). Taxi drivers, pilots, accountants, laborers… you name it and we’re going to be replaced by robots.

Ultimately this is a good thing. When the age of a scarcity economy has ended, we’ll be able to focus on more scientific and cultural pursuits. It will be a new age of enlightenment. But, that’s still a ways off and we need to focus on the now.

Why Rural?

In early October, I took a drive through Michigan. All the way up and across the Upper Peninsula and through Wisconsin. And do you know what I saw? Besides the amazing vistas of the lakes and the changing leaves? I saw abandoned buildings. Rotting motels with plywood over the windows. Store after store with Out of Business signs. Ghost towns with a gas station and little else.

While the economy gets better in the cities, these rural towns are suffering. Blame the shift to a service economy. It’s harder to make a living serving when there aren’t as many people to serve.

The Candidates’ Plans

Trump’s plans for revitalizing the rural sector has been: Bringing back manufacturing jobs and deporting illegal immigrants.

There are a number of great articles about Trump’s plan to deport illegal immigrants.
http://www.bloomberg.com/news/articles/2015-08-18/here-s-what-the-u-s-economy-would-look-like-if-trump-deported-undocumented-immigrants
http://www.businessinsider.com/cost-deporting-undocumented-immigrants-study-2016-5
http://www.cnbc.com/2015/08/17/deporting-undocumented-workers-would-be-very-costly.html
https://www.washingtonpost.com/opinions/donald-trumps-immigration-plan-would-wreck-havoc-on-us-society/2015/08/17/19703368-451d-11e5-8ab4-c73967a143d3_story.html

The gist of all of them? Deporting illegals will cost a prohibitive amount and will actually hurt the economy more than help.

What about manufacturing jobs? Here’s Trump saying he’ll force Apple to make iPhones in the US:
https://www.cnet.com/news/trump-says-hell-force-apple-to-manufacture-in-the-us/
The problem with that? Apple iPhones are currently made by FoxConn. The same FoxConn that installed netting around the building because so many workers were committing suicide: https://en.wikipedia.org/wiki/Foxconn_suicides. The same FoxConn that pays its workers less than $3 an hour. CNet did an analysis on this proposal and found that, if Trump were to succeed in bringing iPhone production to the US, the price of iPhones would rise dramatically (https://www.cnet.com/news/if-donald-trump-had-his-way-your-iphone-would-be-insanely-pricey/).

Besides Apple, as I’ve already illustrated, manufacturing jobs are simply not a viable long-term solution.

Hillary Clinton

Hillary’s plan for Rural Revitalization is very well documented: https://www.hillaryclinton.com/briefing/factsheets/2015/08/26/vibrant-rural-america/

There are a couple of points that I think are well worth diving into. I’ll start with Section 4: Expanding opportunity in rural communities across America. Her plan focuses on ensuring that the rural population has access to the same opportunities that people get in the cities. She focuses a lot on education and that’s important. As jobs increasingly require a college degree, it’s very important that everyone has access to that level of education. Rural areas fall far behind metropolitan areas when it comes to higher education completion rates, and this has to change if we want everyone to have access to those same levels of opportunities (http://www.ers.usda.gov/amber-waves/2014-december/rural-areas-lag-urban-areas-in-college-completion.aspx). Clinton’s plan is to increase access to on-line learning which is essential as many rural areas are too far from colleges and universities to provide meaningful access.

Hillary also emphasizes need for better substance abuse prevention and treatment. Drug abuse is a huge problem in small town America (http://claad.org/wp-content/uploads/2013/11/AMEPRE_3905-stamped-111213.pdf). While I believe that substance abuse is a lagging indicator of economic conditions and as such will be improved by virtue of improving rural economy, it’s essential to have a plan in place to help cure the current state. I can’t find her plan on this issue to judge it, but I’m willing to give her credit for at least making it a talking point. Rural drug use is an issue that I feel goes without discussion far too often in our debates (which tend to focus more on metropolitan drug use).

In Section 3: Promoting clean energy leadership and collaborative stewardship, Hillary lays out her plan to promote clean energy. I think this is important for two reasons: First, traditional rural jobs like coal mining and working in oil fields are drying up (http://www.eia.gov/coal/annual/). Massive infrastructure projects like clean energy let us create jobs for those workers while at the same time promoting a healthier environment. That healthier environment part is important. Our country has ample natural beauty that we need to take care to preserve, for ourselves and for driving our tourism industry (both foreign and domestic).

In Section 1: Spurring investment to power the rural economy, Clinton touches on the importance of small and medium sized businesses. It’s an odd feeling when you realize that it’s much easier to have a viable mom and pop store in a big city than in the country, despite the vision of small towns being more quaint and old fashioned. But it’s true and a lot of it has to do with opportunity and competition. Simply put, there isn’t enough opportunity in the rural areas for a small business to do well. A mom and pop store in the country can’t compete with Wal-Mart. There simply aren’t enough customers. Expanding access to equity capital and improving the market for community banks helps, but I don’t think Clinton goes far enough here. If anything, I believe the government should subsidize small business in rural areas. It might sound un-capitalistic, but I think it can be justified by understanding that: It’s not going to hurt Wal-Mart and other big box stores since they won’t be losing any significant amount of customers, it improves the overall economy by adding more wage earners, and there’s significant cultural benefit. In fact, I believe that it would increase tourism to the small towns of America, which even further helps improve those small town economies.

My Conclusions

I’ve often criticized Clinton for being too moderate, and I will continue to do so here. Her plan makes efforts to improving the economy of rural and small town America, but it does so in half measures. A true revitalization will require more radical and creative thinking. I have my own thoughts on the matter that I’ll be sharing in a later essay. But, despite that, her plan is significantly better and more tenable than Trump’s. His plan is predicated on the myth of manufacturing jobs returning and the evidence shows that it’s just not going to happen. Hillary’s plan makes real efforts to improve the rural economy using more realistic plans.

Hillary Clinton’s plans are better for small town America.

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