April 30, 2010
National Journal reports [$] that the administration wants more rural development programs in the next farm bill. Responding to congressional criticism that the administration isn’t sufficiently attuned to rural America’s needs, USDA secretary Tom Vilsack said that subsidizing biofuel facilities and high speed Internet service are “about a renaissance of the rural community.”
Ironically, a new report on broadband competition finds that rural states tend to have more service options. The Reason Foundation’s Steven Titch points out that the study “seriously challenges the oft-repeated claim of market failure in rural broadband.” Nonetheless, the president’s stimulus package contained almost $8 billion in broadband grants that will subsidize service in areas that already have access.
There are no good economic arguments for the federal government to subsidize Internet access for certain areas of the country. Technology markets have shown again and again that prices of new products fall due to competition and innovation and products become ever more widely available. There is no “market failure” here.
Besides, federal taxpayers in Chicago shouldn’t be taxed to pay for a community in South Dakota to get better broadband service. Americans are highly mobile—they choose where they want to live and each place has various pros and cons. One chooses to live in a rural area where internet service might be weak or nonexistent, and with that choice comes the responsibility to pay for one’s own wants and needs.
Rural areas don’t suffer from a lack of government subsidies. It’s the opposite. A Cato essay on rural subsides cites a study that found almost 1,400 federal programs that serve rural America. Everything from rural electricity and housing to seldom-used airports are activities that taxpayers across the country are forced to subsidize through the federal government.
Vilsack thinks more subsidy programs are needed for rural economic development, but the opposite can be true as a study on farm subsidies by the Federal Reserve Bank of Kansas found:
Job gains are weak and population growth is actually negative in most of the counties where farm payments are the biggest share of income.Job growth is decidedly weak in the counties most dependent on farm payments. The vast majority of such counties (483) had job gains below the 19 percent national average from 1992 to 2002. A considerable number (167) had outright job losses over the period.In short, farm payments are not yielding robust economic and population gains in the counties where they should have the greatest impact. If anything, the payments appear to be linked with sub par economic and population growth. To be sure, this quick comparison cannot answer whether growth would have been even weaker in the absence of the payments. Still, farm payments appear to create dependency on even more payments, not new engines of growth.
Rural subsidies don’t foster economic growth. All they do is redistribute wealth from one group of people to another with the middle man (Washington) becoming wealthy in the process.
The availability of “free” money from Washington induces local officials to waste time and taxpayer money lobbying federal policymakers for a slice of the pie. It also enables local officials to ignore their own growth-inhibiting policies.
Local officials should use their energies to pursue pro-growth policies such as tax reform and a friendly regulatory environment. Communities with such policies are more likely to attract the private capital and investment that fosters economic growth.