Bridging The Urban-Rural Divide

With the possible exception of educational attainment, with which it is somewhat related, the urban-rural divide is the defining feature of current American politics. Joe Biden only won 16% of all the counties in the country, just five more than Hillary Clinton in 2016, yet those counties accounted for 70% of GDP.  And, despite Democratic outreach and indications from polls, once again rural America voted overwhelmingly for Trump.

Back in the middle of 2019, things looked a lot more hopeful for Democrats with rural voters. Because of Trump’s trade wars, farm income had plummeted to 15 year lows. The median farm income in 2018 was actually negative $1,500 and farm bankruptcies were surging to levels not seen since 2010 and the fallout of the Great Recession. Trump’s tariff wars had cratered food exports, especially soybean exports to China. Severe flooding, a product of relentless climate change, had reduced plantings of some crops by nearly 50%. Trump’s Agriculture Secretary was telling small dairy farmers to basically either get big or get out of the business. Since 2010, over one hundred rural hospitals had closed and one quarter of the remaining were in danger of going out of business. All of this was reflected in polling at that time, assuming those polls are to be believed, and it gave Democrats real hope they could make inroads with rural voters. In Iowa, for instance, Trump’s net approval was -12; in Indiana and Texas, it was only +3, Nebraska +2, Kansas and North Dakota +1; and in the critical swing states of Michigan and Wisconsin, it was -12 and -13 respectively.

Unfortunately for Democrats, conditions changed rather dramatically in 2020, most of it driven by the Trump administration. Due to higher commodity prices and massive governmental subsides, farm income in 2020 is expected to be the highest since 2013.  However, a full 40% of that income was made up of direct government subsidies to the tune of a record $46.5 billion. Without those subsidies, farm income would have declined again in 2020. In effect, Trump bought off rural voters, something Republicans constantly accuse Democrats of doing with urban Black voters. As one Indiana corn and soybean farmer said about the Trump administration and its massive subsidies, “I feel that we have got the ear of the folks that are making policy decision on the farm side”. In total, since 2018, Trump has provided over $50 billion in emergency farm assistance due to the deleterious effects of his trade war and COVID-19, and that’s in addition to the normal agriculture subsidies and relief approved through the CARES Act. And Trump was able to use his emergency powers to deliver this aid without the authorization of Congress, something that Biden should keep in mind over the next four years.

The obvious danger for Democrats is that these massive subsidies will now end, farm income will again plummet, and Biden will bear the brunt of the blame. But the subsidies have just hidden the structural problems facing rural voters, giving Biden and Democrats a chance to actually convert some rural voters by addressing some of those issues head on. Over the last 70 years, farmers’ share of food income has fallen from 50% to 15%, an all-time low, and the farmers’ loss has primarily become the big agriculture monopolies’ gain. Those monopolies squeeze farmers on both the input and output side. On the input side, just four companies dominate the agricultural seed and chemical market, BASF, Bayer-Monsanto, ChemChina-Syngenta, and Corteva. Together they control 60% of the global seed market and, in the US, those percentages are even higher, controlling 85% of the US corn seed market and 76% of the market in soybean seeds and 70% of the nitrogen fertilizer market. Such monopoly power has led to 300% increases in the seed prices of corn and soybeans since the mid-1990s.

It’s just as bad on the output side. Four mega-firms, Cargill, Archer-Daniels Midland, Bunge, and Louis Dreyfus, actually control close to 90% of the world’s grains trading business. Four poultry processing firms control over 50% of the US market. Four beef processing firms control 85% of the US market. The four largest hog processing firms control over two-thirds of the US market and their large operations have driven over 70% of hog farmers out of business since the 1990s. These monopsonies have driven down prices paid to farmers, so much so that farmers have been driven into contract production, where the monopsonies strictly control how the farmer produces the product while saddling that same farmer with all the risks entailed with production. As the Center for American Progress writes, “the typical contracting arrangement gives the integrator [monopsony] the power to control the type and quantity of stock raised, the pharmaceuticals used, the type of feed used, and the equipment and facilities required. The integrator [monopsony] owns the animals, supplies the required feed, and controls the veterinarian services that the farmers use, while farmers assume debt in order to meet capital investment requirements. The typical contract explicitly assigns legal liability for regulatory compliance and animal fatalities to the farmers”.

Beyond their problems with monopolies, rural voters are badly underserved in other areas. In Wisconsin, 28% of rural areas have no high-speed broadband. Across the country, only about 63% of rural residents have broadband compared to percentages in the mid-to-high 70s for suburban and urban dwellers. The rural hospital crisis has not abated. And as one Wisconsin rural Democratic leader noted, “Our profit-based health care system is failing rural people…In my own county, there are zero ICU beds, even as Covid infection rates surge…Rural people in Wisconsin are dying by suicide at rates higher than folks in suburban and urban parts of the state. This is not just a matter of poor mental health services—many rural counties lack a single practicing psychiatrist”.

All this presents opportunities for Biden and the Democrats, if they can actually deliver. As that Wisconsin Democrat noted, “Rural voters appreciated Obama’s repeated campaign promises to challenge the rise of agribusiness monopolies. But as president, he allowed for the continued consolidation of corporate power in the food system. His Department of Agriculture balked when it came time to enforce anti-monopoly rules such as those in the Packers and Stockyard Act, and failed to enforce Country of Origin Labeling, which would have allowed independent farmers and ranchers to better compete within the consolidated meat industry…Taken together, these moves signaled that his administration did not have the backs of family farmers…The reality, as I saw in my conversations with voters this year, is that many rural people have lost trust in the Democratic Party”.

Democrats can only regain that trust by actually delivering the real change that Obama originally promised. Biden’s nominee for the Secretary of Agriculture, Tom Vilsack, held the same position in the Obama administration. To his credit, using his power under the Packers and Stockyard Act, Vilsack did produce sweeping new rules to restore competition and restrict abusive contracts in the livestock and poultry markets only to have the Obama administration back away from them after the disastrous 2010 election. Vilsack was also sabotaged by the Obama White House in his opposition to genetically modified alfafa. Biden should take what Vilsack had already done but wasn’t able to implement and expand on it. That means extending antitrust scrutiny to all the Big Ag monopolies and monopsonies, not just livestock and poultry, and cracking down on abusive and overly restrictive contracts that only end up reducing the fair prices that farmers should receive for their product. That means looking at new and perhaps even past mergers for their effect not just on consumer prices but on producer prices as well. And if that means forcing some of these Big Ag firms to spin off certain parts of their business, then so be it. Even if some of those antitrust efforts fail in court, as least rural voters will see Democrats fighting for them.

Biden has already made a commitment to universal broadband, promising a $20 billion investment in rural broadband infrastructure. This can be accomplished either under the umbrella of economic relief from the pandemic or a major infrastructure package. If the GOP Senate balks, then Biden’s FCC could look into how it could mandate universal broadband under its statutory obligation to provide universal communication services. As one Democratic member of the FCC has stated, “There was a time, not that long ago, when Washington saw broadband as nice-to-have, not need-to-have. This pandemic has forever changed that”.

Biden has also promised to expand the Pennsylvania Rural Health Model that was created by the ACA. That approach eliminates the traditional fee-for-service model that is economically unsustainable for rural hospitals and replaces it with what’s called a global budget. The rural hospital would receive a guaranteed amount of money based on its past patient volume, services, and revenue. The hope is that such a guaranteed income would not just keep the hospital open but also incentivize the hospital to provide more preventive care in order to reduce the need for expensive emergency or inpatient care, further increasing the hospital’s bottom lime at the same time. In addition, Biden proposes to create a new type of hospital, the Community Outpatient Hospital, which can provide emergency services for rural communities without requiring additional inpatient services, as well as expanding on existing community health centers. Finally, universal broadband for rural residents will allow for expanded telehealth alternatives to rural communities

All of these plans fit well within the progressive playbook – attacking monopoly power, expanding access to healthcare, upgrading American infrastructure. So this is not “moderating” Democratic ideals to win over rural voters. But, as Erik Loomis points out,  “From a progressive policy standpoint, it would absolutely 100% be good policy to fix these problems. We should have universal healthcare. We should have a national broadband initiative to provide everyone with high-speed internet. The problem is that a) these are already positions held by large swaths of the Democratic Party and b) what evidence is there that even if these policies were implemented that these voters would turn back to the Democratic Party?…what is not mentioned at all here is race. Or immigration. Or evangelical religion. Or misogyny. Or homophobia. In other words, none of the cultural factors that have led to Trump’s success. In the end, this is…making it all about the economy when it fact it not all about the economy”.

Indeed, Loomis is probably correct. Democrats are probably never going to win these rural counties anytime soon. But with a US Senate that is weighted in favor of land mass over population, as is the Electoral College to a lesser degree, even converting a small percentage of rural voters could put some states in play for Democrats. Biden has talked about being an FDR-like President although it is unclear whether he clearly understands that the country might be in just as bad a position in the immediate post-vaccine era as FDR faced with the Great Depression. And Biden will not have the huge majorities in Congress that FDR had. But if Trump has taught us anything, it is that the President can wield extraordinary power under emergencies that the President himself can declare. If Biden is prepared to use those extraordinary powers, he will not have to waste time and precious political capital in drawn-out fights with Congress. And if he can deliver for all Americans, even some rural voters will support him.