If you look around, there are many signs that the proverbial “light at the end of the tunnel” might actually be daylight—not an oncoming train. We are losing jobs at a decelerating rate. Equity values have risen by over one-third since the bottom was hit in early March. Housing prices inched up by 0.5 percent between April and May, marking the first increase in about three years. Finally, the Index of Leading Economic Indicators (LEI) has risen some 13.8 percent over the past three months.
Such a jump in the LEI has reliably signaled an end to every recession since 1960. Even Larry Summers, economic advisor to President Obama and former Harvard President, noted that in April he finally stopped waking up at 4:00 a.m. each morning to check on the Asian markets. Until then, the threat of a global credit squeeze and a worldwide economic meltdown worried the best and brightest. But even if we see visible signs of recovery this fall, as anticipated, the current economic decline will be the steepest in the past half century and the longest since the Great Depression.
The big unknown is what kind of recovery might we expect? After the last recession, earlier this decade, job growth was sluggish and fueled largely by a speculative housing market that was destined to be short-lived. Many fear that future job growth will be slow, if not glacial. The July Bureau of Labor Statistics data show that we have lost 6.5 million jobs since the onset of the recession and have fewer jobs now than nine years ago. Consumer confidence, after jumping some 30 points between February and May of this year has slid once again over the past two months. Additional countercyclical spending attached to the stimulus bill passed this winter will start to flow in earnest over the coming months. Unlike past stimulus efforts, this spending will hit the streets when needed, not after the crisis has past. Still, it may not be enough to jumpstart the economy and there is little political stomach for more pump priming.
Federal stimulus spending, moreover, comes at a time when state and local revenue flows are collapsing. State and local spending on social welfare declined by 3.1 percent between 2005 and 2006, the first decline in real terms since 1983. While cash assistance to low-income families has been falling since the mid-1990s, non-cash social service spending declined after reaching a peak, or inflection point, in 2002. Even state and local spending on medical services began to fall after 2005.
If anything, the capacity of state and local jurisdictions to meet increased human needs that are likely to persist for years appears questionable at best. Based on Census Bureau data, analysts from the Rockefeller Institute for Government estimate that state first-quarter tax collections (January through March) dropped by 11.7 percent, the sharpest decline in the 46 years that such data are available. Preliminary data for April and May suggest a worsening revenue situation. The California spectacle may capture the headlines, but virtually all states are struggling to meet human needs.
As Alexander Hamilton penned in a 1787 Federalist Paper arguing for a new American constitution (which was quoted in a recent issue of the journal, Publius), “Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the states have remained empty.” Our first Treasury Secretary might well be describing our contemporary situation.
In short, we face a slow recovery with exhausted treasuries and growing human needs. I cannot find many reputable observers who believe that we will simply grow our way back to prosperity as has occurred in previous downturns. This will be a long-haul recovery demanding creativity and imagination.
In such challenging times, many rural communities remain particularly vulnerable. The Carsey Institute just published a report, Place Matters, which surveys some 8,000 randomly selected respondents from several rural communities. The study taps surveyed residents living in four distinct communities: amenity-rich areas, declining resource-dependent areas, chronically poor areas and areas in transition. The authors assumed that rural communities are not homogeneous, nor are one-size-fits-all policies likely to work.
Study data were collected in the fall of 2007, just before we slid into the current recession. Even then, rural folks were worried about jobs. Only 40 percent of respondents worked full time, well below the national average. But averages always obscure deeper patterns. Let us focus on two of the community types—the declining resource-dependent areas and the chronically poor areas.
The first type depended on agriculture, timber, mining and related manufacturing to sustain a middle class and provide opportunity. Now, the study concludes that resources are depleted and globalization is bringing harsh new realities into the picture. The survey results suggest that populations are declining and aging, hope is evaporating and infrastructure quality is threatened. The sense of a permanent downward spiral is present.
In the second type (chronically poor rural America), according to the report, “…both residents and the land have experienced decades of resource depletion and underinvestment, leaving behind broken communities with dysfunctional services, inadequate infrastructure, and ineffective or corrupt leadership. Generations of families have been held back by inadequate education and weak civic institutions. As the population suffers, so does the environment, and the downward spiral continues.”
These kinds of communities might well have been ignored in the best of times. Though we probably have dodged a catastrophic depression, we may not experience good times again for many years. Will vulnerable rural communities be part of America’s recovery agenda? How should we rethink human services in an era of diminished resources? Stay tuned…
Tom Corbett has emeritus status at the University of Wisconsin-Madison and is an active affiliate with the Institute for Research on Poverty where he served as Associate Director. He has worked on welfare reform issues at all levels of government and continues to work with a number of states on issues of program and systems integration.
Opinions expressed in this column are those of the author and do not necessarily reflect the views of the Rural Health Information Hub.
Professor Corbett welcomes your feedback. Comments and reactions can be sent to: Corbett@ssc.wisc.edu.
Back to: Summer 2009 Issue