One of the great debates in American politics and economics in 2018 is likely to be how to help the country's forgotten towns, the former coal-mining and manufacturing hubs with quaint Main Streets that haven't changed much since the 1950s and '60s. Many of these places turned out heavily to vote for Donald Trump. He talks often about wanting to help them, but it's unclear how he can.
Traditional economics says people living in these struggling towns should just move. Many of the United States' urban centers (and surrounding suburbs) are booming. If jobs are plentiful in Denver (unemployment rate: 2.6 percent) and Salt Lake City (unemployment rate: 2.8 percent), then Economics 101 suggests it's time for a big migration west from the Rust Belt to the Boom Belt. Trump appeared to endorse this solution over the summer when he said Americans are “going to have to start moving” from places such as Upstate New York to areas where they can get jobs.
“I’m going to explain you can leave. It’s okay,” he said in July.
But the reality is Americans have become homebodies. People in the United States are moving at about half the rate that they did in the 1970s and '80s, according to census data, and no one really understands why. There are obvious economic barriers to moving. It's expensive and risky to leave a place your family has been living in for generations, and there's no guarantee the job you move for will still exist in a few years. But there seems to be something deeper holding people in place.
A high school vocational tech teacher in central Ohio — who asked not to be named, to speak freely — told me: “Most of our students will not give the slightest thought to relocating should they not be able to find good employment here. They cite all the [usual reasons], but a big one is just plain fear of the unknown. My students think Columbus is a big, scary city. Many have never even been out of the county.”
Among economists, a major rethink is underway about how to help people in forgotten towns, and it's starting to filter into policy debates in Washington. The mentality is shifting from “let's get these people to move” to “let's get new jobs to these towns.” Trump is focusing on boosting coal and manufacturing, largely by scaling back environmental regulations on these industries. Manufacturing jobs are up 171,000 since Trump took office, but coal mining is up only 1,500. The jobs being created aren't necessarily where they are needed most. Trump promised to help Carrier workers in Indianapolis, for example, but more than 600 workers were laid off there.
Nobel Prize-winning economist Joseph Stiglitz says Trump's obsession with muscle jobs is shortsighted. Stiglitz is advocating for totally transforming what these towns are known for, taking them from blue collar to green collar — or even high-tech hoodie. Stiglitz points to Pittsburgh as the true American success story, a place that evolved from a steel city into a tech and health-care hub.
“We need a lot more Pittsburghs,” Stiglitz told The Washington Post in an interview in December. “I'm optimistic about the ability of cities to rejuvenate.”
But Pittsburgh can go only so far as a model for other places in the Rust Belt. It's not a small town, and it has benefited from a lot of private money from universities and billion-dollar organizations such as the Heinz Endowments and Pittsburgh Foundation, which has been around since 1945. Few small towns have those kinds of resources, meaning they will probably be much more dependent on some government help.
Trump and top Republican leaders in Congress are debating their next move after their triumph in passing a large tax overhaul bill just before the holidays. They are eyeing major changes to social programs, including Social Security and Medicare, and aiming for a large infrastructure spending plan. There's also a call from the White House to tackle the opioid crisis, although a concrete policy has yet to materialize for that. Drug overdoses in rural areas are about 50 percent higher than in urban areas, according to the Centers for Disease Control and Prevention.
A White House spokesperson heralded the strong economic growth that is already evident after Trump's first year in office and said there are more policy announcements to come.
"In 2018 his administration will go even further, including overseeing a rebuilding of our nation’s infrastructure and supporting educational programs to retrain our workforce," Lindsay Walters, deputy press secretary, said Tuesday. "The president is committed to improving the lives of each and every forgotten American, regardless of where they live."
In many of these struggling towns where few, if any, major corporations remain, the tax cut is unlikely to do much to transform them. But the next steps Republicans take could have a deeper reach. Scaling back welfare, especially Medicaid, Social Security Disability Insurance and housing subsidies might force people to finally move.
“There's a lot of progress that can be made reconnecting working-age people to the workforce,” Kevin Hassett, Trump's top economist, said in an interview just before the holidays. “We’re certainly thinking about policies to help with that.”
While unemployment is at a 17-year low nationally, looking at the data by county shows a glaring trend in “Trump country”: Much of the Rust Belt and parts of the Deep South are still above 6 percent unemployment. There remains a disconnect between where job seekers are sitting and where the help-wanted signs are out.
A vast infrastructure spending project could bring much-needed jobs and better highways — physical and cyber — to parts of the rural United States. But with the national debt over $20 trillion, some Republicans are balking at the idea of government spending on infrastructure. Trump's initial idea, floated a year ago, of a $1 tillion infrastructure plan, is now being whittled down to closer to $200 billion. Instead of government money, the idea has morphed into relying heavily on public-private partnerships. But it's unclear whether private money would go to places that have been neglected for years.
Stiglitz and Trump are about as far apart on the political spectrum as you can get, but they agree that these forgotten towns were clearly hurt by globalization and new technologies. They differ on the solutions — and how much government funding should be involved.
Stiglitz, a liberal who once predicted Trump would be a “nightmare” president, is calling for a massive government spending program with money for roads and infrastructure in these towns, as well as a “whole variety of public services” to restart businesses and cultural assets.
“You have to change the business model of the community . . . not just attract one assembly plant that creates 100 jobs,” he said. “You really need a concept of where the town is going.” He envisions a new economy in the Rust Belt that is focused on growing healthy foods — what he calls “high-tech agriculture” — and more environmental tourism.
In his new book, “Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump,” Stiglitz argues that economists missed something important about these towns: They have social capital. Trust is what you might call the “magic fairy dust” that helps economies thrive. When people trust each other, they work better and harder and they tend to live happier lives, as Harvard professor Robert Putnam's research has shown. Overall, trust has eroded substantially in the United States in recent years as fewer and fewer people have a bond with their neighbors, let alone the government, businesses or civic institutions. But trust still exists in many of these smaller towns where people talk to and watch out for each other. That can be harnessed to transform the town for the 21st century, Stiglitz says.
“Economists have traditionally said we care about people but not places,” Stiglitz said. “Therefore, so what if Appalachia dies? Or if Detroit dies? There is another city being created. I think that view is fundamentally wrong.”
In Beattyville, Ky. — once dubbed America's “poorest white town” — the median income is $15,000. In other words, most people there aren't earning enough to pay federal income taxes, so the GOP tax cuts probably won't help them much. The big companies have mostly moved out of town. Even the nearest Walmart is about half an hour away. What is starting to grow in Beattyville, a part of the United States that explorer Daniel Boone made famous, is tourism. There are lots of mountains to climb, and old mines and mining roads are being transformed into all-terrain-vehicle courses.
“Too much in the mind of Trump is just the old industrial economy,” Stiglitz said. “Look at where we are spending money and how we are living today. Millennials have a new view of the world.”