Inflation is crippling rural America and may even drive people to the cities: NPR

Inflation is crippling rural America and prompting some people to consider moving closer to cities in an effort to ease financial stress, according to the latest expert analysis.

Iowa State University professor Dave Peters has been studying the effect of inflation on people in rural communities as part of the school’s Small Town Project. It found that this year alone, rural Americans’ spending had increased 9.2%, but their earnings were only up 2.6%.

And Peters has pinpointed where it hurts the most.

“Mainly fuel prices, particularly among farmers and the farming community,” he said. “They are really worried about the price of gasoline and diesel.”

Inflation spiked to a 40-year high in June and is hitting every American household. But Peters said travel was one of the main reasons it was hitting rural areas hardest.

“People in rural areas have to drive long distances to go to work, to school, to health care, just to meet the daily necessities of life, like groceries… there is no public transportation,” he said. .

Their analysis found that it costs rural households $2,500 more a year to pay for gasoline than it did two years ago. At the same time, prices for health insurance, veterinary care and fuel to heat homes are also rising.

“Most rural households have to buy tanks of liquefied petroleum or liquefied propane, or they have to get fuel oil,” Peters said. “And those have also increased their costs — that’s, I think, something like $1,000 more.”

In response to June’s inflation numbers, President Joe Biden said tackling the problem was his top priority.

He said the administration would continue to release oil from the Strategic Petroleum Reserves in an effort to drive down gasoline prices, and would “continue to give the Federal Reserve the room it needs to help it fight inflation.”

“Inflation is our most pressing economic challenge… we need to go further, faster, to control price increases,” he added. said in a statement.

The Fed is now attempting the delicate task of bringing down inflation without tipping the economy into recession, and is expected to raise interest rates for the fourth time in five months when it meets later this week.

“The Fed slows the economy by raising interest rates, which reduces spending.” Princeton economist Alan Blinder told NPR. “If you do too much of that, you’ll have a recession.”

Peters warned that if prices stay too high for too long, it could start a dangerous cycle for some rural Americans.

It starts with people dipping into their savings, which Peters said was already happening. They will then be forced to spend their discretionary money on essential goods; and after that they will be in debt with credit cards.

But what really worries Peters is the idea that some people in rural America will start taking out home equity lines of credit because their home values ​​have risen, especially in the Midwest. But he warned that this strategy could backfire.

“That’s particularly dangerous if home prices drop again and then you’re left with a mortgage that your home’s value doesn’t cover,” he said.

This combination of factors was prompting some people in rural areas to consider moving closer to cities, Peters said. But it is complicated.

“There are people I’ve talked to in Iowa and in Nebraska … who are really trying to do that financial calculation,” he said. “They would love to work and get wages from the city, but they can’t travel. It’s too expensive with gas prices. And really, what’s holding them back is the cost of houses.”

“Some people are looking at moving closer to a city, moving to the suburbs, or moving to a small community 45 minutes from a city. So yes, probably if it continues it will accelerate rural depopulation in parts of the Midwest and Greater Plains.”

The audio interview for this story was conducted by Steve Inskeep, produced by Ziad Buchh, and edited by Raquel Maria Dillon and Amra Pasic.