Plan offers old name, new twist in North Dakota- a contemporary homestead act – offering tax credits and venture capital instead of free land to attract adventuresome souls to repopulate the Great Plains.

By:
Patrick Springer
The Forum
Fargo, ND
http://www.in-forum.com

The lure of free land drew thousands of homesteaders to places like Wagendorf Township in southwest North Dakota, where Caroline Bach settled in 1906.

By:
Patrick Springer

The Forum

Fargo, ND
http://www.in-forum.com

Her husband, Otto, had filed the claim but later died of cancer. So the widow Bach traveled by train from St. Paul to Dickinson, N.D., then continued by horse and wagon. She lived with her six children in a tent that spring until their home was built.

The Norwegian immigrant family was drawn west by land incentives first enacted in the Homestead Act of 1862, which allowed settlers to file a claim for 160 acres, provided they cultivated the land for five years. A second homestead act upped the ante, providing 640 acres, an enticement that continued until about 1920.

Now Byron Dorgan, the Bachs’ great-grandson, thinks it’s time for a contemporary homestead act – offering tax credits and venture capital instead of free land to attract adventuresome souls to repopulate the Great Plains.

"This is about economic opportunity," Sen. Dorgan, D-N.D., said of his New Homestead Economic Opportunity Act legislation.

The measure, first introduced a year ago, is billed by its authors as the first comprehensive plan to create the kind of incentives needed to reverse the long trend of population decline throughout the Great Plains.

The idea is to lure entrepreneurs and others, including Great Plains natives who have left for greener economic pastures, to rebuild forgotten places on the map.

"This is a big idea," Dorgan said. "This is not some kind of a small, incremental notion," and therefore will take time to become law.

It was natural for Dorgan to think of homesteading when he was looking for ways to revitalize areas like Hettinger County in southwest North Dakota, where he grew up. Four sets of his grandparents and great-grandparents were homesteaders.

Hettinger County is one of 48 high out-migration counties in North Dakota that would qualify for incentives under the act, which he will reintroduce early next year when the new Congress meets.
Dorgan’s home county, which is larger than the state of Rhode Island, had 5,000 people when he graduated from high school in 1960 in a class of nine. Now Hettinger County has 2,715 residents, after losing 21 percent of its population in the 1990s.

Regent, a hamlet of 211, lost both its clinic and its high school in recent years. Its big growth industry is outfitting and feeding pheasant hunters, an example of the opportunities to be found in outdoor tourism.

Rural population dips
The same story of depopulation and decline is repeated throughout the Great Plains, where almost 70 percent of rural counties saw their populations shrink by a third over the past 50 years.
On a color-coded national map, the counties suffering chronic out-migration are concentrated in an irregular egg shape in the middle of the country – representing the hollowing out of the rural heartland.

Those who stay in places like Regent and Hettinger County struggle with incomes that lag far behind the national average. Rural residents have incomes that are barely 70 percent of the salaries of their urban cousins.

To narrow that gap, Dorgan and his prime co-sponsor, Sen. Chuck Hagel, R-Neb., are proposing a program that both compare to the major investments the country made in urban renewal. The senators argue that the whole country will benefit if the rural heartland is economically healthy.
"I think our country should at least give the opportunity that we gave to the major cities," Dorgan said.

One important reason for the failure to wage a major national battle to revive the heartland is the hidden nature of the problem. Rural depopulation is so gradual, and so isolated, that it becomes invisible.

"This is economic blight that’s out of sight," Dorgan said. "A big city with serious economic trouble is obvious to everyone. People don’t drive through Regent, N.D., by and large, unless that’s their destination."

Immigrants can help
The absence of a comprehensive federal program to revitalize the heartland doesn’t mean, though, that the country isn’t spending significant sums in rural America. Last year, farm subsidies alone totaled $25 billion.

The problem with farm supports, according to researcher Joel Kotkin, is that they have bred rural dependency, "sapping those communities of the motivation to take risks, invest and build new businesses."

Subsidies tend to go to those who are least likely to bring change to rural areas, such as the elderly, who aren’t inclined to reinvent the local economy, said Kotkin, a senior fellow at the Davenport Institute for Public Policy at Pepperdine University.

The key to North Dakota’s success will be to find ways to attract people, especially those who are young, entrepreneurial and part of the "digital revolution," Kotkin said. Immigrants – an important component of past waves of homesteaders, including Dorgan’s forebears – also should be targeted.

"There needs to be an effort based on migration rather than subsidies," Kotkin said.
Kotkin supports the New Homestead Economic Opportunity Act. The tax credits and venture capital can attract the information-technology entrepreneurs who can help revitalize the Great Plains, he said.

Bill faces tough go
The "New Economy" has largely bypassed the rural heartland. That’s unfortunate, in Kotkin’s view, since the Great Plains comprise a "brain belt" with high literacy rates and scores in national science tests – natural ingredients for a high-tech work force.

Kotkin and Karl Stauber, president of the Northwest Area Foundation, said Dorgan’s new homestead proposal faces several steep challenges – not the least of which, Kotkin said, are the war on terrorism and a possible war with Iraq.

"The money environment is going to be brutal," Stauber said of efforts to secure funding. When Dorgan reintroduces the measure in the new Congress, it will be somewhat slimmed down, Dorgan said. So far, no fiscal note is available to estimate the proposal’s cost.

The tax credits and other incentives in the proposal, including forgiveness of up to half of college loans for recent graduates who work five years, likely will attract people already thinking of moving to the rural heartland, Stauber said.

"This is really a program that provides a subsidy to middle-class folks who are thinking of moving to a new area," he said. "The incentive alone won’t cause people to move to sparse, rural North Dakota or Nebraska."

But as part of broader efforts to invest, privately and publicly, in areas that will create competitive economic advantages, the new homestead incentives would help to revitalize parts of the Great Plains, Stauber said.

"It will provide a motivation to disperse," he said. "It won’t provide a motivation to come in the first place. By itself, I don’t think it’s going to be successful. It still comes down to creating opportunity."

10 sponsor bill
Dorgan argues that his plan is, in fact, designed to create opportunity. It would allocate $3 billion for a venture capital fund to help launch risky startup companies.

There has been a drought of capital in the Great Plains, which has received only about 2 percent of the nation’s venture capital, in an estimate cited by Dorgan’s office.

Rural tax investment credits of up to $1 million would be available for every rural, high out-migration county – those that have lost at least 10 percent of their population during the past 20 years – to businesses that expand or relocate there.

The measure also would protect home values in high out-migration counties by allowing losses – a common problem in rural communities – to be deducted from federal income taxes.
"Let’s address a range of these issues," Dorgan said of the broad approach the bill takes.
Dorgan and Hagel have 10 additional Senate co-sponsors, which Dorgan said indicates wide support. Their new homestead act has attracted national attention, including recent articles in The New York Times, the Washington Post and the Los Angeles Times, as well as a segment on "CBS News Sunday Morning.”

"I think people are trying now to pay some attention to the plight of the heartland," Dorgan said. "It’s pretty relentless."

Crisis looms for state
Not all Great Plains places can be saved, however, he said. Many are fated to dissolve into the prairie, no longer needed because technology and society have passed them by.

"Some of them may have very little to do with today’s world," Dorgan said.

There won’t be another Great Dakota Boom, with its droves of people flooding the prairie in search of opportunity – a creation of railroad hype and free land.

But major initiatives must be taken to save rural areas, which offer good schools, close-knit communities and attractive alternatives to congested metropolitan areas.

In North Dakota, Dorgan said, only two urban areas are on track to continue robust growth, Fargo and Bismarck. Two others, Grand Forks and Minot, add stability.

That leaves most of the rest of the state to suffer continued high rates of out-migration – often projected to be 25 percent to 35 percent during the next 20 years, Dorgan said.

"If trend lines continue, you have to conclude that much of our state will be in full-blown crisis," he said. Those problems are not unique to North Dakota; they exist throughout much of the rural Great Plains, he said.

"I don’t think you can fault anybody for this," Dorgan said. However, he added, "I think it’s true that our state has not embraced this as a crisis. I think the whole heartland is a bit like the frog in a pan of water," with the water brought to a boil so gradually that the frog doesn’t even notice.