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v Center for Rural Affairs, www.cfra.org Strategy #1 A Federal Rural Policy It is time to establish a national rural policy that revitalizes rural communities through new initiatives and re- forms to existing policy. This article will focus on small agricultural communities because they are the Center's focus. But a national rural policy must address the needs of all of America's struggling rural communities. Money, Farm Programs, and Rural Development Discussion of federal rural policy often starts with money and ends with proposals to eliminate farm programs and commit the money to rural development. That won't work. Ending farm programs would cause bankruptcies, farm foreclosures, and bank failures and wreak havoc in agri- cultural communities. We would lose many small and mid -size farms. Some advocate divorcing rural development policy from agriculture policy and removing it from the agricul- tural committees of Congress. That won't work either, at least not for agricultural communities. There's not much new money laying around to be had elsewhere in the federal budget. And a rural policy di- vorced from agriculture won't adequately address the needs of farm and ranch communities. But there are practical steps that can be taken to balance federal spending on immediate income support for farmers with the critical investments that must be made in creating a future for rural communities and family farmers and ranchers. We could start by capping payments to large farms and investing the savings in sustain- able rural community development. Payment caps would keep more small farmers on the land to support rural communities. A payment cap that cut 10 percent of farm program spending would free up sufficient funds for a ten -fold increase in rural development — nearly $10 billion over the life of the farm bill. And it would improve the income of most farm operators by reducing the incentive for large expansion- oriented farms to drive up cash rents and land purchase prices. Likewise, the introduction of modest supply management measures for years of extreme surplus would prevent the kind of free fall in farm commodity prices that fueled record federal farm spending in recent years. That would moderate the level of farm commodity payments and generate some savings for rural development initia- tives without undermining the family farms so important to agricultural communities. Supporting Rural Entrepreneurship There is great potential to enhance rural community viability by investing in entrepreneurship. Agricultural communities often have extraordinarily high rates of self - employment — two to three times the rate of metro- politan areas in the nation's heartland. But funding is sparse for programs that support rural entrepreneurship and small business. The federal Small Business Administration provides funds for loans, technical assistance, and training programs for micro enter- prises — businesses with five or fewer employees. But funding is not adequate to come close to reaching all of the rural areas that need assistance. Page 1