Tribal Leakage: How the Curse of Trust Land Impedes Tribal Economic Self-Sustainability

Abstract:     

Economic leakage occurs when money leaves or “leaks” away from the local economy sooner than expected and sooner than is optimal. From an ideal economic perspective, money should circulate in the local economy where it was received or earned five to seven times before leaving that community. When consumers cannot buy the goods and services they desire in their local areas, however, they are forced to spend their money outside their communities, and that money rarely cycles back. On some reservations, nearly 80% of the dollars flow out of the tribal economy without cycling even once, resulting in substantial economic leakage.

This article argues that a primary cause for the lack of on-reservation consumer options is the cumbersome and onerous policy of the United States government holding tribal land in trust. An artifact of a long since discredited congressional policy called Allotment, federally-imposed restrictions on trust land make it nearly impossible for on-reservation entrepreneurs to secure startup financing, as they cannot borrow against the equity they have in their homes. As a result, fewer entrepreneurial ventures exist on reservations and thus fewer options are available for on-reservation consumers to spend their money on reservation. The inevitable consequence of such a lack of consumer spending options on reservations is leakage.

This article also argues that title to trust land can and should be returned to tribes and individuals in fee under a new tribal status that confers permanent jurisdiction to the tribe, complete with full taxation powers. Such a system will end a primary cause of economic leaking while ensuring that the newly transferred land will always be subject to tribal jurisdiction regardless of the race of the landowner.

Number of Pages in PDF File: 16

Keywords: Indian Law, Economic Leakage, Trust Land, Entrepreneurship

JEL Classification: O11, O13, O18