Small towns are often depicted as places with many interpersonal relationships and generalized trust, or high social capital. Social capital is a resource which towns can use to solve problems and improve the local quality of life. In this paper, I determined if social capital and civic engagements have declined in small towns in the U.S. Midwest as has happened more generally and tested likely explanations for the change. Quantitative analyses of data from the U.S. Census, other secondary sources, and a longitudinal study of residents of 99 small towns were conducted. Findings revealed that social capital has declined, but one type of civic engagement improved. Towns in counties with more small farms in 1990 had more bonding social capital and civic engagement in 2004 than other towns when other factors were controlled. The proportion of local businesses had no impact on civic engagement and was negatively associated with one kind of social capital. Mixed findings about how income impacted social capital and civic engagement indicated a complex relationship. The retirement of the so called "civic generation" had minimal impact on social capital and civic engagement. (Contains 5 tables.)