Given the new federal budget cuts, more affordable medical care for many Americans seems unlikely

Many Americans will pay more for health care in
the coming months. (Adobe Stock image)

Americans who hoped to see their medical costs decrease during the next four years are likely to be disappointed, as federal-level decisions aimed at cutting or reducing benefits take effect and other expenses are passed off to states and the public.

"Millions of people are expected to lose health insurance in the coming years as a result of the tax cut legislation, leaving them with fewer protections from large bills if they get sick or suffer an accident," reports Noam N. Levey of KFF Health News.

President Donald Trump "promised a rosier future while campaigning last year, pledging to 'make America affordable again' and 'expand access to new Affordable Healthcare,'" Levey writes. "Polls suggest voters were looking for relief."

People who purchase health insurance on state marketplaces can expect to see substantial increases over the next year, which may cause more people to drop coverage or opt for higher-deductible plans. Certain Medicaid enrollees may be required to cover copays up to $35.

For consumers who can’t pay their medical bills, there are fewer guardrails. Levey writes, "(In July), the Trump administration secured permission from a federal court to roll back regulations that would have removed medical debt from consumer credit reports."

Arika Sánchez, who oversees health care policy at the nonprofit New Mexico Center on Law and Poverty, sees how negative credit report "dings" can hurt a family struggling to survive. She told Levey, "When families get stuck with medical debt, it hurts their credit scores, makes it harder to get a car, a home, or even a job. Medical debt wrecks people’s lives.”

Overall, medical debt is a national problem and not a partisan issue. "About 6 in 10 adults — Democrats and Republicans — say they are worried about being able to afford health care, according to one recent survey," Levey explains. 

The sting of high interest rates is hurting farmers, home buyers, consumers and small businesses

Graph by Karl Russell, NYT, from Federal Reserve data

Painful interest rates are not going away anytime soon, and when borrowing money costs more, business sectors, agriculture and consumers all take a hit. "Home buyers, entrepreneurs and public officials are confronting a new reality: If they want to hold off on big purchases or investments until borrowing is less expensive, it’s probably going to be a long wait," reports Lydia DePillis of The New York Times. The sting of rate hikes may be nearing an end, but "market-based measures of long-term borrowing costs have continued rising . . . Governments are paying more to borrow money for new schools and parks. . . . .Companies, forced to refinance debts at sharply higher interest rates, are more likely to lay off employees — especially if they were already operating with little or no profits."

Because borrowing money costs more, smaller banks have chosen to limit the amount of money they borrow from the Federal Reserve and lend more selectively. DePillis writes, "Small banks are at the epicenter of America’s credit crunch for small businesses." Mary Kay Bates, the chief executive of Bank Midwest in Spirit Lake, Iowa, told DePillis, "It’s a trickle-down effect for everyone. . . . We’re not looking at rates coming down any time soon. I really see us taking a close watch and an internal focus, not so much on innovating and getting into new markets but taking care of the bank we have."

For smaller businesses, the increasing costs of credit may mean downsizing. For entrepreneurs, survival becomes the focus. Even farmers are facing some of the fallout. DePillis reports, "Commodity prices have been dropping, helping to bring down overall inflation, but that has depressed farm income. At the same time, high interest rates have made buying new equipment more expensive."

The problem could eventually spread to affordable housing developments and auto manufacturers. "The real problem may arrive in a couple of years, when a new generation of renters begins searching for properties that never got built because of high borrowing costs," DePillis adds. "Car dealers may feel that shift soon. In recent years, dealers made up for low inventory by raising prices. Carmakers have been offering promotional interest deals, but the average interest rate on new four-year auto loans has climbed to 8.3 percent, the highest level since the early 2000s."

Louie Mullen buys more newspapers, has about 40; says he has a friendly banker, and it helps that his wife is a doctor

Louie Mullen

J. Louis "Louie" Mullen has bought eight newspapers in Colorado’s San Luis Valley, bringing his number of newspaper titles "up to roughly 40 across nearly a dozen states from the Mountain West to New Jersey," Corey Hutchins reports in his Substack newsletter Inside the News in Colorado.

Mullen, 37, of Buffalo, Wyo., told Hutchins he has been “fairly aggressively” buying small weekly and biweekly papers with loans from Buffalo-based First Northern Bank, which is “bullish” on newspapers. So is Mullen, who is on the board of directors of the National Newspaper Association, the lobby for weeklies and small dailies. He told Hutchins that he’s seeing “more opportunity” than ever, his print business is growting, "and circulation has been stable for the past 10 years," Hutchins writes. 

Mullen bought the daily Valley Courier in Alamosa from the Tompkins family of the Illinois-based News Media Corp. Also in the sale: the Monte Vista Journal, The Del Norte Prospector, The Conejos County Citizen, the Center Post-Dispatch, The Mineral County Miner, The South Fork Times and SLV Lifestyles.

Mullen's outfit isn't a typical newspaper chain. It doesn’t have a corporate umbrella, and he owns his papers as individual companies, he told Hutchins: “Every paper is different, every community is different, readership is different, demographics are different, politics are different. And I don’t put my own politics on any of these. These newspapers are supposed to be a reflection of the community that they’re in and serving, not whatever nonsense I believe.”

He said rural newspaper markets have been “the last to adopt new technologies, always have been — but these are still viable markets. And there is a large population in these rural markets that need news.”  Last year, Mullen bought the North Scott Press in Iowa, for many years one of the nation's standout weeklies.

Hutchins writes, "Asked what it takes for someone to get into the newspaper business in their 20s, Mullen said for his first acquisition the seller financed the deal and he brought in his newspaper publisher father in case things got hairy. For his second purchase, he brought along his two brothers. With some numbers behind him and a bit of a track record, someone offered him money to become a minority partner in a new deal, and then he brought on investors. Now, he said, he either owns outright a newspaper business he buys or he’s a majority partner with minority partners that are his friends. It helps that his wife is a physician."

“There are not many people in this country that do what I do,” Mullen told Hutchins. “It’s such a niche market, it makes it easier for me. I’m not some wunderkind.” He said anyone can do it if they are willing to take risks, bit there are fewer such people after the Great Recession. "He’s looking for more competition among his cohort," Hutchins concludes, quoting him: “Take a chance. I guarantee you can find some old codger who would love to give a kid a chance for next to nothing.”

What's a community development financial institution? Knowing the answer could be key to a community's progress

The main obstacle to economic development in many rural areas is a shortage of capital for investment. One source of capital can be a community development financial instiution, one of the most important sources of venture capital in poor places. They invest federal and private-sector money in start-ups and other projects in economically disadvantaged communities.

The U.S. has more than 1,000 CDFIs, but “I don’t think they’re very well understood,” said Betsy Whaley, chief strategy officer the Mountain Association, a CDFI for Appalachian Kentucky. “Most projects couldn’t be funded by a traditional bank; banks won’t fund start-ups; they just won’t.”

The role of CDFIs in fighting rural poverty is being explored in a series of articles in Nonprofit Quarterly, co-produced by Partners for Rural Transformation, a coalition of six regional CDFIs in Appalachia, the rural West, Indian Country, South Texas, and the Mississippi Delta.

"CDFIs strengthen local economies, generate wealth that sticks, and foster agency and power among local people to determine their destinies. This is true in urban areas and, critically, rural communities," writes PRT President Jose Quinonez, who offers examples, starting with this one:

"In 2018, a nurse practitioner with over a decade’s experience opened an urgent care facility in her hometown of Clarksdale, Miss. When committing to opening the clinic, she was ready to invest her savings to open the facility, but she had no idea it would be so difficult to obtain the rest of the necessary financing. She had a strong business plan and the medical skills to succeed, but still faced difficulties getting banks or state agencies to back her. When she finally got a loan approved, the loan conditions included putting a second mortgage on her home, which she agreed to do. But home values in Clarksdale were so low that her house fell short of the minimum appraisal value, and the loan fell through. This is where Communities Unlimited stepped in, providing a small loan and technical assistance. Now, the urgent care center employs nine people and pays good wages in a community with low incomes and high unemployment. Moreover, the business provides critical services to an area with few health-care options."

Federal consumer watchdog warns about the risks of medical credit cards, which can raise costs, hurt the poor

By Noam A. Levey

KFF Health News

The Biden administration on Thursday cautioned Americans about the growing risks of medical credit cards and other loans for medical bills, warning in a new report that high interest rates can deepen patients’ debts and threaten their financial security.

In its report, the Consumer Financial Protection Bureau estimated that people in the U.S. paid $1 billion in deferred interest on medical credit cards and other medical financing in just three years, from 2018 to 2020.

The interest payments can inflate medical bills by almost 25 percent, the agency found by analyzing financial data that lenders submitted to regulators.

“Lending outfits are designing costly loan products to peddle to patients looking to make ends meet on their medical bills,” said Rohit Chopra, director of CFPB, the federal consumer watchdog. “These new forms of medical debt can create financial ruin for individuals who get sick.”

Nationwide, about 100 million people — including 41% of adults — have some kind of health-care debt, KFF Health News found in an investigation conducted with NPR to explore the scale and impact of the nation’s medical-debt crisis.

The vast scope of the problem is feeding a multibillion-dollar patient-financing business, with private equity and big banks looking to cash in when patients and their families can’t pay for care, KFF Health News and NPR found. In the patient financing industry, profit margins top 29%, according to research firm IBISWorld, or seven times what is considered a solid hospital profit margin.

Millions of patients sign up for credit cards, such as CareCredit, offered by Synchrony Bank. These cards are often marketed in the waiting rooms of physicians’ and dentists’ offices to help people with their bills. The cards typically offer a promotional period during which patients pay no interest, but if patients miss a payment or can’t pay off the loan during the promotional period, they can face interest rates that reach as high as 27%, according to the CFPB.

Patients are also increasingly being routed by hospitals and other providers into loans administered by financing companies such as AccessOne. These loans, which often replace no-interest installment plans that hospitals once commonly offered, can add hundreds or thousands of dollars in interest to the debts patients owe.

A KFF Health News analysis of public records from UNC Health, North Carolina’s public university medical system, found that after AccessOne began administering payment plans for the system’s patients, the share paying interest on their bills jumped from 9% to 46%.

Hospital and finance-industry officials insist they take care to educate patients about the risks of taking out loans with interest rates, but federal regulators have found that many patients remain confused about the terms of the loans. In 2013, the CFPB ordered CareCredit to create a $34.1 million reimbursement fund for consumers the agency said had been victims of “deceptive credit card enrollment tactics.”

The new CFPB report does not recommend new sanctions against lenders. Regulators cautioned, however, that the system still traps many patients in damaging financing arrangements. “Patients appear not to fully understand the terms of the products and sometimes end up with credit they are unable to afford,” the agency said.

The risks are particularly high for lower-income borrowers and those with poor credit. Regulators found, for example, that about a quarter of people with a low credit score who signed up for a deferred-interest medical loan were unable to pay it off before interest rates jumped. By contrast, just 10% of borrowers with excellent credit failed to avoid the high interest rates.

The CFPB warned that the growth of patient financing products poses yet another risk to low-income patients, saying they should be offered financial assistance with large medical bills but instead are being routed into credit cards or loans that pile interest on top of medical bills they can’t afford.

“Consumer complaints to the CFPB suggest that, rather than benefiting consumers, as claimed by the companies offering these products, these products in fact may cause confusion and hardship,” the report concluded. “Many people would be better off without these products.”

Small banks have a lot to offer to their customers and communities; there's little risk and lots of service

Thanks the FDIC local banks are just as safe as larger ones.
(iStockphoto,WSJ Photo Illustration)

Remember Banking 101 from "It's a Wonderful Life"? "During the first bank run, George was able to convince people not to pull all of their money out and instead take out only what they needed in the short term so the bank could stay afloat," Bourree Lam retells for The Atlantic. "Instead of George Bailey, Americans have the Federal Deposit Insurance Corp., which was created to insure bank deposits precisely so people wouldn't fear losing everything and pull cash out of the financial system in a panic, triggering bank failures."

"In the past few weeks, many small bank-account holders have gotten jitters: The surprise collapse of Silicon Valley Bank and Signature Bank has sent customers scrambling to larger competitors," reports Martha C. White of The Wall Street Journal. "Thinking of joining the stampede? Experts say now may be the time to consider what small banks offer. Thanks to FDIC insurance, they are just as safe as larger competitors. And right now, they're competing harder than ever for your dollars—many are offering deals for savers that leave their big-bank rivals in the dust."

It may be natural to leave what feels financially risky. "Depositors appear to be fleeing small banks because they fear problems in the banking sector could spread beyond the tiny number of troubled banks that have made headlines so far," White writes. "While many small and regional banks have seen their stock prices take a hit, the problems don't appear contagious." Michael Finke, professor of wealth management at the American College of Financial Services, told White, "A lot of the flight to capital to large banks is driven by emotion and not by true risk."

When offerings and protections are combined, reconsidering your small bank could yield good things. "Small banks tend to shine when it comes to being able to deliver personal, caring customer service and commitment to their local neighborhoods," White adds. "Just how much of your savings will be covered? FDIC insurance protects savings and checking account deposits up to $250,000—an amount much higher than most Americans keep as cash savings. Joint accounts, say between you and your spouse, are covered for up to $500,000. And if you have to protect still more than that, there are other simple strategies you can use to guarantee even larger sums." Finke told White, "The FDIC is going to protect you."

Interest-rate risks could sneak up on some community banks; regulators may need a stricter approach

Photo by Immimagery via stock.adobe.com

Big banks aren't the only ones that stocked up on bonds only later to regret it. "Dozens of other banks — most of them quite small — are deeply underwater on their bond investments and could hit trouble if they were unexpectedly forced to liquidate the investments. That's according to an American Banker analysis of regulatory filings by the country's more than 4,700 banks," reports Polo Rocha of American Banker. "The losses, a result of banks' bonds losing their value when interest rates rose, remain 'unrealized' and only theoretical. They would only cause trouble if a bank needed cash and was forced to sell the bonds early for less than it bought them, thus making the losses real."

"Bert Ely, a bank consultant, said it 'boggles the mind' that banks took on the same type of interest rate risk that brought down hundreds of savings and loan companies starting in the 1980s," Rocha adds. "Ely, who predicted what became the savings-and-loan crisis, said American Banker's analysis shows a need for regulators to take a stricter approach on the issue. Commenting on the large degree of risk many banks took on, Ely told Rocha, "It just absolutely astounds me that they can be in compliance with the regulations."

"Several bankers contacted for this story pushed back on any concern that they'd ever need to get rid of the bonds to raise cash. Those bankers said they have plenty of cash available. . . . The Federal Reserve Board launched a new program this month aimed specifically at helping banks with underwater bonds," Rocha reports. Still, "The review of call report data reveals how some banks appear to have misplanned for a scenario in which interest rates rose sharply. . . They effectively took the same position as Silicon Valley Bank, where executives thought interest rates would stay ultralow for years and were caught by surprise when the Fed raised rates aggressively." Cliff Rossi, a University of Maryland professor and former chief risk officer of Citigroup's consumer lending division, told Rocha, "It was Risk Management 101. They need to be all over that."

"The Federal Deposit Insurance Corp., whose chairman has warned about unrealized bond losses across the industry since at least May 2022, declined to comment," Rocha adds. "Bank lobbying groups, as well as several of the banks in question, said American Banker's analysis is incomplete and paints an inaccurate picture of those banks' health. . . .Hugh Carney, a top executive at the American Bankers Association, said a single metric such as unrealized bond losses 'does not accurately capture the risks or health of an individual bank.'"

Ex-FDIC chair worries bank 'bailouts' could drive deposits out of community banks; they'd have less money to lend

Federal officials' determination that two bank collapses posed “systemic risk” to the banking system, justifying their guarantee of uninsured deposits at the banks, poses a threat to smaller banks, a former chair of the Federal Deposit Insurance Corp. told James Jacoby of PBS's "Frontline."

Ex-FDIC chair Sheila Bair (PBS image)

“I do worry about community banks, in particular,” said Sheila Bair, FDIC chair in 2006-2011. “For these larger institutions, $100 billion, $200 billion, that’s not huge. But if you’re a $1 billion community bank, it’s a big difference. And what happens to them if the market starts assuming anybody, say, over $100 billion is going to have their uninsured deposits protected? Then that money is going to start going out of the community banks into those institutions that are viewed as having favored status. So these one-off bailouts that are particularly just for a couple of institutions create a lot of distortions and competitive disadvantages for others.”

Referring to what she called "bailouts" of Silicon Valley Bank and Signature Bank, Bair said "It’s extraordinary that they’re singling out just a couple of midsized institutions to basically bail out all their uninsured depositors. That is extraordinary. I have never seen that before. And the systemic-risk exception itself, which is the legal mechanism they’re using, is very extraordinary to trigger. It is meant to be used very rarely when things are really dire. . . . If they think just a couple of these small institutions have to be bailed out, how resilient is the system, really?" Later, Bair said, "At this point, I still think these risks can be managed. I think that Silicon Valley Bank in particular was unusual, in that it had a lot of uninsured deposits. And it was a very concentrated group of depositors … Silicon Valley folks. And word spread very fast precipitating a bank run and that had a cascading effect on some other banks that had somewhat similar vulnerabilities though not as severe." That said, "The FDIC and the Fed have quietly bailed out most uninsured depositors since 2008," notes Los Angeles Times Washington columnist Doyle McManus.

What about us? "I would say, if you have your money in a traditional community bank or regional bank, one where you banked for a long time, that has lots of households and businesses that do business with them, have done business with them for a long time, most of their deposits were insured or with institutions that have loyalty and multiple relationships with them — that’s the vast majority of the regional banks and community banks in this country. Stay where you are, right? Don’t get scared. If you’re a household, make sure you’re under the insured deposit limits," $250,000 per depositor, per bank, in each account ownership category. "If you are, the FDIC has a perfect record. … Again, I think most banks are okay. What we need to guard against is just contagion: otherwise healthy banks starting to lose deposits just because everybody gets scared."

The threat to smaller banks is a threat to small busienss, report Justin Lahart and Telis Demos of The Wall Street Journal: "Even if any outflows are halted or reversed, small banks may now grow cautious, such as by simply sitting on more of their cash as a defensive measure. Doing so would effectively reduce their capacity to extend credit. For small and midsize businesses that rely on smaller banks, this would be worrisome, says Raghuram Rajan, an economist at the University of Chicago’s Booth School of Business and former governor of India’s central bank. Loans to them are often based on so-called soft information that local lenders have built up over years." Rajan told the Journal, “These are loans built on strength of character and a handshake.”

Growth in cropland value slowed as interest rates increased

Federal Reserve Bank of Kansas City map, based on bank surveys

"Farmland values increased sharply in 2022, but growth slowed during recent quarters in some regions alongside higher interest rates," the Federal Reserve Bank of Kansas City said in a report March 9. "The value of nonirrigated cropland increased by an average of 15% from the previous year across all regions, following growth of more than 20% in early 2022."

The figures are based on surveys by the Federal Reserve banks that cover most of the nation's agricultural production. “Benchmark interest rates surpassed returns to farmland owners in recent months, which could put some downward pressure on growth in farmland values going forward," the report said.

Some local governments show the way to slaying medical debt with federal relief money, for pennies on the dollar

(Photo by Micheile dot com, Unsplash)

Do your local governments have some pandemic relief money that hasn’t been spent or appropriated? Perhaps they would be interested in helping to wipe out local residents’ medical debt for pennies on the dollar, as some have. "Local governments in Ohio and Illinois are using American Rescue Plan Act money to relieve residents struggling with medical debt by partnering with an organization that buys debt and wipes the slate clean for debtors. It’s a strategy advocates say could be duplicated across the country to help erase a multi-billion-dollar problem," reports Casey Quinlan of States Newsroom.

Toledo is an example where $800,000 of ARPA funds were used to erase eligible residents' medical debt and "Commissioners in Lucas County, of which Toledo is a part, also announced they would contribute $800,000 in ARPA funds," Quinlan writes. "The combined $1.6 million will go to RIP Medical Debt, a nonprofit based in New York, which buys medical debt from hospitals in bundles at a much lower price than the actual debt, allowing the money to go further." Michele Grim, a Toledo City Council member who pushed to have RIP Medical Debt help with the transactions, said, "This means that $190 million to $240 million of community members’ debt will be eliminated."

The sheer size of medical debt can be overwhelming for many Americans. "According to a Kaiser Family Foundation report published in June, 4 in 10 adults in the United States have some kind of medical debt, and 1 in 5 of those with health care debt don’t think they will ever be able to pay off their debt," Quinlan reports. "The Consumer Financial Protection Bureau estimates the total amount of medical debt in the U.S. at $81 billion, based on data from credit reporting agencies, but acknowledges its total is likely understated."

Allison Sesso, president of RIP Medical Debt, told Quinlan that more local governments have reached out to the group to use ARPA funds to wipe out medical debt after learning about Toledo's and Cook County’s efforts: “I think it was sort of a no-brainer for anyone that’s focused on health equity and the recovery, post-Covid, on their communities, to get rid of this medical debt burden from people as quickly as possible.”

Higher interest rates complicate life for many farmers

Spring wheat was harvested in Kentucky to make way for a soybean crop. (Photo by Amrira Karaoud, Reuters)

The short-term, variable-rate loans that most American farmers take out after fall harvest and before spring planting "to pay for everything from seeds and fertilizer to livestock and machinery" now carry higher interest rates, and "Producers are wrestling with how to pay for that debt," Reuters reports.

P. J. Huffstutter and Bianca Flowers interviewed 24 farmers and bankers and reviewed data from the U.S. Department of Agriculture and the Federal Reserve Bank of Kansas City. They found that some farmers are having to defer capital improvements because of higher interest rates.

"Montana farmer Sarah Degn had big plans to invest the healthy profits she gleaned for her soybeans and wheat this year into upgrading her planter or buying a new storage bin," they report. "Those plans have gone by the wayside. Everything Degn needs to farm is more expensive."

Some farmers try to get loans by the end of the year or early January "to take advantage of suppliers' early-pay discounts and to ensure they won't be caught short as global supplies of fertilizers and chemicals remain tight," Huffstutter and Flowers write. "This rising cost of credit is straining some producers' liquidity and prompting them to look at reducing fertilizer or chemical use, or plant fewer seeds next spring. That, in turn, could reduce crop yields, and place upward pressure on the cost of producing that food."

USDA gives debt-ridden farmers $800 million to make them current on debt payments or clear tax refunds from IRS

The Agriculture Department has given about $800 million in debt relief to more than 13,000 farmers as part of a $3.1 billion appropriation in the Inflation Reduction Act, Democrats' name for the last big spending bill they passed through Congress.

Payments were made Tuesday to farmers "who were facing the loss of their operations," reports Spencer Chase of Agri-Pulse. "Ag Secretary Tom Vilsack detailed a handful of investments he said would help make about 11,000 farmers current on their loans and help some 2,100 others facing Treasury Department action to direct tax refunds to debt repayment.

“The first order of business was to keep people on the land,” Vilsack told reporters. Chase notes, "USDA has had a foreclosure moratorium in place since the earliest days of the Biden administration in January 2021. That moratorium cites the national public health emergency due to Covid-19, and lifting of that emergency could also reinstate regular debt servicing protocols by the department."

USDA plans to use about $434 million to help producers that it expects "to have tough financial times," Chase reports. "A department release identified 1,600 'complex cases' where borrowers are on the brink of bankruptcy or foreclosure and another 14,000 cases where producers could receive help to 'avoid even becoming delinquent'." The cases will be worked by local Farm Service Agency loan officers.

"Vilsack said USDA is also working on a separate program, funded through a different IRA allocation, to help borrowers who feel they have faced discrimination from USDA," Chase reports. "A previous debt forgiveness program was challenged in the courts and was repealed in the IRA."

Quick hits: USDA lending system called outdated; rewriting the history of farming; who funds pink-slime publications?

The Department of Agriculture's outdated underwriting system hobbles rural lending, Maria Volkova reports for National Mortgage News.

America's lost crops rewrite the history of farming, Sarah Laskow writes for The Atlantic.

The Daily Beast names one billionaire who is funding "pink slime" journalism.

Montana wants to be the next wine country, from the Daily Yonder. 

The West is losing 1.3 million acres of sagebrush steppe per year, writes Sarah Trent for High Country News.

N.M. group pushes for a state public bank, citing N.D. example and touting benefits for small communities, farmers

Angela Merkert

Public banks – which are virtually non-existent in the U.S. – could be a major benefit to agriculture and other small, rural businesses, said Angela Merkert, the executive director of the Alliance For Local Economic Prosperity, in an interview with the Daily Yonder. The New Mexico-based alliance is working to push the state legislature to establish a public bank – a financial institution managed by the government in the public's interest.

North Dakota is the only state with a public bank, and that state had the lowest unemployment rate throughout the 2008 recession, a feat which Merkert said is creditable to an oil boom and programs of the bank. In New Mexico, one of the groups most interested in how a public bank could help small business is the New Mexico Food and Agriculture Policy Council. Lending programs from a public bank could help generate food processing businesses to keep the state's food production profits inside state lines.

"About 95 percent of our agricultural products go outside the state for processing and then we bring back 94 to 95 percent of those processed foods into the state," Merkert said. "A number of people involved in agriculture would like to see those percentages decreased."

Farmers relying on short-term loans that can be paid off "in the fall or early winter when the crops are in" could also benefit from a public bank, Merkert said. Fewer community banks support those types of short loans, but a public bank could step into that void. Opponents of the bank proposal, Merkert said, are often those who call for smaller government.

Consumer finances in rural Appalachia have fallen even farther behind the rest of the nation in the last 20 years

A new report from the Consumer Financial Protection Bureau examines the financial challenges faced by residents of rural counties in Appalachia. "On average, rural Appalachians earn less than other rural people across the country and significantly less than non-rural consumers," CFPB says.

Strikingly, the income gap is growing: "While the median rural Appalachian household income was 89% of the national median in 1999, it was only 69% of the national median in 2020." 

A possible contributing factor: "The share of rural Appalachians attending at least some college lies far below the national average—53% compared to 67% nationally."

Appalachians also have far less access to high-speed internet, says the report: "Only 76% of households in rural Appalachia have access to broadband, compared to 85% of households nationally. Eighteen counties—overwhelmingly in rural areas—lag with rates below 60%."

Consumer Financial Protection Bureau map, adapted by The Rural Blog

Credit-card statistics suggest that Appalachians from the poorest rural counties, those classified as "persistent poverty counties," are less likely to qualify for a card, and that those who do have a card are less likely to be able to pay it off, even though they tend to have lower than average balances on their cards. Appalachians in persistent-poverty counties were less likely to have a credit card and carried a lower average credit card balance than other rural Appalachians, other rural non-Appalachians, or the nationwide average. But those in rural persistent-poverty counties who did have a credit card were more likely to use it than those in other groups, and were more more likely to have delinquent debt on at least one credit card.

"Rural Appalachians are more likely to have a subprime or deep subprime credit score compared to all consumers nationally and consumers in the rest of rural America, which typically leads to a higher cost of credit," the report says. "Rural Appalachians are also more likely than consumers in other parts of the country to have medical debt collections on their credit record."

Biden issues student debt relief; legal challenges likely; rural areas have higher debt rates; see state-level statistics

President Biden announced today that he's canceling $10,000 in student loan debt for individuals who earn $125,000 or less per year or who live in households that earn $250,000 or less. He is also "extending a pause on payments for all borrowers until Dec. 31, capping months of anticipation over a campaign promise to provide economic relief to millions of people," The New York Times reports. Also, there is "$10,000 of debt forgiveness for students who received Pell grants in college, focusing the additional aid on people from lower-income backgrounds." Legal challenges are likely.

Though rural areas tend to have lower college-graduation rates than metro areas, student debt is a critical issue for many rural Americans. "Recent estimates indicate that 6.5 million people in rural areas across the country each owe an average of $35,000 in student loan debt, and that as many as 1.1 million rural student loan borrowers (nearly one-in-six rural borrowers) have fallen into delinquency or default (compared to roughly one-in-seven student-loan borrowers nationwide)," according to the Student Borrower Protection Center, a nonprofit that advocates debt relief. 

"Moreover, the student debt crisis is hitting rural states the hardest. For example, borrowers in the five states with the highest proportion of residents that live in rural areas (Wyoming, Vermont, Montana, Mississippi, and South Dakota, as defined by the U.S. Department of Agriculture) have a 3-year federal student loan cohort default rate that is over 25 percent higher than that of borrowers in other states (using an average weighted by the number of borrowers in the state, 12.3 percent v. 9.2 percent)." Here's a list of rural student debt data for each state, as of December 2020, from SBPC.

The Biden administration says that 90% of the announced debt relief will go to households that earn $75,000 a year or less. However, the move will likely face legal challenges, so it's unclear when or if it will go into effect, the Times reports: "On its face, the move could cost taxpayers about $300 billion or more in money they effectively lent out that will never be repaid. But the true cost is harder to calculate, and smaller, because much of that debt was unlikely to ever be repaid. More than 8 million people — one in five borrowers with a payment due — had defaulted on their loans before the coronavirus pandemic. Many of those people carried fairly small balances and will now be eligible to have their loans canceled."

The plan "reduces the maximum monthly payment amount from 10% of income to 5% and guarantees that individuals with incomes under 225% of the federal poverty level do not make a monthly payment," reports Ashley Spalding of the Kentucky Center for Economic Policy. "In addition, as long as those required to make payments do so every month, interest will not accrue."

The issue has been hotly argued for months; some oppose relief, saying it's unfair to those who have paid off loans or are current on them. Senate Minority Leader Mitch McConnell called it "a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our armed forces in order to avoid taking on debt." Some moderate Democrats on the ballot this fall also came out against it, "a sign of fears that it could alienate swing voters in November," reports Josh Kraushaar of Axios.

Others say $10,000 isn't enough, and still others say it's more important to reduce or eliminate interest, noting that many have paid off the principal many times over, but still owe as much or more than they started with because of interest, the Times reports. Still, the measures will help many. Some 33% of Americans with student loan debt owe $10,000 or less, The Washington Post reports: "Economists at the Federal Reserve say borrowers with the least amount of debt often have difficulty repaying their loans, at times because they did not complete a degree. Conversely, people with the highest loan balances are often current on their payments likely because of their higher education levels and associated earning power."

Consumer Financial Protection Bureau says rural areas face unique difficulties accessing banking services

The Consumer Financial Protection Bureau, an independent agency Congress created during the Great Recesssion, launched an initiative last month to focus on financial issues rural Americans disproportionately face. This week, CFPB issued a follow-up report detailing the banking disparities rural Americans often contend with.

"The report highlights that many of these communities lack access to physical bank branches, are more likely to seek credit from nonbanks, and are heavily affected by medical bills. The CFPB will be expanding its efforts to address these and other challenges facing the people and families of rural America," CFPB reports. "Local financial institutions, such as community banks and credit unions, often offer products and services that fit the local economic terrain. However, rural communities are experiencing a fast-paced exodus of in-person banking services, with rural communities 10 times more likely than urban communities to be located in banking deserts. In fact, the Federal Reserve has identified more than 2,100 existing and potential banking deserts across the country with more than 1,500 located in rural areas."

Other key findings of the report:

• Rural Americans are more likely to depend on brick-and-mortar bank branches and smaller banks.
• Rural Americans are less likely to have a credit history (i.e., have held and used a credit card). Lack of a credit card, or the credit history to get one, makes it more difficult to address short-term financial emergencies, seek new opportunities (such as moving or starting a business), or fill short-term income gaps.
• Unpaid medical bills affect rural access to credit, housing, and unemployment. Also, health-care and insurance costs tend to be higher in rural communities than in suburban or urban areas.

As part of its Rural Initiative, CFPB is conducting more research to figure out root causes of rural financial disparities, and plans to conduct roundtables with rural stakeholders across the country, as well as work with federal partners to improve rural financial policy. Rural residents are encouraged to use the CFPB's complaint tool to bring attention to shady, inadequate or inaccessible financial services.

Black farmers facing an under-researched mental-health crisis driven by debt, racism, and fear of displacement

Unpredictable natural forces, financial risks, and pure physical exertion make farming one of the most stressful occupations in the nation. "But Black farmers have to contend with an additional menace: the systemic racism that has long marred U.S. agriculture," Safiya Charles reports for The Counter, which defines itself as "a nonprofit, independent, nonpartisan newsroom investigating the forces shaping how and what America eats."

"These producers face down all the typical hardships while also navigating other hazards, including legal battles with the government, discriminatory lenders and opportunistic land grabbers," Charles reports. "These painful interactions tend to underscore the racist—and tragically long-standing—myth that Black people don’t belong in farming, and don’t deserve the tools required to succeed."

Louisiana sugar cane farmer Angie Provost told Charles that many Black farmers, including those in her and her husband's families, "have the same story: sitting there in a USDA office waiting to be serviced, and never being serviced properly; being told by local agents that you will not succeed," said Angie. "'You will fail.' 'You are not a farmer.' Those types of things are told to you directly." Only about 1% of farmers are Black, and advocates blame the declining percentage on decades of loan denials by the Agriculture Department and associated lenders.

"These grinding forms of discrimination take a deeply personal toll, contributing to a mental-health crisis among Black farmers that’s at once acute and yet hard to see," Charles writes. "Help is not exactly on the way. While programs do exist to help farmers handle the stress of the profession, many existing lifelines are geared toward the approximately 95 percent of U.S. farmers who are white, downplaying or outright ignoring the specific forms of distress that stem from race-based prejudice. Though a small but vital body of research points to the need for a more inclusive approach, and at least one advocacy group is working to better understand the scope of the problem, few efforts are being made to address the problem on the ground. For now, too many farmers still have nowhere to turn, their suffering largely rendered invisible within the support systems that exist."

Government programs meant to tackle farming stress don't generally tend to the unique needs of Black farmers. "In 2021, the USDA announced $25 million to state Farm and Ranch Stress Assistance Networks to build crisis hotlines, establish anti-suicide trainings, and offer free or low-cost counseling, among other services," Charles reports. "It was an important step toward recognizing the emotionally grueling, often isolating nature of farm work. But it did little to respond to the needs of Black farmers, who tend to operate smaller farms, face increased economic pressure, and are routinely exposed to racism in agriculture and beyond. Of the 50 FRSAN projects USDA funded in 2021, only seven—in Maine, Massachusetts, Minnesota, New Hampshire, New Mexico, North Carolina, and Rhode Island—pledge to make efforts to accommodate the specific needs of communities of color."

More researchers are beginning to examine racism in farming. "Kentucky State University economist and rural sociologist Marcus Bernard worked with farmers in Alabama’s Black Belt region as the former director of a rural training and research center for the Federation of Southern Cooperatives, a nonprofit association of about 20,000 mostly Black farmers and landowners," Charles reports. "While completing his Ph.D. at the University of Kentucky, Bernard examined how racism, institutional racism, and class conflict affected Black male farmers. His research identified high levels of acute stress in both African American men and women farmers," including farm wives.

Non-profit helps Black entrepreneurs in Mississippi Delta

Tim Lampkin (NPR photo by Kirk Siegler)

"The mostly rural Mississippi Delta has long been synonymous with racial and economic inequality. Yet today there are a growing number of small, economic bright spots, due in part to a grassroots effort that's trying to right some of the wrongs of the past," Kirk Siegler reports for NPR.

Though the Delta's population is mostly Black, relatively few Blacks own businesses, especially Black women. There are a number of reasons: distrust of banks, banks' reluctance to lend to Black entrepreneurs, lack of local role models and more, Siegler reports. But non-profits like Higher Purpose Co. are mentoring Black business owners, assisting with everything from securing grants and loans to navigating everyday operating issues.

Tim Lampkin, 35, founded Higher Purpose when he moved back to his hometown of Clarksdale after working in corporate America. He noticed that most local businesses were white-owned, even though more than 80% of the town's 15,000 residents are Black.

Ensuring that people of color can succeed as entrepreneurs is critical, according to Bill Bynum. He has worked to help Black entrepreneurs in the Delta since the 1990s, and has served as a White House economic advisor to Republicans and Democrats, including Joe Biden. "People of color are an emerging majority and if we leave the emerging majority of Americans on the outside of the economy, then we are really in for trouble," Bynum told Siegler.

Rural banker survey finds record-high farmland price index, 12 straight months of sunny local economic outlook

Creighton University chart compares current month to last month and year ago; click here to download it and chart below.

A November survey of rural bankers in 10 Midwestern states that rely on agriculture and energy marked 12 straight months of positive outlooks on economies in about 200 rural communities with an average population of 1,300 in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

The Rural Mainstreet Index rose to 67.7 from October's 66.1, and the farmland price index hit a record-high 85.5, up from 81.5. "Readings for farmland prices and equipment sales over the last several months represent the strongest consistent growth since 2012" writes Creighton University economist Ernie Goss, who compiles the index. "Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy."

However, labor shortages continue to plague rural businesses; Bureau of Labor Statistics data show nonfarm employment in Rural Mainstreet states remains 2.5% lower than before the pandemic. Some bankers also worry about the infrastructure bill; asked what parts of it would most help agriculture, 30% said it has too many negatives to help at all, while more than a fourth each said it would help most with broadband and waterways.