Tulsi Gabbard fact check on farmer bankruptcies, median income
Farmers are declaring bankruptcy in “record numbers” and President Donald Trump is to blame, said Democratic Representative Tulsi Gabbard. The Hawaii congresswoman is running for president in the 2020 election.
“Trump’s unstable and ill-conceived trade wars are pushing farmers into bankruptcy in record numbers,” Gabbard said. tweeted February 19. “Median US farm household income was -$1,548 in 2018. That’s crazy. We need leadership in the WH that provides the stability and support small farmers need to thrive.”
Is it true that farmers are declaring bankruptcy in record numbers? Historical data does not prove his claim. What about the median income of farmers? Gabbard’s tweet paints an incomplete picture. Experts said it was too early to assess whether the administration’s trade policies — however characterized — are a factor in bankruptcies.
National Farmer Bankruptcy Data
Historical bankruptcy data does not support Gabbard’s claim about “record” filings among farmers. There are several types of bankruptcy proceedings that individuals and corporations can file when they experience financial difficulty or are unable to repay a debt. The filing or “chapter” of bankruptcy law that most directly applies to farmers is Chapter 12, created after a farm financial crisis in the 1980s.
Chapter 12 allows family farmers and family fishers to reorganize their debt and continue to operate. Farmers must meet certain criteria to be eligible for Chapter 12, including a debt cap that is currently around $4.15 million. (The debt limit is updated every three years to account for inflation.)
Bankruptcy court data shows the number of Chapter 12 filings over a period of time. The data is not disaggregated by the number of declarations from fishermen and the number of declarations from farmers. But experts told us it’s safe to infer that most are farmers.
Regardless of the time period we looked at, Chapter 12 filings are not at record highs.
In fiscal year 2018, there were 468 Chapter 12 filings. This is less than the number in fiscal year 2017, when there were 508 Chapter 12 filings. Looking back, there were 707 filings in fiscal year 2010.
Chapter 12 filings in calendar year 2018 (498) were slightly lower than 2017 (501) and lower than several other recent calendar years. In calendar year 2010, there were 723 Chapter 12 filings.
Chapter 12 filings for the 12 months ending June 2018 were also lower than for the same period in 2017.
Researchers at Ohio State University told PolitiFact that farmers and fishers, especially those who exceed the Chapter 12 debt limit, can also file for Chapters 7 and 11 bankruptcies. Chapter 12 are only a subset of all bankruptcy cases filed by farmers. But even then, Chapters 7 and 11 bankruptcy filings in 2018 were not the highest on record. (It is unclear how many of these were from farmers.)
The Federal Reserve Bank of Minneapolis said in November 2018 that Chapter 12 bankruptcies were on the rise in the Ninth District. The Federal Reserve Bank’s analysis focused on deposits from Montana, South and North Dakota, Minnesota and Wisconsin.
“In the 12 months ending June 2018, 84 farms in the Ninth District states had filed for Chapter 12 bankruptcy protection, more than double the level seen in June 2014,” said the bank.
It’s unclear whether Gabbard’s claim is based on the Federal Reserve Bank of Minneapolis’ November report — his team did not respond to our repeated questions.
But there is not a single region in the United States that reflects “national” agricultural production, because different types of crops, agriculture/livestock, specializations occur across the United States, a said by email Ani Katchova, associate professor in the department of agriculture, environment, and development economics at Ohio State University, and Robert Dinterman, postdoctoral fellow in the Farm Income Enhancement Program at Ohio State University .
Overall, bankruptcies aren’t at an all-time high and the numbers don’t support stories of a major crisis, said Ed Flynn, a consultant at the American Bankruptcy Institute.
Gabbard’s tweet said Trump’s “volatile and ill-conceived trade wars” were pushing farmers to file for bankruptcy in record numbers. But a policy, whatever its nature, usually won’t lead to bankruptcy in the short term, and bankruptcy numbers alone aren’t enough to indicate that a policy is driving it, experts said.
“Someone could look at the same data and turn it around to say the bankruptcy rate is just a fraction of what it was 20 or 30 years ago,” Flynn said.
Median income of farmers
Gabbard tweeted that “median US farm household income was -$1,548 in 2018.”
This formulation does not say everything.
Farmers’ income typically comes from both farm and non-farm sources, so the financial well-being of farm households is determined by both incomes, according to the U.S. Department of Agriculture.
The median farm income for 2018 was forecast at -$1,548, down from the median farm income of -$800 in 2017 (figures in nominal terms, unadjusted). But 2018’s negative numbers aren’t entirely unusual. “In recent years, just over half of farm households have had negative farm income each year,” the USDA said.
Yet many households depend on non-farm income (such as the education, construction, and healthcare sectors) and that median income actually rose from $67,500 in 2017 to $69,418 in 2018.
Taking into account off-farm and farm income, the median farm household income is expected to reach $76,594 in 2018, the USDA said in November 2018.
Without mentioning off-farm income in his tweet, Gabbard gives the misleading impression that the overall median income of farmers was negative in 2018.
Households that derive most of their income from off-farm employment are not as affected by changes in farm costs and returns as large commercial farms, but they may be more sensitive to changes in the wider economy, a said the USDA.
According to the USDA, negative farm income can also reduce income taxes paid on nonfarm sources of income.
Just because a farm has a net loss doesn’t mean it isn’t contributing to a household’s well-being, according to an August 2018 USDA report.
“A farmer may experience a net farm loss in most years, but be economically sound by continuing to farm when total economic returns are considered,” the report said. “For example, a farmer may have negative net farm income but anticipate substantial long-term capital gains and use short-term farm losses as a tax deduction to increase returns from other sources of income.”
Gabbard said farmers were declaring bankruptcy “in record numbers” and “the median income of U.S. farm households was -$1,548 in 2018.”
Bankruptcy filings are not at record highs. Chapter 12 filings in 2018 were lower than in 2017 and other recent years.
And Gabbard’s formulation for median farm household income is misleading. Median farm income was projected at -$1,548 in 2018. But this is not representative of a farmer’s overall median income. Farm household income includes non-farm and farm income.
The median farm household income (off farm and farm) for 2018 is expected to reach $76,594 in 2018.
Gabbard’s assertion contains an element of truth but ignores critical facts that would give a different impression. We rate it mostly wrong.