CORRECTION: An earlier version of this column contained a factual error. I stated that Indiana’s inflation-adjusted state gross domestic product grew at only a 1.9 percent annual rate last year as compared with 2011 levels. The correct rate is 3.3 percent, nearly as high as Minnesota’s 3.5 percent. This has been corrected in the text below. Coming out of the recession, growth of GDP has been nearly the same for the two states. However, over the longer run, the overall growth for Minnesota is somewhat higher. The cumulative total increase for the decade from 2002 through 2012, that includes the bubble, recession and the recovery so far, is 16.1 percent for Minnesota versus 13.7 percent for Indiana. — Edward Lotterman
When you compare the social and economic performance of different states or countries, it is best to consider a broad range of measures. Cherry-picking one attribute while ignoring others that may be related can lead to self-defeating policies.
This is my advice to the local Center of the American Experiment on its decision to bring in Mitch Daniels, president of Purdue University and Republican governor of Indiana from 2005 through 2013, as the keynote speaker for its fall briefing on Monday at Orchestra Hall in Minneapolis.
(Daniels also was George W. Bush’s first director of the Office of Management and Budget, heading it during the preparation of the budgets for fiscal years 2002-2004 and during passage of the two Bush tax cuts of 2001 and 2003. In this, he holds the dubious distinction of having overseen the worst deterioration of federal finances of any director in the post-war period.)
The center’s announcement asserts that, in contrast to Minnesota, “Indiana … has been leading the way when it comes to taxing less, spending less, but doing government better. The governor most responsible for Indiana’s great success was Mitch Daniels … .”
During Daniels’ time in office, Indiana’s state workforce dropped by 18 percent, property taxes were capped, and state spending grew by less than inflation. Daniels also succeeded in getting Indiana, a state that once had a strong labor union movement, to enact a right-to-work law.
So the center is correct that Daniels has some experience in taxing less and in restricting spending. And perhaps Indiana government is doing better than it was pre-Daniels. But it still is doing a lousy job, and Minnesotans would be crazy to choose it as an example to emulate.
Indiana is a state that some have termed the “Argentina of the Midwest” in that — compared with other states with similar human and natural resources — it does poorly in meeting the needs of its people.
On almost any conceivable economic or social indicator, Indiana compares badly with Minnesota. In some cases this may be for reasons entirely outside of government, but in others it is clear that Minnesota has more effective government.
Before exploring this further, let me clarify some issues.
First, I have no animus against Daniels. He is clearly a bright guy. Had he run in 2012, he clearly would have exceeded the other GOP presidential candidates in his understanding of economic policy issues.
Moreover, he was a protege of a particular hero of mine, former Sen. Richard Lugar, whom I have admired for 45 years. If Lugar chose Daniels as a key aide for 10 years, that says something. Daniels also worked with Bill Ruckleshaus, another Hoosier Republican I admire.
Now let’s look at a few Indiana-Minnesota comparisons:
By any standard, incomes are higher here. Minnesota’s 2012 per capita income of $46,227 is 25 percent higher than Indiana’s. Looking at median household income, our lead is 16 percent. If you prefer per capita state gross domestic product, Minnesota is 20 percent higher than Daniel’s state.
Moreover, this gap is growing. In 1992, Minnesota only beat Indiana in per capita income by 11 percent versus today’s 25 percent. In median household income, the gap went to 16 percent from 8 percent over the same period.
We are coming out of the recession in better shape, with output here growing at an annual 3.5 percent rate compared with Indiana’s 3.3 percent. Our unemployment rate has fallen three points, from 8 percent in 2009 to 5.1 percent now. For Indiana, the drop is just over 2 percentage points, from 10.4 percent to 8.1. Note that Indiana’s lower jobless rate still is higher than ours was in the key recession year.
This gap is usual, if one goes back decades, Indiana’s unemployment nearly always has been higher than ours.
Minnesota’s social indicators are better, with our life expectancy of 81.1 years compares their 77.6.
Our state ranks second in the nation, Indiana 39th. Our infant mortality rate is 4.5 per 100,000 compared with their 7.6. Minnesota’s rank is fourth from the top, theirs sixth from the bottom.
Hoosiers’ adult illiteracy rate is a third higher than Minnesota’s. Our percentage of adults who graduated from high school is 5 percentage points higher, and with bachelor’s degrees nine points higher.
Minnesota’s poverty rate is 8.1 percent while theirs is 12.6 percent. Their incarceration rate of 442 per 100,000 is 2 1/2 times ours of 179. Only 9 percent of Minnesota households with children lack health insurance while 16 percent do in Indiana.
One could go on, but the same theme repeats again and again. Hoosiers have lower incomes, are more likely to be poor, are less well educated and have poorer health than Minnesotans. Do we really want to emulate that state’s policies?
Of course, only some of these factors are affected by state-level policies.
But state governments can and do have considerable influence on how well their economies and societies perform. Historically, Minnesota benefited from bipartisan agreement on this point.
GOP leaders such as former Gov. Elmer Anderson and legislative leader Charlie Weaver Sr., who together helped craft the “Minnesota Miracle” restructuring of state and local finances a generation ago exemplified this approach.
So, in a less prominent way, did Harold LeVander and Al Quie. All supported the responsible spending on education, public infrastructure and health that has had a big economic and social payout. But all would be deemed RINOs, or Republican in name only, in today’s GOP and I doubt that any would be chosen by the Center of the American Experiment to share their ideas.
There is one final irony.
Daniels is lauded for his success in reducing Indiana state employees. Supposedly we should imitate that. But after his eight years in office, Indiana still has a higher proportion of its labor force working for the state government than does Minnesota, 3.1 percent v. 2.8 percent.
Will some conservative think tank in Indiana summon Minnesota’s DFL governor to give them pointers on how to structure lean and mean state government?
One wonders.