The State of Our State

Welcome to a new year, fellow Hoosiers.

Given that 2016 will be an election year, Hoosiers will hear lots of rhetoric about Indiana’s economic performance, both from the incumbent administration and those seeking to replace it; a credible analysis of that performance is thus essential if we are to separate the wheat from the chaff.

Morton Marcus is an economist who spent nearly 40 years at IU’s Kelley School of Business,  where he presided over a center that generated data about Indiana’s business climate. He is now retired (but by no means retiring), and he still writes a column carried by a number of newspapers around the state.

A recent Marcus column measured Indiana’s economic performance.

Let’s start with Real Gross Domestic Product (GDP), which Marcus defines as  “the value (adjusted for inflation) of all the goods and services produced in a nation or a state, over the course of a year or a quarter of the year.”  “

And how has the Hoosier state done by this measure?

The United States’ Real GDP has grown by about 13 percent in the last decade, while Indiana has added only 7 percent….If you look at the nation’s Real GDP each spring (the second quarter of the year), the progress made by Indiana every year since 2012 lags the growth of the nation. Indiana ranked 32nd with 2.8 percent compared with 5.8 percent for the U.S.

Then there is the question of jobs and wages.

The total of wages and salaries takes into account both how many people are working and what they make for their labors. Nationally, from the third quarter of 2005 to 2015 and after adjusting for price changes, wages and salaries grew by 13.2 percent. Here, in the Hoosier Holyland, the growth was 5.5 percent.

The news isn’t unremittingly negative: as Marcus tells us, “Non-durable goods were a winner; Indiana up one percent while nationally that sector was off by seven percent.”

But in durable goods, like autos, RVs and steel, the news was less cheery: “Indiana was down eight percent at the same time the country slipped six percent.”

All in all,

Over the past decade, the nation’s output and wages both grew by about 13 percent. In Indiana, however, they both trailed the U.S.; Hoosier output (Real GDP) grew by only 7.1 percent and wages by a mere 5.5 percent. Why aren’t Hoosier businesses and workers keeping pace?

As we head into 2016 and the inevitable political spin, it may be worth revisiting this analysis of actual economic performance—and considering whether we’d be better served by replacing our current Governor with someone less fixated on protecting retailers who want to refuse service to same-sex couples, and more committed to conventional economic development.

16 thoughts on “The State of Our State

  1. I’ve lived here a long time and have finally decided it’s time to give up. My New Year’s resolution is to move somewhere else.

  2. I have always believed that it’s closer to true than not that the government’s influence on the economy is minor. Good economic performance is mostly dependent on innovation and most economic ills are reactions to business cycles.

    However that doesn’t restrict political candidates from talking endlessly about what they will do about the economy and promising jobs for everyone and a chicken in every pot. Promises that they will consider fulfilled if they are lucky enough to be in office when good things happen to happen.

    It is true however IMO that good government floats all boats over the long term. Very long term.

    Business has worked hard to keep out of the headlines by advertising government incompetence. Part of the natural competition from government’s responsibility to regulate business into compliance with our priorities. Business’s one priority, make more money regardless of the cost to others, just doesn’t fulfill all of our expectations. Our government regulates all of their shortcomings.

    Many businesses apparently feel that it’s cheaper to buy compliant government and minds than comply with regulations. That’s the end of the analysis that they perform. Cheaper is always better to them.

    Often though cheap for them is unaffordable to us.

  3. Wages never really rise on their own and more than one factor causes upward cost of labor. One is simply demand when business is competing for your labor they will do what ever it takes, including raising wages, to get the help they need. Two for the lower middle class has always been labor unions but the era is nearly gone and if some who project such trends say unions will be completely gone by 2025 unless the laws age changed again to encourage union membership. I don’t see that happening with the current political landscape. Both political parties say they want a stronger middle class but neither of them are willing to accept unions as the answer.

  4. Happy New Year Sheila and to the amazing Morton Marcus as well!!

    I sure am glad that Dr. Marcus is still at work telling the truth about the Hoosier economy as it continues to lag behind the nation statistically. It’s fairly obvious, regardless of one’s political affiliations, that at some point we will need a Governor that will lead and actually fix things that need to be fixed here in Indiana and not just be an ideologue. All of this continual ’tilting at windmills’ at the expense of credible governance will have to stop.

  5. Can a new governor accomplish much given the lineup in the Indiana legislature? There seems to be an inertia there that will be difficult to overcome in the absence of a free press and with the overlay of systematic voter disenfranchisement. The campaign needs to be larger than the governor’s office.

    Come to think of it, it needs to include all of the city and county offices too.

  6. The business climate seems to function best when people sort of leave it alone and when people feel good about spending money. From that perspective, when the population and business view things as being O.K., things seem to stay/get better. From that standpoint, business is conservative.

    On the other hand, while our governor and legislature is ostensibly pro-business, they have done some things which really soured the atmosphere while catering to the social “conservatives” (in quotes because they are more reactionary than conservative). The “religious freedom” bill helped do-in the business climate, but the fact that the state has not contributed to the quality of life–the education environment, as measured by the number of people who actually want to teach here, and our crumbling infrastructure–which sends a bad message to businesses that want a good quality of life for employees and positive environment to transact business. The message I hear from legislators is “Don’t attend our public schools”, stemming from their need for negative demagoguery. Surely I’m not alone in that perception.

    In addition to those factors, that state of affairs also sends a message to people graduating from our universities: this is a bad place to work. The data show that only a minority of professionals educated in Indiana actually remain here. In fact, if you have an advanced degree in this state, people are more likely to be threatened by you than welcoming. An Indiana author said that many good people come from Indiana, and the smarter they are, the sooner they leave it. In fact, as I understand it, the only jobs that are really growing are the low-wage fast food and service groups that use local people who may not have the flexibility, training or education to move elsewhere.

    Pete’s comment about good government serving to float all boats is right on, but I would like to extend it. When business, education, government and its services are viewed as positive, that tends to improve the perceptions of the entire environment. The northern suburbs of Chicago come to mind, where people have a long tradition of investing in infrastructure, schools and the general quality of life. That has attracted excellent people over the years who, in turn, contribute to that quality. The residents stand on the shoulders of people have preceded them. Pete also said that this improvement happens over the very long term. Absolutely. People in Indiana who think that one big business, one excellent governor or one outstanding school system will “fix” things are mistaken. It requires long term commitment over a broad number of areas. We have failed that test.

  7. I am waiting for a credible candidate to step up to the plate and run for the governor office. As of now, it seems that we are in for more of the same uselessness of Pence.

    I believe that there is not a Democrat out there that thinks they have even a slight chance of becoming our governor. At this point I would be content with just voting in a more reasonable and intelligent Republican.

    Gerrymandering continues to ruin our state.

  8. Interesting and telling statistics; has anyone made the same comparisons between Republican and Democratic states? Also comparing education statistics between the two factions, and they are now factions, widely separated and diversely represented at all levels of government – local and federal. What are the high school and/or college graduation statistics between red and blue states?

    Notation in the Star today; Ballard reported a 4.4% unemployment rate locally and announced (we already received this news) he had vetoed the bill to require reporting of all lost and stolen weapons. The latter is part of the content of President Obama’s bill regarding gun control – which we will see in the media reported as “he’s coming to get your guns before he leaves office”. Not even close to what the bill states or why. I wonder what statistics between purchasing weapons and purchasing books would show, other than required school books? I also wonder what are the politics of those buying weapons and those buying books…if they bother to have a political perspective rather than religious, racist, bigoted or xenophobic?

    The overall outlook for 2016 is gloomy at best; we in the liberal group are David fighting the Republican Goliath currently in control. I believe the politics between red and blue states would give us some answers regarding the national statistics on all levels.

  9. A rising tide, contrary to President Kennedy’s observation, does not lift all boats because the poor and working classes have no boats to lift. Likewise, you cannot pull yourself up by your bootstraps if you have no boots. I do not agree that we must all sit and wait for business cycles to turn this way or that in some inexorable form of invisible hand happenstance, especially when Keynesianism (as adopted by government) is a proven set of policy choices that has historically and demonstrably shown us how to end or ameliorate the horrors of the Great Depression and other downturns in the economy. The old “business cycle” theory of ups and downs has been proven to be very sensitive to government intervention via policy. There is little to show that “laissez faire” treatment of doing nothing and waiting for “the market” to turn solves or softens downturns in the economy. (See Coolidge, Hoover, the Great Depression et al.)

    Government intervention via Keynesian policies of carrots and sticks works to solve market problems via increases in employment and wages and (thus) demand, which in turn reinvigorates and stimulates “the market” to reassume growth. Government should not be a bystander in the Hoosier or any other economy but should rather adopt policies and engage in strategies that stimulate aggregate demand, the final arbiter of economic activity. Far from being a mere bystander, it should rather be a participant in the maintenance of market equilibrium and serve as crucial component in early recognition and regulation of the now outmoded concepts of “business cycles.” Contrary to the assertions of Wall Street and other status quo exponents who have a vested interest in failed market solutions, it is time to tell them that this economy is ours and not theirs to manipulate for their own ends and that our elected representatives will set the rules and regulations for their participation in our economy that look to the peoples’ interests and not their bottom lines (even though their bottom lines will greatly improve with Keynesian-fed increases in demand).

    Finally, we live in a world these days of international demand with globalized markets, and government rather than private enterprise is the only entity empowered to enter into agreements with such other entities (trade, tax, labor standards, capital movement, etc. – even though as a practical matter Wall Street lobbyists currently write our trade and tax treaties). It is time for the peoples’ representatives to negotiate such international understandings on behalf of the people who elected them and their interests (labor, environment etc.) rather than the bottom line interests of big banks and multinational corporations.

    Perhaps unfortunately, the solution for correcting these wrongs and adopting what works for the people involves a political process that has been blurred by incessant propaganda of Fox News and others intent on profit-making irrespective of how their greedy myopia adversely affects America and its people which, simply stated, means we have to change politicians, so let’s get on with it.

  10. Given the gutting of America’s industrial and manufacturing base via NAFTA, and Permanent Normal Trade Relations with China the opportunity to grow the economy is limited at best. Instead of having trade treaties that raised the standards of living around the world, American workers have to compete with sweat shops. The war against Unions goes on unabated. I cannot recall the Democrats in this state vocally and loudly supporting Unions.
    We can try to hang our hats on higher education, but that is only available for those that can afford it or choose to go into debt.
    The Trumpets call to arms to make America great is hollow rhetoric. He never explains the details of his plan. The Trumpeters inhale the smoke, and look at the glittering objects in the mirrors.

  11. Sheila recently showed the comparison between MN & WI w MN far ahead in terms of revenues generated and tax surplus. Poster boy Scott Walker’s conservative policies are failing. A larger sample would be interesting, maybe instructive.

  12. daleb; yes, those are the types of statistic I referred to. Political differences are no longer opposing political views; they are opposing lifestyles, humanitarian considerations and actions, compartmentalizing people into specific groups and deciding their value in and to society, the haves vs. the have-nots seems to be uppermost in these decisions. America is becoming a nation with a caste system; Indiana with one of the highest rates of separatism regarding what used to be high-income vs. middle-income with those now living in low-income and poverty levels rising at an alarming rate. This is obvious in the statistics in Sheila’s blog today. I have seen the decline in my own small neighborhood; when built in the mid-1950’s till about 10 years ago this was a very nice middle-income area; now tightly clinging to low-middle-income status by our fingernails.

    Disheartening personally because I cannot sell my home for the assessed value the Treasurer’s Office lists on my property taxes; IF it could be sold it would mean a $15,000 to $20,000 loss over the $67,900 I paid for it 10 1/2 years ago. I don’t remember seeing real estate statistics in the blog (could have missed or forgotten); this is one of the greatest expenses and longest lasting debts we will have in our lifetime. We obviously should have met George W. Bush’s two terms in the White House carrying a large jar of Vaseline with us at all times. I’m still feeling the effects of that administration; doubt it will be gone in my lifetime…but ridding all government of as many Republicans as possible would be a good start.

  13. JoAnn, Perfect! Your comments are always right on target and add much to this blog. Thank you and Happy New Year to you and all others reading this today.

  14. JoAnn, you can appeal the assessed value of your home. Just find sales for comparable homes in your neighborhood (or nearby) and then show those to the assessor, along with your written appeal. If you can prove that your home is not worth what it is assessed at, they will have to reduce the assessed value for tax purposes.

  15. Theresa; thanks for the kudos.

    Nancy; thanks for the information.

    I am wondering why there are so many of us sitting at home on our computers on this holiday:) Glad we are; this blog has garnered much attention, it appears we are not happy with the state of this state. The only thing to do is vote to change it.

    Happy New Year to all of you, may 2016 be kinder to us than 2015 has been.

  16. Shelia: I agree with JoAnn — It is sad to have so many of your readers write so much about one of my columns as their first activities on New Year’s Day.

    I do thank you for bringing my efforts to the attention of your very responsive, often loquacious readers. If your readers would like to receive my column each week, free of charge, and not wait until you have vetted it, they may send me an email at: mortonjmarcus@yahoo.com.

    Free will gifts and offerings are always welcome, but not necessary.

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