Gubernatorial candidates Daniels, Thompson see economic development differently

October 20, 2008

Democratic gubernatorial candidate Jill Long Thompson promises to buoy Indiana's slumping rural counties with a three-tiered incentive plan.

Republican Gov. Mitch Daniels has a different vision for stoking the state economy.

He wants to build on Indiana's strengths--such as world-class research at universities--to innovate and create jobs. That, he believes, will improve the well-being of the entire state.

The two major-party candidates for governor agree on little about economic development or the state economy. Daniels contends the state's glass is half full and rising, thanks to his leadership. Thompson argues it's half-empty, and draining fast.

The Nov. 4 election may turn on whether Hoosiers feel optimistic or gloomy about their job prospects. With the stock market tumbling and the economy likely headed for a deep recession, pocketbook issues have taken center stage.

"All the polling shows the economy is not merely the dominant issue, but really the only issue on most voters' minds right now," said Indiana University political science professor Russell Hanson. Daniels, 59, considers economic development his calling card.

In his first campaign, he promised to modernize the state's economy by cultivating--and delivering--the jobs of the future. Today, he acknowledges there's more work ahead. But only after ticking off his long list of items "done."

Thompson's attacks sound strikingly similar to Daniels' broadsides against Gov. Joe Kernan four years ago.

Back then, Daniels hammered hard on Indiana's woeful economic statistics, including that Hoosiers' per-capita income badly lagged the national average.

Now, Thompson, 56, is using that same per-capita income measure against the governor, pointing out that Hoosiers earn just 87 cents for every $1 earned nationally.

She regularly pins the blame for small-town plant closings and Indiana's rising unemployment rate on Daniels. And she bemoans the state's high rate of bankruptcy and home foreclosure--problems she says she would address by slowing down those processes, giving Hoosiers more time to get back on their feet.

Her platform also includes emphasizing "green" jobs and retooling Indiana's taxes and incentives to help home-grown companies, rather than recruiting firms from out of state.

In contrast, Daniels prides himself on providing rapid responses to basic business needs.

His Indiana Economic Development Corp. attempts to build upon existing strengths, such as road improvements funded by the $3.8 billion lease of the Indiana Toll Road.

Daniels has made getting maximum bang from economic development investments a priority. The state ties certification of technology parks to job creation, and awards money from the 21st Century Research and Technology Fund to businesses based on their prospects to rapidly commercialize new products or services.

Contrasting outlook

Daniels concedes a national recession is looming, and that many macroeconomic factors are outside the state's control.

But that's the very reason, he says, the state must work hard to fight against the tide. Indiana is in a much better position to weather the storm, he argues, thanks to its balanced budget, its business-friendly tax climate and his administration's aggressive efforts at job attraction.

His biggest economic-development plum to date: landing the new Honda plant, which began commercial production this month in Greensburg. The plant is expected to employ 2,000 by 2010.

The project, he said, is one of the fruits of his administration's push to help boost small cities and towns, those with populations below 25,000. He said such communities have landed more than half the jobs recruited to the state since he took office.

"Though we are feeling the effects of the global economy, we're holding our own, especially as compared to a number of other states facing deep deficits," Daniels wrote in response to IBJ's questions.

The governor has a hopeful view on the per-capita income issue, as well. It'll take time to reverse trends that have dogged Indiana for decades, he said. Indiana is making strides, he wrote, diversifying its economy and improving the skills of its work force.

Thompson, on the other hand, is working hard at placing all the nation's woes at Daniels' feet.

She said she would work closely with Congress and the president to make international trade agreements more favorable for Hoosiers.

And she wags her finger at what she considers Daniels' bleak record running President George W. Bush's Office of Management and Budget early in his administration.

"Gov. Daniels was one of George Bush's top economic advisers and the architect of the biggest deficit in the history of the world. Deficit federal spending is a factor in our economic problems," she said.

"A trillion dollars is being spent in Iraq," she continued. "The president misled the public and it's important to put pressure on presidents to stop that kind of thing from ever happening again."

Those kinds of arguments sometimes gain political traction. But they don't hold much water with an economist.

"We're probably stuck with a recession. It's certainly true that governors can't do anything to avoid a national or global recession," said Indiana State University economics chairman John Conant. "That said, a governor can enact policy that minimizes the pain."

Rising unemployment

Daniels acknowledges unemployment--which now stands at 6.4 percent--is up during his term. But he points out that the state nonetheless has eked out a 30,800 net gain in jobs. He also notes that Indiana's unemployment rate is substantially below that of Ohio, Illinois and Michigan.

"Unemployment has risen in 48 states this year, and our rate is likely to follow the national trend," Daniels wrote.

"Until midyear this year, our unemployment rate was lower than it had been for six years, but we are not immune from the negative effects of national economic factors, such as rising gas and diesel prices, which have directly impacted the RV and auto industries."

Thompson paints an entirely different picture. She said Indiana lost jobs this summer faster than any of its neighbors.

"Since last summer, we've lost 64,000 jobs. Our unemployment rate hasn't been this high since 1987," she said. "I just think it's a very critical time and the state needs new leadership growing the economy."

The wild card in the governor's race is Libertarian Andrew Horning, 50.

In his view, Indiana should continue Daniels' approach, but in overdrive.

Horning would dramatically reduce both taxes collected and government services provided in Indiana. He believes the result would make Indiana the most attractive place in the nation for businesses to locate.

Horning noted the parallels between these tough economic times and the Great Depression.

"In 1929, the governor cut dramatically what Indiana government does," he added. "And because it did, it put us in a pretty fair position during the [Second World] War and after, and allowed us to spring back pretty quickly."

View from the ground

Thompson is hoping the ire of voters in the most distressed parts of the state, along with a ride on Sen. Barack Obama's coattails, will help her prevail at the polls.

But her economic arguments aren't always resonating where they're aimed. For example, even though she's a farmer and former U.S. undersecretary of agriculture, she wasn't able to secure the Indiana Farm Bureau's powerful endorsement.

IFB isn't backing either candidate. Bob Kraft, IFB's director of state government relations, said his organization endorsed Daniels in 2004 and remains pleased with his economic-development performance. Some farmers question the property-tax-reform plan and daylight-saving-time plans Daniels pushed through the Legislature. But not enough to move Farm Bureau over to Thompson.

"The Daniels administration has gone out of its way to promote agriculture as an integral part of the Indiana economy," Kraft said.

On the other hand, Thompson's focus on economic distress plays well in Fayette County, which once was an auto-manufacturing hub but now has the state's highest unemployment, 11.2 percent.

"I am a little aggravated with Mitch Daniels because he doesn't respond as quick as I'd like," said Leonard Urban, mayor of Fayette County's seat, Connersville. "There are some counties that need extra help. Don't just let us sit here and rot on the vine."

Neither candidate is likely to be able to fix the state's problems overnight. The full impact of economic policies aren't felt for years.

That's why Democrats and Republicans are able to use the same stats against each other election after election.

"Four years is enough time to turn a ship," noted Conant, the economics chairman. "But it's not enough time necessarily to overcome decades of problems."

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