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Feelings may contradict economic facts

March 9, 2009

In this space last week, I wrote that the Great Depression ended in 1937. Several readers reminded me that for those who lived through it, the Great Depression did not feel over until much later. For some, hardship and denial did not end until well after World War II. Others failed to see significant improvement until the Korean War had come to a conclusion in the mid-'50s.

How we feel individually about the economy is often at odds with how the economy is performing. If you don't lose your job and if the value of what you own doesn't decline, you're likely to ask, "What recession?" If you didn't have much of a job to begin with and you owned very little, the reported recession hardly seems different from every day previously.

The data tell us how the economy is performing, not how people feel. Most of us have difficulties relating to data because our minds are not attuned to the realities shown by the numbers. We don't see checkout counters when we read retail statistics. Data on earnings in health care are not as stimulating as a siren and the imagined flow of blood.

But I can see it now. News programs that dramatize business news. Jim Cramer, the stock market screamer, is only a forerunner of the times to come. The possibilities are great. A nightly report with Fozzie Bear and Billy Bull reporting on Wall Street. They use computer-assisted animation as we saw in election reporting. Lou Dobbs hosts a show from an exercise studio while Fox News has a kiddie playground as its set.

Jon Stewart and Stephen Colbert will have features about the commodities markets, hedge funds, credit-default swaps, and government regulation. Lots of great gags there. But I digress.

I wanted to use this space to point out that Hoosiers know more about bad economic times than do most Americans. Since 1970, the total earnings of Hoosiers, adjusted for inflation, have declined 32 percent of the time (49 of 154 quarters). Nationally, a decline in real earnings has occurred only 18 percent of the time.

From 1970 until 2008, real earnings in Indiana have risen 104 percent; that is, they doubled over 38 years. In the nation as a whole, real earnings have gone up 185 percent; that is, they have nearly tripled.

What does this mean in dollars? If Indiana had kept pace with the nation (comparable to saying if elephants could elevate), our total real earnings in 2008 would have been 40 percent higher than we actually received. That is, our total earnings would have been $52.3 billion greater than the $131.7 billion we realized.

Not only did our Hoosier economy fail to achieve national mediocrity, we had a much bumpier ride than did the country overall. The volatility of our earnings was twice that of the nation. Our swings up and down were more severe, as we ranged from a 5.3-percent high of quarterly growth to a 4.9-percent quarterly decline. For the nation, the high was just 3.2 percent and the low was -2.7 percent.

Just for the record, Hoosiers currently enjoy 1.77 percent of the earnings in the United States overall. Our most recent peak was 2.53 percent at the end of 1973. It did not make a difference if Republicans or Democrats were in office; we lost regardless of the party in charge.

Our problems are of our making, the failures of our firms and workers to compete in the marketplace. These failures are not the fault of our elected leaders, for they, too, are our fault. Think only of continuing to live with meaningless, expensive township governments to get the point.

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Marcus taught economics for more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com. 

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