ECONOMIC ANALYSIS: A healthy economy makes an uninteresting campaign

May 5, 2008

In this curious primary season, Indiana finds itself the brief center of attention as Sens. Hillary Clinton and Barack Obama invest time and treasure in the crossroads of America. The strongest focus in both their campaigns is my favorite subject-the economy. Both candidates bemoan the poor Hoosier economy, its job losses and income inequality. This would be a superb campaign approach for both candidates, except that their claims are wholly, totally and embarrassingly devoid of facts.

Indiana's economy is doing just fine, thank you. Though the 2001 recession hit the state hard, since then, employment is up 3.69 percent. Almost all that growth happened since 2004, when the state began to grow at about 1.5 percent per year.

Hoosier manufacturing is booming and 2007 was a record year for the value of goods produced (in inflation-adjusted terms). While total manufacturing employment has been fairly static since 2004, employment in production workers has been growing as a share of manufacturing. Most of the job losses represent firms eliminating non-core functions, such as specialized management, finance, research and development, business services, and logistics. All these sectors are booming, and enjoy double-digit employment growth since the last recession.

Why are these good things happening in the Hoosier State? Part of the answer lies in the folly of our neighbors. Michigan's tax-and-spend policy appears designed to ease the fiscal embarrassment of several South American countries. And just last year, Ohio voters replaced the ineffectual Bob Taft. Sadly, his replacement, Ted Strickland, is an old friend of taxes, so Ohio suffers. And must I really discuss Illinois?

Indiana's prosperity lies in three arenas. The first is fiscal sensibility. Though Indiana ranked among the top in the nation for tax-friendliness, Gov. Mitch Daniels led the split-party Legislature to a bipartisan property tax reform plan of real significance. The second is education. Indiana ranks very low in terms of educational achievement, but is a leader in educational improvement. Third, Indiana enjoys remarkable transportation infrastructure, both public and private. In taking the bold step in public-private partnerships, Indiana is one of the few states to be actually extending the interstate highway system.

To be sure, there are pockets of economic distress. I live in one. In these small and midsize towns, it is hard to lure the sexy new industries of finance and R&D, but this, too, slowly changes.

Painting Indiana as an economic catastrophe makes for good sound bites, and might well have been true in the runup to the 2004 election, but it is silly in today's Indiana, a rare point of prosperity in the Midwest. Like many Hoosiers, I haven't decided where to cast my vote, but I do have some advice for candidates-if you want to win in Indiana, you ought to know this isn't 2004.

Hicks is director of the Bureau of Business Research at Ball State University. His column appears weekly. He can be reached at bbr@bsu.edu.
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