EYE ON THE PIE: It's not just the economy, stupid

June 30, 2008

No doubt, the Daniels administration will trumpet the fact that Indiana was the ninth-fastestgrowing state in the first quarter of this year. That's right; personal income in the Hoosier state grew at an annual rate of 5.1 percent, while the nation advanced 4.6 percent.

But, as noted by the U.S. Bureau of Economic Analysis, which generates these data, Indiana was among the fastergrowing states because of dramatic increases in the prices of corn and soybeans. North Dakota came in first, with a 34.1-percent increase, while Arkansas, a poultry state and thus a heavy user of animal feed, was last at a loss of 7.3 percent.

State government deserves no credit for the explosion of commodity prices.

Of course, Jill Long Thompson and the Democrats will search through the same data to find negative truths and use them to accuse the Daniels administration of grave neglect of the Indiana economy. For example, if they look beyond the most recent quarter, over the past year, Indiana's personal income growth rate ranked 36th in the nation. From the start of the Daniels administration (first quarter of 2005), they'll find Indiana has been the fifth-slowest-growing state in the nation.

Plus, when we remove the unusual farm-sector gains, Indiana's non-farm earnings for the most recent quarter were up 4.6 percent compared to the nation's 5.5-percent increase.

However, it is foolish to believe that any governor, any administration has much influence on the state's economy. The state government can do little to keep our auto manufacturers and their suppliers competitive. At best, a state government's policies can be effective in the long term and in limited areas.

These areas include-first-education, not trade schools focused on employable skills. What is required is emphasis on imagination, initiative, ideas, ideals and inspiration. This is possible if students can read effectively and have a fundamental knowledge of history. We should be less concerned about Indiana Statewide Testing for Educational Progress scores, graduation rates and college attendance. We should enhance the capabilities of students to be independent citizens whenever they leave school.

As they enter the larger society, students need to be energetic and ambitious. Do our schools nurture or crush independence? A successful economy is populated by people who want to be successful, not by those who feel entitled to rewards because they have certification from the education bureaucracy.

Second, the state can promote modernization and efficiency by maintaining superior infrastructure. "Major moves," a highway reconstruction program made possible by leasing (not selling) the Indiana Toll Road, was truly a major move. It put funds to work that can bring Indiana's highways into the latter part of the 20th century.

But we cannot rest. Our cities must reclaim their environmentally damaged land and restore or replace unused structures. Indiana cannot attract or retain entrepreneurs with antiquated, shabby communities. We need to invest in sewage systems, land clearance and the full complement of urban amenities.

Third, local governments must be liberated from the serfdom imposed by the megalomania of the General Assembly. As long as 150 legislators dictate how localities function, as long as an anti-urban philosophy retards progressive government, Indiana has little hope of prospering.

In this decade, 77 percent of Indiana's population growth has occurred within our cities and towns. But much of that is sub-urbanization. Nine of our 10 most populous cities together lost 30,300 citizens, while Fishers, Noblesville, Plainfield, Westfield, Brownsburg, Greenwood, Carmel and Zionsville grew like cankers.

These three areas of concern are appropriate challenges for the gubernatorial candidates. But do the political parties and the major office seekers from Argos, Bedford and English understand that our urban needs are our state's priorities?

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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