HICKS: Indiana an economic anomaly in Midwest

In the almost four years in which I have penned this column, I have written appreciatively of Indiana’s economic prospects. This has shocked two groups. The first of these was my wife and family, who have long dubbed me Dr. Glum. This moniker I right well earned while commenting on West Virginia’s economy from 1999 to 2004. The second group composed some longtime economic pundits in the state. As it should, this disbelief has given me pause to stop and think. My tools are those of the researcher in a university research center, so I have turned again and again to the research questions surrounding Indiana’s economic performance. After a number of studies and fairly detailed analysis, I have returned to the same conclusion. While there are surely problems in Indiana’s economy, the past few years have heralded a monumental change in the state’s economic prospects.

This week, the Department of Commerce released statistics that not only validated my prognostications, but fairly made me appear a pessimist. The first of these was the most recent manufacturing employment reports. In the two years since the recession, the U.S. economy has lost 2 percent of its manufacturing employment. Indiana has not merely bucked the job-loss trend, but added 4.6 percent more jobs in manufacturing. This is astonishing because the sectors of manufacturing that Indiana is most concentrated in have continued to lag nationally.

The most enduring testament to Indiana’s transformation is the June 2011 release of the state’s gross domestic product in 2010. This measures the growth in the total value of goods and services produced in a state from 2009 to 2010. During this time, the United States as a whole grew at 2.6 percent. This is quite a bit less than we might have hoped. Growth at 3.5 percent to 4 percent would signal a healthy recovery.

During the same period, Indiana grew at a whopping 4.6 percent. The states bordering us that should look much like us fared far worse. Michigan grew at 2.9 percent, Ohio at 2.1 percent, and Illinois at 1.9 percent. In fact, Indiana ranked third best nationally in this recovery year. Only North Dakota and New York grew more quickly than Indiana. North Dakota’s growth was almost wholly due to new energy discoveries, while New York’s recovery was dominated by the financial sector resurgence. We Hoosiers are an economic anomaly, an island of growth and resurgent prosperity.

Why is this so? The earliest foundation of prosperity lies in bipartisan pension reform. Indiana’s unfunded liability is the lowest in the Midwest, and does not significantly threaten our public finances. The property tax reforms of 2008 clearly changed the cost of doing business in Indiana.

Most important, it is the expectations of businesses about the future of Indiana’s finances that matter most. Indiana shouldered the tough budget decisions in 2008-2009, while other states wavered. We now enjoy the fruit of that sacrifice and the opportunities and hope for the future that accompanies it.•

__________

Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.