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The title of economist Michael Hicks’ July 22 column in The Indianapolis Star caught my attention: “Running Indiana like a business has failed.” As a former Indiana commerce secretary under Gov. Mitch Daniels—a governor who took great pride in bringing common-sense business principles to state government—I had to read on.
Given the title, I thought Hicks might advocate for higher taxes, budget deficits and running the Bureau of Motor Vehicles less like a business and more like a typical government bureaucracy where accomplishing simple ministerial tasks takes hours of productive time out of one’s day.
Instead, Hicks argued that tax incentives and subsidies are bad policy as evidenced by his claim that Indiana has the “worst relative economic performance to the nation on record” over the last two decades. He called the LEAP Research and Innovation District in Lebanon, where Eli Lilly and Co. is investing nearly $9 billion to manufacture drugs to treat obesity and Type 2 diabetes and where Purdue University and Lilly will partner on a new training facility, a “deeply troubled project.”
Hicks points out that California and New York, while having much higher taxes than Indiana, grew faster than Indiana last year, primarily as a result of overall higher educational attainment. He closes by stating: “The Midwest has lagged behind the nation in growth for four decades, all the while embracing an economic development strategy from the 1950s and 60s that showed no evidence of success even then.”
A few thoughts in response:
◗ I buy Hicks’ argument that education is king and that regions that better educate their residents will benefit economically. So, if he had argued that Indiana should spend more of its surplus on supporting state universities so that more first-generation college students have access to a college degree, I could have bought it. But unfortunately, Hicks offered no ideas for improving Indiana’s economy.
◗ In theory, I also am not in favor of tax incentives and subsidies, but unfortunately, all states offer them, including California and New York. If Indiana became the sole state not offering incentives, we would lose job-creating investments to other states, including the massive investment by Lilly in the LEAP District. That said, we should always measure the cost of incentives against the value of investment and jobs and make the incentives contingent on company performance (as the state does).
◗ From 2010–2023, Indiana ranked in the middle of the pack in terms of per capita income growth: 21st in the nation from 2010-2019 and 23rd from 2020-2023. While 2023 reporting shows more troubling data, one year does not tell the whole story.
◗ Of course, Indiana would love to capture more of the innovation economy that is found in places like Silicon Valley. The state’s successful efforts to land three federal tech hub designations in microelectronics, hydrogen energy and biotechnology are hopeful. But the trend is not the friend in high-tax jurisdictions like California and New York where skyrocketing budget deficits will mean yet higher taxes and cuts to critical government services.
Classifying Indiana’s economic development efforts as “failed business attraction strategies” and the LEAP District (which will bring hundreds of new high-paying jobs to the state) as “deeply troubled” is wrong. Landing new high-paying jobs today is a competitive business, and Indiana must compete.
Of course, more must be done to raise the educational attainment of Hoosiers. But investments in education and talent attraction should be pursued simultaneously with robust economic development efforts to allow more Hoosiers to earn a good living in Indiana.•
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Feltman is publisher of IBJ and CEO of IBJ Media. Send comments to nfeltman@ibj.com.
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Thanks for the counterpoint, Nate! I sense some “axe to grind” when I read the many of Dr. Hicks musings regarding the state’s economic development strategy. You can make arguments that some elements were not completely vetted, like the water concerns but standing pat and maintaining the status quo is not a viable option.
Daniels did many good things. Defunding K-college education during the 2007-2008 budget crisis and never restoring the funding was a mistake. Both things can be true.
It led institutions of higher learning that Indiana taxpayers support with many millions of dollars, *including the one that Daniels went on to lead*, to decrease the percentage of Indiana students that they admitted in favor of more profitable out-of-state and international students. You can see the impact in K-12 educational outcomes, and the response from the state level appears to be to give up in improving outcomes and instead lowering the bar for high school graduates as witnessed by the initial drafts of new high school diplomas that seem intent on producing a workforce for a bunch of jobs that are never ever coming back to Indiana, much less America.
You can get federal designations all day long. If Indiana can’t land those “innovation economy” companies because we don’t have the workers, because we don’t have the will or the vision to spend the money and think a few decades out, it won’t matter.
Hicks is paid to write for the Indianapolis Star, once a decent American newspaper that is now far left fish wrap. Fortunately there aren’t many people left buying it or reading it.