Minnesota Lawyer
The Minnesota economy has performed relatively well since the onset of the 2008-09 Great Recession — but not as well in the last two years. Coming out of the recession in 2010-12, the state had healthy growth rates, but Minnesota’s gross domestic product growth slowed to 2.1 percent in 2013 and just 1.4 percent in 2014.
So Minnesota’s growth path since 2010 has been good, but lately not so great. That has not prevented some scholars and journalists from touting the improvement as the result of the recent policies of Gov. Mark Dayton and his 2011-12 Democratic Legislature.
Patrick Caldwell in Mother Jones magazine touted Mark Dayton as “America’s most successful governor“ despite being a “terrible retail politician.” Caldwell cited the state’s “booming” economy as evidence of the success of progressive economic and social policies. Some of the facts he cited are indisputable: a low state unemployment rate, higher-than-average median income and a red-hot job market in the Twin Cities.
Ann Markusen of the Humphrey Institute in her American Prospect article “The High Road Wins” contrasts Dayton’s Minnesota with Scott Walker’s Wisconsin and notes how Minnesota benefits from the comparison. She concludes: “In sum, Minnesota’s policies on wages, health care and unionization have improved the quality of life for large numbers of state residents. … Dayton’s progressive taxation has not scared off business, but has funded better public services… .”
The most exuberant endorsement of Dayton comes from the group Occupy Minnesota, which trumpeted a number of audacious claims. Minnesota, according to the group, “is creating jobs at a record pace,” has unemployment at an “historic low” and a “billion-dollar surplus.” The group assigns great credit for these outcomes to Gov. Dayton.
Wow – nirvana on the Mississippi, all due to our governor. As you might think, the story is a bit more complicated than that. Let’s sort through the hyperbole in these accounts, of which there is a lot.
Louis Jacobson of Politifact examined Occupy Minnesota’s empirical claims regarding Dayton’s record. He labels their claims “half true.” They are right, he argues, about the unemployment rate and budget surplus — though since his analysis the unemployment rate has ticked upward a bit. He notes, however, that job creation is below the record pace of earlier years and that while median incomes have grown, they are not “skyrocketing.” Instead, they have grown by 1.7 percent more than the country as a whole from 2010 to 2013.
Beyond that, our more recent economic performance does not merit superlatives, given the slower economic growth in 2013 and 2014.
Ann Markusen is right to credit some of Mark Dayton’s decisions as aiding the state. His willingness to accept the expansion of Medicaid under Obamacare has boosted medical care for many state citizens, as she notes. Her assertion that progressive economic policies — “the high road” of additional progressive taxes, an increased minimum wage and boosts in state spending — caused Minnesota’s recent prosperity is a much dicier claim.
To her credit, Markusen notes that there are important and lasting reasons beyond recent state policies for the varying economic performances of Minnesota and Wisconsin. Wisconsin’s manufacturing involves smaller plants with pay inferior to those of Minnesota. Further, the Twin Cities may benefit from its status as an “agglomeration economy” where “the density of labor, markets and employers attracts and holds jobs and incomes.” Wisconsin has no similar agglomeration.
A broader investigation the causes of state economic performance presents a far murkier picture than that drawn by Markusen, Caldwell and Occupy Minnesota. For starters, if “blue” economic policies so powerfully shape state economic performance in the short term, how does one explain the lagging performance of deep blue states like Illinois and New York in recent years? Or the unarguable economic boom of deep red Texas? Clearly other factors are at work.
One can find economic studies contradicting the pro-Dayton claims. Thomas Garrett and Russell Rhine of the St. Louis Federal Reserve Bank, for example, find that “States with greater economic freedom — defined as the protection of private property and private markets operating with minimal government interference — experience greater rates of employment growth” from 1990 to 2005.
Neil Bania, Jo Anna Gray and Joe A. Stone in National Tax Journal report that “the incremental effect of taxes” toward state economic growth “directed toward publicly provided productive inputs is initially positive, but eventually turns negative, consistent with a growth hill.” By “growth hill” they mean that state economic growth rises and then falls due to such spending.
Mark Partridge in the Journal of Regional Science finds over the long term among U.S. states, overall income inequality is positively related to economic growth.
Such studies encourage skepticism about the claims of liberal scholars and journalists about the immediate effect of Dayton’s economic policies, particularly given the modest economic performance of the state in 2013 and 2014.
This sort of dubious causal argument — “my policies yesterday created prosperity today” — is widespread in politics and frequently practiced by the ideologues and office servers of both parties. A conservative variant is now on display in next-door Wisconsin. Gov. Scott Walker touts his economic policies that supposedly boosted the Badger State’s economic performance as an important credential qualifying him for the White House.
Buyer beware. Careful causal argument is one of the first victims of ideological thinking, as Mark Dayton’s academic and journalistic supporters vividly demonstrate.
Steven Schier is Congdon Professor of Political Science at Carleton College in Northfield, Minnesota.
