News From Terre Haute, Indiana


January 27, 2013

Morton Marcus: It’s time to take a realistic view of Indiana’s economy

You cannot blame Mike Pence for delivering an upbeat inaugural address. Let’s just hope he has a clear understanding of Indiana’s real economic circumstances.

Take a look at the contrast between 2011, the last year for which we have full data, and eight years earlier. This is not to say that the Daniels’ administration is responsible for the problems we face. No state administration is capable of offsetting the trends of the times.

In fact, it is best, from a purely political point of view, for governors not to raise economic expectations in areas where they are mostly powerless. For example, Gov. Daniels set a goal of raising Indiana’s per capita personal income closer to the national average.

In 2003, Indiana’s PCPI was 9 percent below the national average. We ranked 33rd among the 50 states. Eight years later, we ranked 40th in the nation, 14 percent below the United States average. Our average annual growth rate was 2.4 percent, the fourth lowest in the nation.

PCPI is the result of dividing personal income by population. It turns out our personal income growth rate was the third lowest in America, just below Ohio and Michigan. If it were not for the slow rate of growth in population (0.6 percent annually), Indiana’s PCPI could have been even lower.

In 2003, the average compensation per job in Indiana was $42,489. This grew to $51,297 by 2011. Sounds good, but over the course of eight years that 21 percent growth was second lowest in the nation. More important, it was a mere one percentage point greater than the increase in consumer prices. One percentage point of real increase in compensation per job over an eight year period!

As we step back and look at state’s economy, we see that Indiana’s Gross Domestic Product went from 15th largest in the country to 17th as we were passed by Maryland and Minnesota.

Our total output of goods and services was seven percent less than it would have been if we had but grown at the national rate of increase.

In manufacturing, there is a deceptive bright point. Indiana moved from producing the eighth largest value of output to sixth place. This occurred because Pennsylvania and Michigan slipped drastically during those eight years.

While our average annual growth rate was 2.5 percent, the nation advanced by 3.7 percent and Indiana’s share of all manufacturing in the U.S. shrank.

These are but a few of the economic facts of the past eight years. The self-congratulatory notes struck by the out-going and the incoming administrations concerning our fiscal circumstances highlight their values. They believe it is appropriate to sacrifice services to the disadvantaged, the poor, and the state’s students in order to protect private consumption.

While Indiana enjoys a fiscal surplus, we suffer from a deficit of social responsibility.    


Morton Marcus is an independent economist, writer and speaker. Contact him at mortonjmarcus@

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