Marcus: Indiana floating with the tide

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Morton Marcus

For several decades, Hoosiers have heard state candidates vow to raise per capita personal income (PCPI).

That means those vote-seeking missiles of state economic development must aim at the level of PCPI, not the rate of growth. If we want to progress compared to the nation, we can’t just float along with the tide, being content with a below average rate of growth.

The facts are these: in 1989, PCPI for Indiana was $16,924, 9% lower than the nation. By 2022, at $58,323, we dropped to 11% below the nation. What happened?

Was it party politics? No. It was not Democrat vs Republican politics. Evan Bayh, Frank O’Bannon and Joe Kernan,, Democrats, held the governor’s office from 1989 to 2004. From 2005 onwards, the office was held by Mitch Daniels, Mike Pence and Eric Holcomb, Republicans. That’s 16 years of Ds and 17 years of Rs, enough time for each to take credit/blame for where we were in 2022.

It was politics, however, in the sense of Urban vs Rural. The Past vs the Future. Yesterday’s vs Today’s economic interests. My patch of ground vs Your patch of ground. Hesitation vs Anticipation.

The results: Personal income, the numerator of PCPI, rose on average by 4.8% annually across the nation, but just 4.5% in Indiana. Population, the denominator for PCPI, advanced 0.9% at an annual rate in the U.S and 0.6% in Indiana.

That left per capita personal income to rise nationally by 3.9% and 3.8% in the Hoosier state. Just a 0.1% differential, compounding over 33 years of stop and go, changing horses at every crossing, trying to satisfy all and helping few.

What did that mean at the individual level? Whereas, our PCPI in 1989 was $1,734 below the national PCPI, we fell to $7,147 below the nation’s average by 2022. The spread between the average American and the average Hoosier grew by 4.4% compounding every year.

That’s because, starting from our low 1989 level, we lagged the national rate of personal income growth by 0.3% annually. If you want to get up closer to the national average, you have to grow faster than the nation.

Actually, the per capita numbers look better than they might because our population growth was also slower than the nation. Whereas the U.S. population grew by 0.9% at an annual rate, Indiana had a 0.6% growth rate. Again, just 0.3% short of the nation, but this time in the denominator of the PCPI measure.

The slower the growth of population, the faster PCPI grows. A declining population can make PCPI growth seem like boom times, if personal income continues to grow, which often happens when the kids leave home.

Thus official apologists can say, “Oh, Indiana’s only a tad slower than elsewhere in meeting the challenges of our times.”

Are you satisfied being a tad slow?

Mr. Marcus is an economist. Reach him at [email protected]. Follow him and John Guy on Who Gets What? wherever podcasts are available or at mortonjohn.libsyn.com.