The data are in from the federal Bureau of Economic Analysis. Indiana had a good year in fiscal 2012 (the 12 months ending in June this year).
We have known for several weeks that the state surplus looks good. Part of that is due to stringent economies forced by the state budget process. The balance is due to an improved economy, confirmed by the BEA, which boosted state revenues.
How good was the economy in fiscal 2012? This state, like most others, uses personal income as its best indicator of economic health. During the year which began in July 2011, the BEA reports Indiana’s personal income advanced by 4.2 percent. The nation by contrast, grew by only 3.3 percent.
Indiana led all five states in the Great Lakes region. Michigan and Ohio also exceeded the national growth rate, but Illinois and Wisconsin did not. As the fiscal year ended, Indiana ranked 11th in the nation in the rate of growth for personal income.
Where did this growth come from? It did not come from unemployment compensation, which fell by 31 percent as jobs were gained by some and other Hoosiers exhausted their eligibility for assistance while out of work.
The growth did not come from state and local government employment, where the budget crisis allowed total earnings by workers in this sector to increase by a mere 0.3 percent.
Let’s not be coy. Indiana’s growth in personal income came largely from an 8.9 percent increase in earnings paid to workers in durable goods manufacturing.
When you think of durable goods manufacturing and couple it with Indiana, Ohio and Michigan, what do you get? I come up with manufacturing for the automobile industry, the giant which continues to dominate the economies of those three states.
We all know what happened. Two of the three domestic titans were failing and in danger of going out of business, leaving hundreds of thousands of workers across the nation in danger of losing their jobs. In an unprecedented step, the federal government took charge, restructured the anemic firms and prevented an economic meltdown.
Yes, Indiana’s good economic performance in fiscal 2012 may be the result of the federal restructuring program that saved General Motors and Chrysler. This is ironic since prominent Hoosier politicians opposed that program as bad economics and morally questionable government intervention in the private market place.
Whether or not the federal action was philosophically sound, it worked. Today’s auto industry is stronger than before and an economic catastrophe has been averted. Indiana, Michigan and Ohio are the beneficiaries of the federal intervention although few of our political leaders are willing to acknowledge their misguided opposition.
The next time you hear how well Indiana is doing, it is worth asking, what aspects or sectors of our economy are doing well and why that is happening? As in the farm yard, the rooster doing the crowing may not be responsible for the increase in egg production.