Comparing the economic records of Minnesota and Wisconsin governors

This op-ed appeared August 11, 2018 in the St. Cloud Times. 

For most, the St. Croix is a scenic river. For others, it is an Iron Curtain or 38th Parallel, separating different economic systems. This is the position taken by the Economic Policy Institute in a new report comparing the economic records of Minnesota and Wisconsin Governors Mark Dayton and Scott Walker since they took office in January 2011.

The EPI writes that “Governor Walker and the Wisconsin state legislature have pursued a highly conservative agenda centered on cutting taxes, shrinking government, and weakening unions. In contrast, Minnesota under Governor Dayton has enacted a slate of progressive priorities: raising the minimum wage, strengthening safety net programs and labor standards, and boosting public investments in infrastructure and education, financed through higher taxes (largely on the wealthy).” As a result, “by virtually every available measure, Minnesota’s recovery has outperformed Wisconsin’s.”

But once you start to examine the data for yourself, the EPI’s case looks much less clear cut.

Take unemployment. The data from the Bureau of Labor Statistics show that from December 2010 to March 2018, Wisconsin’s unemployment rate fell by more percentage points than Minnesota’s and to a lower level — by 5.2 percentage points from 8.1 to 2.9 percent for Wisconsin and 3.9 percentage points from 7.1 to 3.2 percent for Minnesota. In short, the unemployment rate has fallen faster and further in Wisconsin under Gov. Walker than it has in Minnesota under Gov. Dayton.

Yet the EPI claim that “Minnesota was arguably more effective at reducing unemployment than Wisconsin was throughout the recovery.” How can this be, given the data?

They argue that “Minnesota was back at its prerecession (December 2007) unemployment rate of 4.7 percent by September 2013, fewer than three years after Governor Dayton took office. In contrast, it took until December of 2014 — 15 months later — for Wisconsin to reach its pre-recession unemployment rate of 4.8 percent.”

But remember, for Minnesota the journey back to that level from December 2010 was 2.4 percentage points, for Wisconsin it was 3.3 percentage points so of course it took longer. The EPI’s analysis takes absolutely no account of the different unemployment rates the governors inherited. This is dishonest.

It is also strange that a report on two state economies performance relegates GDP to one paragraph on page 19, one of the few without an accompanying chart.

Here, the EPI uses annual data from the Bureau of Economic Analysis for 2010 to 2016 to claim that “Minnesota’s GDP grew by 12.8 percent in real (inflation adjusted) terms, while Wisconsin’s grew by 10.1 percent.”

But there is also quarterly data available from the BEA. Using this allows us to select a more precise base period for our comparison, Q4: 2010, the three months before the two men took office, rather than an average of all of all four quarters in 2010. It also allows us to add another year to our comparison. Using this series, we find that, in real terms, Wisconsin’s economy grew by 11.9% and Minnesota’s by 10.9% between Q4: 2010 and Q4: 2017. Contrary to the EPI’s report, Wisconsin’s economic growth under Gov. Walker has outpaced Minnesota’s under Gov. Dayton. Perhaps this explains the lack of a graph?

Just as Wisconsin beats Minnesota on some measures, Minnesota beats Wisconsin on others. Bureau of Labor Statistics data shows that the Gopher State has added more jobs under Dayton than the Badger State added under Walker. Minnesota’s population also grew faster than Wisconsin’s, at 5.1% from Q1: 2010 to Q4: 2017 while Wisconsin’s has grown by just 1.9% over that period.

It is interesting to compare Minnesota and Wisconsin, but only up to a point. For each similarity the states have, there are differences too. Neither state — yet — is beating the other hands down over the last seven years. To say otherwise is to go against the data, which is why the EPI had to cherry-pick data to make that argument.

This is the opinion of John Phelan, an economist with the Center of the American Experiment in Golden Valley.