Economist’s View: Actually, economic growth in Walker’s Wisconsin outpaced Dayton’s Minnesota

This op-ed appeared August 30, 2018 in the Duluth News Tribune. 

On the one side is socialism and state control. On the other is red-blooded free-market capitalism. Am I talking about the Berlin Wall or the 38th Parallel? Perhaps. But according to some, this could apply also to the St. Croix River, a border between Minnesota and Wisconsin.

A new report of the Economic Policy Institute compared the economic records of Minnesota and Wisconsin Govs. Mark Dayton and Scott Walker since they took office in January 2011. “Governor Walker and the Wisconsin state legislature have pursued a highly conservative agenda centered on cutting taxes, shrinking government, and weakening unions,” the report states. “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).”

The institute claims that, “By virtually every available measure, Minnesota’s recovery has outperformed Wisconsin’s.”

This was a striking finding. But once you start to look at the data for yourself, the case looks much more doubtful.

Start with unemployment. Bureau of Labor Statistics data 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 percent to 2.9 percent for Wisconsin and 3.9 percentage points from 7.1 percent to 3.2 percent for Minnesota. Simply put, the unemployment rate fell faster and further under Gov. Walker in Wisconsin than under Gov. Dayton in Minnesota.

Despite this, the report claims that “Minnesota was arguably more effective at reducing unemployment than Wisconsin was throughout the recovery.” How was a conclusion reached that’s so at odds with the data?

The Economic Policy Institute argues that “Minnesota was back at its pre-recession (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 Gov. Dayton’ Minnesota, the journey back to that level from the December 2010 level he inherited was 2.4 percentage points; for Gov. Walker in Wisconsin, it was 3.3 percentage points. So, obviously, it took Walker and Wisconsin longer. The institute’s conclusion took no account of the different unemployment rates the governors inherited. This was dishonest.

It also was strange that a report comparing the economic performances of two states would relegate GDP to one paragraph on page 19, and it was one of the few paragraphs without an accompanying chart.

When they do get around to talking about GDP, Economic Policy Institute researchers use 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 Bureau of Economic Analysis. Using this enables the selection of a more precise base period for comparison: the fourth quarter of 2010, which was the three months before the two governors took office, rather than an average of all four quarters in 2010. It also enables adding another year to the comparison.

This series shows that between the fourth quarter of 2010 and the fourth quarter of 2017, Wisconsin’s economy grew by 11.9 percent in real terms while Minnesota’s grew by 10.9 percent. Contrary to the Economic Policy Institute report, Wisconsin’s economic growth under Gov. Walker has outpaced Minnesota’s under Gov. Dayton.

Wisconsin beats Minnesota on some measures, but Minnesota beats Wisconsin on others. Under Gov. Dayton, the Gopher State added more jobs than the Badger State did under Gov. Walker. Minnesota’s population growth also outpaced Wisconsin’s at 5.1 percent from the first quarter of 2010 to the fourth quarter of 2017 in Minnesota compared to just 1.9 percent over the same period in Wisconsin.

Comparisons of Minnesota’s and Wisconsin’s economies are interesting but shouldn’t be pushed too far. The states have similarities, but they have many differences, too. As yet, neither state is beating the other hands down since the Iron Curtain went up along the St. Croix. To say otherwise is to go against the data — which was why the Economic Policy Institute had to cherry-pick data to make its argument.

John Phelan is an economist at the Center of the American Experiment (americanexperiment.org), which is based in Golden Valley, Minn.