Minnesota’s Economic News – W/E 7/30/21
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Minnesota’s economic growth has lagged Wisconsin’s since Dayton and Walker took office.
There’s an old saying where I’m from: If something seems too good to be true, it probably is. The recent report by the Economic Policy Institute (EPI) comparing the economic records of Wisconsin and Minnesota since Governors Scott Walker and Mark Dayton took office in January 2011, is a case in point.
But just as you should never buy a car without checking under the hood, you should never trumpet an economic report as proving your case until you have checked the numbers for yourself. If the folks who saw proof in the EPI’s report that Governor Dayton’s policies were so much better than Governor Walker’s had done this, they would have found that on important measures Wisconsin’s economy has actually outperformed Minnesota’s.
The EPI report makes some strange choices on which data to use. For example, it uses annual data from the Bureau of Economic Analysis for 2010 to 2016 when quarterly data is available going into 2017. Using quarterly data is better because it 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 2010. It also allows us to add another year to our comparison.
Using the annual series, the EPI reported that “Minnesota’s GDP grew by 12.8 percent in real (inflation-adjusted) terms, while Wisconsin’s grew by 10.1 percent.” But when we look at GDP growth using quarterly data covering Q4:2010 to Q4:2017, we find that Wisconsin’s economy has grown by 11.9 percent and Minnesota’s by 10.9 percent in real terms.
Wisconsin’s economic growth under Governor Walker has outpaced Minnesota’s under Governor Dayton.
As well as strange data selections, there are odd interpretations. The EPI notes that by December 2017, Wisconsin and Minnesota “have reached effectively the same unemployment rate, at 3 percent and 3.1 percent, respectively.” But the EPI goes on to argue 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.”
This is horribly misleading. The EPI fails to mention that in the race to these pre-recession levels of unemployment, Governor Walker was starting from a rate of 8.1 percent and Governor Dayton was starting from a rate of 7.1 percent. EPI’s comparison takes no account of this handicap. In fact, from December 2010 to March 2018, Wisconsin’s unemployment rate fell by 5.2 percentage points to 2.9 percent, while Minnesota’s fell by 3.9 percentage points to 3.2 percent. The unemployment rate has fallen faster and further in Wisconsin under Walker than it has in Minnesota under Dayton.
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 percent from Q1:2010 to Q4:2017, while Wisconsin’s has grown by just 1.9 percent over that period.
But, even here, given Minnesota’s lower rate of GDP growth, Wisconsin’s GDP per capita—what really matters for economic well-being—has risen by 9.8 percent in real terms compared to 5.5 percent in Minnesota, a substantial difference.
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.
Whether a report supports bigger or smaller government, this or that economic policy, whichever way you lean, pop the hood and check the data for yourself. A bleeding heart is no substitute for an engaged brain.
This article first appeared in the Milwaukee Journal Sentinel.