Minnesota and Wisconsin

By • on December 5, 2013

Interesting New York Times column on the recent economic fortunes of Minnesota and Wisconsin. And the correlation between that and the policies pursued by their Governors the past three years: Minnesota’s progressive Mark Dayton and Wisconsin’s conservative Scott Walker.

The column’s conclusion: “Which side of the experiment — the new right or modern progressivism — has been most effective in increasing jobs and improving business opportunities, not to mention living conditions? Obviously, firm answers will require more time and more data, but the first round of evidence gives the edge to Minnesota’s model of increased services, higher costs (mostly for the affluent) and reduced payments to entrenched interests like the insurers who cover the Medicaid population.”

The column then goes on to detail the outperformance of Minnesota’s economy. As we have detailed here many times before. Its not just Wisconsin, but every other Great Lakes state (including Michigan) that Minnesota is performing better than with a policy regime of  higher state taxes and spending. Which according to convention wisdom should lead to economic ruin.

As readers of this blog know I believe the Dayton approach to growing the economy is more likely to lead to long term prosperity than the Walker approach. But I am skeptical that the outperformance of the Minnesota economy compared to Wisconsin’s the past three years has much to do with the policies of either Dayton or Walker. State tax and spending polices simply are not powerful enough to have an immediate impact on a state’s economic performance. If they matter at all, it is over the long term. Either building or not the assets that matter for long term economic success.

To me the more accurate lesson to learn is Minnesota, under both D and R governors, for at least two decades, has been a higher tax/higher spending state than Wisconsin, Michigan, Ohio and Indiana, also under both D and R governors, and for that entire period has done best on every measure of economic well being with the gap between Minnesota and the rest growing greater over time.

The higher taxes Minnesota has imposed over the long term has enabled them to make more of the public investments that matter most to concentrating talent: education from early childhood through higher eduction; infrastructure; and quality of place to prepare, retain and attract talent. Which leads to a state with higher college attainment than the other Great Lakes states. Which leads to higher employment and personal earnings. The more and better jobs nearly everyone agrees should be the goal of state economic policy.

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