Wednesday, September 26, 2012

Per capita income, not government deficit, is how to judge politicians

It's easy to lose sight of the obvious sometimes.

Lots of Republicans often argue that they should be elected because they will balance the budget of the government they want to help run. That implies the measure of success of a politician is whether the budget is running a surplus or a deficit. If a state like Indiana can run a balanced budget, that must be better than a state like Illinois which runs a deficit.

That message is repeated so often it is hard to see how it is wrong.

While it is certainly better to have a government run a surplus instead of a deficit, the real thing we care about is personal income. If our income is rising and our government is running a deficit, that's better than if our income is falling or stagnant and our government is running a slight surplus (runaway debt notwithstanding).

And in Indiana, while the government budget is balanced, per capita income has plummeted under Republican policies of Mitch Daniels.

This insightful piece by Richard Longworth in his blog the Global Midwest lays out the case quite nicely, inspired by this piece by Aaron Renn of the Urbanophile:

Mitch Daniels will soon be leaving the Indiana governor's office to become president of Purdue University. He'll leave Indianapolis with praise from budget-balancers in other states, the admiration of pundits and a wistful regard from the Republican Party, which hoped that he could have been their presidential nominee this year. (He refused, for personal reasons.)
It's an odd chorus of huzzahs for a governor who, if he hasn't impoverished his state, has helped impoverish its residents. All statistics, including those from Daniels' own government, show that per capita income in Indiana has steadily declined during his eight years as governor. When he took over, Indiana ranked 33rd among the 50 states in per capita income: the latest figures, from 2010, rank it 42nd, with no reason to think things have improved since then.

We don't focus enough on per capita income of state residents as a way to measure progress by politicians. We tend to focus on the size of a state deficit or surplus. That's a mistake. Somehow, Indiana is generally considered to be in better shape than Illinois, even though per capita income is falling in that state relative to Illinois. I think it's largely because the dominant story on how to measure political success is based on the size of the government deficit and not what really matters: growth in per capita income.

Sunday, September 02, 2012

If two doctors diagnosed our economy from each political party...

This is an economic tale.

Imagine the American economy was a person. And the person wasn't feeling very well. He was sick. Not as strong as he should be.

Parts of his body simply weren't working. (The unemployed). His legs. His legs just didn't work. So he was on crutches.

Parts of his body were very healthy and very strong. (The wealthy). His hands (in honor of Rick Santorum). His hands were incredibly strong. He could crush cans with his hands.

He went to see two doctors to check him out, give him a diagnosis and prescribe a cure to get him healthy again.

The Democratic doctor looked him over, noticed that his legs weren't working at all and recognized that because his legs weren't working, his whole body is going to be weak. The way to get the body back to normal, healthy strength is to get all parts of the body working again. So he prescribed physical therapy for the legs, maybe some injections directly into the legs to get them working again and suggested the patient massage his legs with his strong hands every day to help get them back into shape.

The Republican doctor looked him over, noticed that his legs weren't working at all, noticed that his hands were incredibly strong, and prescribed steroid injections into the hands.