Republican Govs. Mike Pence and Mitch Daniels have led Indiana for almost nine years, but the "Indiana miracle" they tout is being undermined by a high jobless rate, soaring suicide, meth use, and lagging per capita income. The question is whether Indiana Democrats can shake off their slumber to become competitive again.
Republican Govs. Mike Pence and Mitch Daniels have led Indiana for almost nine years, but the "Indiana miracle" they tout is being undermined by a high jobless rate, soaring suicide, meth use, and lagging per capita income. The question is whether Indiana Democrats can shake off their slumber to become competitive again.

INDIANAPOLIS – For several years now, it’s been called the “Indiana Miracle” and touted across the nation. Beginning with then-Gov. Mitch Daniels, Indiana had become a bastion a low taxes, balanced budgets, a fully-financed 10 year road plan, and job creation.

With the torch passed to Gov. Mike Pence, the theme is now taking “Indiana from good to great.”

But some of the metrics are disturbing and may no longer support some of the claims, and that was reflected in Gov. Pence’s national Republican radio address last Saturday. The “good the great” talk was shunted aside as Pence made his case against Obamacare, telling Americans “Everywhere I go in Indiana, I meet business owners and workers who are in survival mode.”

Pence’s address comes with the state mired in an 8.4% jobless rate - the 16th consecutive month it’s been above the national average - which stands a full point lower at 7.4%.

The address came a day after a Ball State University study revealed that Indiana’s per capita income has dropped from 30th to 40th in the U.S., with paychecks languishing at 1996 levels. In some counties such as Starke and Miami, the wages are at the 1975 level.

In addition, the state’s infant mortality rate at 7.7 per 1,000 is a full percentage point above the U.S. rate. More than a thousand meth labs have been busted so far this year, injuring 18 cops and involving more than 300 children.

The suicide rate among Indiana’s middle-aged population surged nearly 54 percent from 1999 to 2010, an increase nearly twice the national rate and one of the highest among the 50 states, according The Centers for Disease Control and Prevention, which reported in May that Indiana’s suicide rate among people ages 35 to 64 rose from about 12.7 suicides per 100,000 residents in 1999 to about 19.5 suicides per 100,000 in 2010. Indiana’s nearly 54 percent suicide rate increase over that time frame was the nation’s eighth-highest.

Some 40% of Core 40 high school graduates in Indiana need to take remediation courses in colleges and universities, including 7% of honors students.

One in three graduates from Indiana’s public colleges left the state — and the ones with the most advanced degrees were the most likely to leave — according to a study from Indiana University and the Indiana Workforce Intelligence System, Indiana Public Media reported. The report tracked the payroll records of students who graduated in 2000 with various levels of education to determine what percent remained in the state after five years in the workforce. “These figures document a significant net loss of human capital from the state,” the study’s authors write.

With nine years of Republicans occupying the governor’s office, and five years with legislative majorities, the party is facing a potential “pottery barn” political reckoning in 2014, and certainly by 2016 if these numbers don’t improve. That is, with their stewardship over the budget, education and job creation, and with super majorities in both the House and Senate, they will soon own it.

Speaking before the Indianapolis Kiwanis last Friday, Pence challenged members to help recruit entrepreneurs to the state. “There’s a great sense of optimism, there’s reason to be encouraged as Hoosiers, but this is a difficult time for too many in our state,” Pence said. “These are the economic revenue forecasts upon which we built the fiscal integrity that our state currently enjoys. They are cautious, they are careful, but they are optimistic.”

Pence cited four categories: an “honestly balanced budget,” fully-implemented tax cuts, a moratorium on regulations, and $800 million in additional road funding for the coming biennium.

Additionally, the education reforms of 2011 that expanded charter schools, initiated vouchers, new teacher and school evaluation standards, and an effort to attract non-traditional mid-career administrators and superintendents has not fully kicked in. In 2013, Pence created career councils with the goal of establishing economy-based vocational programs. Speaker Brian Bosma worked with Minority Leader Scott Pelath to create Work Council legislation, and Bosma has identified the “opportunity gap” with highly-degreed college graduates fleeing as his top priority in the coming 2014 session.

As HPI has noted before, the IHS Global Insight analysis as part of the April revenue forecast projected “peak employment” in 2014 and 2015 with a jobless rate of 7.7%, which would still count about 250,000 Hoosiers out of work. There have been at least that many jobless since the Great Recession began in 2009.

Should that continue, will there be political consequences?

Our analysis is a big “perhaps.”

First, the Indiana Democratic Party still slumbers. It has been unable to attract Congressional candidates in the two most competitive Congressional Districts - the 2nd and the 8th. Former state representative and Seymour Mayor Bill Bailey appears to be mounting a 9th CD challenge to U.S. Rep. Todd Young. Legislative challengers that could cut into the 37-seat Senate and 69-seat House majorities have been inconspicuous to date.

As for 2016, former governor and U.S. Sen. Evan Bayh, 2012 nominee John Gregg and former congressman Baron Hill made the rounds at the Indiana Democratic Editorial Association convention last weekend. Bayh and Gregg possess the name ID and approval to potentially wage a tough challenge to Gov. Pence should he seek reelection.

Second, there are structural problems that extend far beyond Indiana’s borders, and well into the ether of the Internet. In a New York Times “Great Divide” analysis published last Sunday, authors David H. Autor and David Dorn note that computerization has cut sharply into mid-level employment. “In the four years since the Great Recession officially ended, the productivity of American workers — those lucky enough to have jobs — has risen smartly. But the United States still has two million fewer jobs than before the downturn, the unemployment rate is stuck at levels not seen since the early 1990s and the proportion of adults who are working is four percentage points off its peak in 2000. This job drought has spurred pundits to wonder whether a profound employment sickness has overtaken us. And from there, it’s only a short leap to ask whether that illness isn’t productivity itself.”

Autor and Dorn ask: Have we mechanized and computerized ourselves into obsolescence?

And they respond: While intuitively appealing, this idea is demonstrably false. In 1900, for example, 41 percent of the United States work force was in agriculture. By 2000, that share had fallen to 2 percent, after the Green Revolution transformed crop yields. But the employment-to-population ratio rose over the 20th century as women moved from home to market, and the unemployment rate fluctuated cyclically, with no long-term increase. Labor-saving technological change necessarily displaces workers performing certain tasks — that’s where the gains in productivity come from — but over the long run, it generates new products and services that raise national income and increase the overall demand for labor. In 1900, no one could foresee that a century later, health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment would employ far more workers than agriculture. A starting point for discussion is the observation that although computers are ubiquitous, they cannot do everything. A computer’s ability to accomplish a task quickly and cheaply depends upon a human programmer’s ability to write procedures or rules that direct the machine to take the correct steps at each contingency. Computers excel at “routine” tasks: organizing, storing, retrieving and manipulating information, or executing exactly defined physical movements in production processes. These tasks are most pervasive in middle-skill jobs like bookkeeping, clerical work and repetitive production and quality-assurance jobs. Logically, computerization has reduced the demand for these jobs, but it has boosted demand for workers who perform “nonroutine” tasks that complement the automated activities. Those tasks happen to lie on opposite ends of the occupational skill distribution.

“The good news, however, is that middle-education, middle-wage jobs are not slated to disappear completely,” they write. “While many middle-skill jobs are susceptible to automation, others demand a mixture of tasks that take advantage of human flexibility. To take one prominent example, medical paraprofessional jobs — radiology technician, phlebotomist, nurse technician — are a rapidly growing category of relatively well-paid, middle-skill occupations.

Noah Smith, writing in the Atlantic Magazine, observed: For most of modern history, two-thirds of the income of most rich nations has gone to pay salaries and wages for people who work, while one-third has gone to pay dividends, capital gains, interest, rent, etc. to the people who own capital. This two-thirds/one-third division was so stable that people began to believe it would last forever. But in the past ten years, something has changed. Labor’s share of income has steadily declined, falling by several percentage points since 2000. It now sits at around 60% or lower. The fall of labor income, and the rise of capital income, has contributed to America’s growing inequality.

Smith answers with “The big question” which is: What do we do if and when our old mechanisms for coping with inequality break down? If the “endowment of human capital” with which people are born gets less and less valuable, we’ll get closer and closer to that Econ 101 example of a world in which the capital owners get everything. A society with cheap robot labor would be an incredibly prosperous one, but we will need to find some way for the vast majority of human beings to share in that prosperity, or we risk the kinds of dystopian outcomes that now exist only in science fiction.

According to the Economic Policy Institute, the productivity of the U.S. economy grew 80 percent from 1979 to 2009.

That prompted Indiana AFL-CIO President Nancy Guyott to observe, “Unfortunately though, the hourly wage for the typical worker grew by only 10.1 percent. In the past several decades the gap between economic productivity and compensation for the typical worker has grown – a sharp contrast to the postwar period. Meanwhile, the top 1 percent has grabbed nearly 60 percent of all income gains in the last 30 years. Today, most of America’s workers are working longer hours, taking on multiple jobs, and producing more goods and services. Yet their wages have not kept pace, despite record setting corporate profits.”

That is a point that Democrat Kokomo Mayor Greg Goodnight and Republican Marion Mayor Wayne Seybold have confirmed. A number of citizens in their cities are working two or three part-time jobs. “Some of them are finding that prefferrable,” Goodnight told me. “They are not just working for one boss. They can control what they do and when they do it.” 

Guyott notes that stagnant wages have impacted middle-class families’ buying power further impeding our nation’s economic growth. “This isn’t happening due to uncontrollable changes,” she said. “It’s being driven by policy. Our minimum wage has been permitted to languish to ever lower levels of buying power.  Our nation has pursued trade and tax policies that incentivize sending good jobs overseas. The jobs our economy has been creating are all too often those that come with low wages, and lower benefits. And as we know all too well, the union movement – a primary mover of making work pay for the workers - has been under assault.”

It comes after Indiana quickly phased out the death tax, and lowered corporate and financial institution taxes. The middle class received an anemic income tax cut.

Ball State Prof. Michael Hicks notes, “Per capita income is a strong measure of standard of living, and its increase will have laudable effects on the states’ citizens. However, changes to policies and programs have long and variable lags. It is nearly certain that no policy, no matter how ambitious, effective or wide reaching, will achieve measurable income goals over the term limit of a governor.”

That may set up an epic battleground in 2014, when economic and social policy collide to create its own political weather. Three years after Republican majorities rammed home “right to work” legislation, Hoosiers still find Great Recession jobless rates and declining personal income. One could only wonder if Gov. Daniels and Treasurer Richard Mourdock had prevailed in the summer of 2009 with their view of the liquidation of General Motors and Chrysler, and with it the collapse of the vast supplier networks and companies like Cummins Engines. Those employers have kept the Indiana jobless rate and personal income out of free-fall.

Legislative Republicans and Gov. Pence are now preparing a marriage amendment battle, something Eli Lilly and Cummins believes will only fuel a further “opportunity gap,” which runs counter to the 2011 argument that lawmakers should do everything they can to produce more jobs, and keep more graduates here.

In these furrows of policy and politics, the seeds for the next two election cycles will be planted.