Last Friday, the Governor’s 21st Century Tax Reform Commission invited State Economist Tom Stinson and State Demographer Tom Gillaspy to talk about Minnesota’s economy – past, present and future. And the news, though sobering, should be a call to action. (You can view their powerpoint on the web.)
We’ve all heard how Minnesota’s economy has historically performed far better than the national average. And you are probably also aware that the trend has ended. From 2004 to 2007 Minnesota’s personal income growth, per capita personal income growth, GDP growth and GDP per capita growth dropped well below the national average. Well below. We now rank somewhere in the 40s (out of 50 states) on these indicators.
Why? Well, it’s too soon for this to be the result of the state and local budget cuts we’ve been experiencing in recent years. Stinson points out that four to six years is too short of a time horizon to really change the economy. No, we’ll more likely be paying the price for these budget cuts about 20 years from now.
Minnesota’s current underperformance is the result of some fundamental changes in the US economy:
• An increase in national defense spending, which is not an important element of Minnesota’s economy,
• Very tough times in the air transportation industry, which is an important element of Minnesota’s economy,
• And a severe dip in the construction industry that inexplicably hit Minnesota earlier and harder than the nation as a whole.
So it’s time to quit rearranging the deck chairs and start rethinking our state’s economy. We’ve done it before…in the 1960s Minnesota began shifting from a resource-based economy to a more diversified manufacturing and services economy that served us well.
When we think about what a redesigned economy might look like, Stinson and Gillaspy point out four “mega-forces” that will be shaping it: globalization, technology, energy prices and demography. This is a blog, not a thesis, so I’ll keep this surface level. But I keep wondering why we tend to think of these forces as our enemy, rather than an opportunity? We should be getting great brains together to think about how we can right the direction of our whole ship – then we can start worrying about the deck chairs, like evaluating the level of businesses taxes.