After last Thursday’s November budget forecast, the Governor held a press conference to spin his usual mantra that government spending is causing Minnesota’s budget woes. To support his claim, the Governor produced a a table (PDF) comparing total state and local government spending in each of the fifty states to the rate of job growth over the last five years. The Governor’s only problem was that his data contradicted his assertion.
Using this table, the Governor argued that “states with larger job growth have lower government spending than Minnesota.” On the surface, this statement is correct. Most, though not all, of the states with lower per capita spending than Minnesota have had higher job growth than Minnesota over the last five years.
However, most of the states with higher per capita spending than Minnesota also have higher job growth than Minnesota over the last five years. In fact, the vast majority of all states-both those with lower and higher spending than Minnesota-had greater job growth than Minnesota.
Most people who examine the Governor’s table will have a hard time discerning any relationship between job growth and per capita government spending. In fact, a statistical analysis gives no hint of any relationship between job growth and per capita spending.
In attempting to explain Minnesota’s sub par job growth, perhaps the Governor was not looking at the appropriate factor. Rather than comparing job growth to government spending, he should have compared it to the change in the level of spending.
Based on data from the U.S. Census Bureau, per capita state and local government spending in Minnesota declined by 10.9 percent from 2002 to 2006 after adjusting for inflation in government purchases. Only three other states had a larger spending reduction over these four years. As a percentage of personal income, state and local government spending in Minnesota has dipped below the national average.
Given the Governor’s philosophy that cuts in government spending will spur the state’s economy, job growth in Minnesota should have soared as a result of our budget slashing. However, the opposite has occurred.
From 2002 to 2006, job growth in Minnesota has been only 1.6 percent-less than one-third the national average and no where near what is needed to keep pace with population growth. A recent Minnesota 2020 report demonstrated that in each of the last three years (2005, 2006, and 2007), Minnesota has ranked among the bottom ten states in the nation in the annual rate of employment growth. The same report showed that since 2002, Minnesota’s position relative to other states in terms of median household income, unemployment levels, pupil-teacher ratios, and other important indicators has deteriorated.
Minnesota’s economy has responded poorly to previous rounds of budget slashing during Governor Pawlenty’s tenure. So what is the Governor’s plan for the future? More slashing. Absent policy direction change, Minnesotans should continue to expect underwhelming, lackadaisical economic performance.
The Governor should not be faulted for proposing some budget cuts. In light of a projected $5.9 billion deficit over the next three years, some expenditure reductions must occur. Everyone understands that. However, the Governor should be faulted for steadfastly insisting that all tax increases are “off the table.”
Based on previous budget cuts and their disappointing impact on the state’s economy, it is time to consider some revenue increases to help balance the state’s budget and to avoid even deeper cuts to long-term economic growth engines like education and transportation. Minnesota will only prosper by investing in the state’s future.