Dave Swenson: Treating the unemployed as if they were social pariahs is not the path to economic recovery.

When a bogus meme gets a head of steam, watch out!

Conservative circles decided last summer that the economy wasn’t growing because of lucrative, federally-funded unemployment benefits. It was clear to those with this view that eliminating extra unemployment benefits would shock all of those over-compensated idlers into finding work.

And so it was that about half of the states, Iowa included, declined extended and emergency federal benefits for their unemployed beginning in June of 2021. A boom in job growth, they were convinced, would soon follow.

It didn’t.

Iowa State University economist Dave Swenson compares Iowa’s per capita COVID-19 case rates and death rates to the numbers for neighboring states, the national average, and the best-performing state (Vermont). -promoted by Laura Belin

It is good that Iowans are getting their COVID-19 vaccinations apace. Iowa now ranks in the top half of states for having administered one dose, as gauged by percentage of population, and in the top third of the states for having administered a second.

No matter how well the state performs on vaccinations in the next few months, though, it will never excuse Iowa’s abysmal record over the past year in caring for its residents.

Iowa ranks seventh worst among the states in its incidence of coronavirus cases per capita, and 17th worst in its death rate. In short, Iowa’s political leadership, its perceived commercial imperatives, and its citizens unarguably came up short when compared with the rest of the U.S.

Iowa State University economist Dave Swenson: Of three possible approaches to health policy, only Medicare for All “reduces the damage that the existing system causes and remedies the cumulative policy failures of the past 70 years.” -promoted by Laura Belin

Health care delivery in the U.S. is a market failure and a governmental failure.

The private sector cannot adequately supply all that is demanded because many of those seeking health care cannot pay for what they need. Government systems, while attentive to the needs of the elderly, disabled, poor, and many veterans, nonetheless fail to cover all who require health care, because policies and funding are inadequate.

As a consequence, too little health care is delivered. And too little health care is socially destructive.

Iowa State University economist Dave Swenson challenges the conventional wisdom on a hot political topic. -promoted by Laura Belin

The sky is falling and Midwest rural economies are in danger of collapse. So say the nation’s ethanol producers, corn farmers, and like-minded politicians.

Their collective fingers are pointing at the federal Environmental Protection Agency’s granting of 31 waivers to U.S. refineries lowering the amount of biofuels they are required to blend into the petro-fuels they distribute. The waivers, the stakeholders claim, are the cause of a string of biorefinery closings and idlings.

Working through this, however, does not lead one to necessarily conclude that the infamous 31 waivers are the chief culprits.

ISU economist Dave Swenson: Iowa’s rural needs are more complicated, persistent, and acute than the current fortunes of the farm sector. -promoted by Laura Belin

Iowa currently hosts a horde of Democratic presidential candidates, but from what I can tell thus far, few have any meaningful experiences or insights dealing with rural areas or rural issues.

Historically, visiting candidates paid obligatory lip service to farm sector concerns – ethanol, commodity prices, and regulatory restrictions as examples — and assumed or pretended that took care of most rural issues.

But rural economies are more diverse than most suppose.

ISU economist Dave Swenson exposes how a Republican property tax bill relies on flawed assumptions and would make the “important job of governing harder” for cities and counties. -promoted by Laura Belin

It is a common canard among the anti-property taxers that city and county governments, those closest to the electorate, are gouging unsuspecting taxpayers. It is their rallying lament, and it requires no substantiation, just confident assertion.

As is frequently the case with made-up woes like this, Iowa House Republicans have a solution. The remedy is House Study Bill 165, a bill to place limits on city and county government property tax growth.

Iowa State University economist Dave Swenson reviews the evidence that President Donald Trump’s trade policy is “harming a large number of Iowans, limiting the state’s potential prosperity.” -promoted by Laura Belin

Governor Kim Reynolds’ Condition of the State address had precious little to say about Iowa’s economy, which is odd because that is something her predecessor and mentor always liked to crow about. She acknowledged that there are challenges for rural areas and that there are ongoing initiatives to promote training and placement of workers, but really said nothing about how the Hawkeye state is performing economically.

There’s plenty to say. Some of it good, some bad, and given the impacts of the President Donald Trump’s trade disputes, lots of ugly.

Dave Swenson is an associate scientist in Iowa State University’s Department of Economics. -promoted by desmoinesdem

Elections inspire economic promises. Whether those promises are realistic or not usually doesn’t matter. It is the economic narrative that matters, and if you hit the right chord, as the Bill Clinton campaign found with “it’s the economy, stupid,” you can milk that for all it is worth to swing an election in your favor.

The GOP retook the Iowa governorship in 2011, and there was a range of economic promises and expectations. Chief among them was the time-worn assumption that Republicans knew how to generate economic prosperity. Jobs were going to be created, household incomes were going to rise, and the state’s economic prospects were going to be righted after four years of mismanagement.

For a time things looked promising. Robust farm profits were driving strong demand for machinery and other capital investments on the farm, which supported both Main Street and manufacturing recovery. Iowa’s already strong wind energy industry continued to expand. There were huge fertilizer plants under construction on both sides of the state. Iowa had become a popular place to site data centers. A dime was added to the gas tax to boost road construction. And a controversial pipeline bisecting the state diagonally requiring hundreds of workers was laid in the ground.

So Iowa’s economy is doing great, right? Wrong. Here are just a few key indicators:

Iowa State University economist Dave Swenson examines “troubling” trends in seventeen mid-sized cities (“micropolitan” areas) with core urban populations of 10,000 or more. -promoted by desmoinesdem

Iowa’s metropolitan areas are growing, a few quite smartly, but a majority of Iowa’s nonmetropolitan areas are declining, several quite sharply. These changes have implications for the vitality of and outlook for much of rural Iowa. They also have implications for dominant rural political attitudes.

As rural economies and populations transform, so too do their collective public policy preferences. Recent statewide and federal election results show clearly that nonmetropolitan Iowa has become more conservative than its historically-conservative norm. And current indications give us no reason to expect that trend to abate.

Economist Dave Swenson explains why “a tight labor market is good for workers and good for families,” contrary to what you may have read in the newspaper. -promoted by desmoinesdem

Iowa’s enviously low unemployment rate of 3.1 percent is distressing many in the business community and, by proxy, business news. In recent months more and more people are declaring that Iowa is at full employment, and that, they say, is a problem.

It’s not. Iowa’s economy bumping up against full employment, if in fact that is happening, is a good thing. It is the stated goal of every politician’s overweening job creation rhetoric. It is what we hope for as our economy moves through the wrenching disruptions to firms and households caused by recessions. It is precisely what we want to happen: as many people are working as our economy can support.

Unless it creates discomfort in the business community. Then low unemployment is a problem. Let me explain.

ISU economist Dave Swenson returns to the important topic of exaggerated claims about job creation and other economic impacts. -promoted by desmoinesdem

The Iowa Department of Education released a study recently claiming Iowa’s community colleges support $5.4 billion in income and 107,170 jobs in Iowa.

The claim is ludicrous, and I’ll get to the details in a bit, but it is on par with a range of private and public economic impact studies of higher education that contort econometric methods in ways never intended in order to provide ever-desperate college and university administrators with economy-benefiting claims that wow legislators and garner public support.

Another helpful reality check by Iowa State University economist Dave Swenson. Find his previous writing for this site here. -promoted by desmoinesdem

It is vexing to hear assertions of a skills gap in Iowa, or nationwide for that matter, when people are really complaining they can’t find workers to do what they want them to do for the wages they are willing to pay. That is not a skills gap.

Neither the inability of a grain elevator in rural Iowa to find grain handling help nor a manufacturer in Clinton to find computer-controlled machine tool operators or programmers are skills gaps. They may be regionally-specific skilled labor shortages, as is the case in much of rural Iowa because of persistent outmigration, they may be workforce indifference to those job opportunities, but they are not skills gaps.

Dave Swenson

The news out of West Des Moines last week was that Microsoft will add a third data center. At first glance, a data center cluster looks to be popping-up in Iowa. We have the three Microsoft projects in West Des Moines, Facebook’s two complexes on the other side of the metro in Altoona, Google’s two projects in Council Bluffs, and a smattering of smaller centers scattered about the state.

“Microsoft could build these centers anywhere in the world,” said West Des Moines Mayor Steve Gaer, as quoted in the Des Moines Register, but they’re building them right here in Iowa. A map of data centers across the U.S. tells us, though, that data centers of all sorts and sizes are just about everywhere there are people. In short, Iowa isn’t that special. Don’t tell West Des Moines.

Dave Swenson

Anyone paying attention in Iowa knows that farmers benefited greatly from robust commodity prices during the earlier part of this decade, but that in recent years prices have slumped, as have the fortunes of farmers. Iowa’s farmers were credited (sometimes over-credited) with helping carry the state through the Great Recession because their boom years allowed them to buy new machinery and other agricultural durable inputs, which in turn multiplied through the Iowa economy. During down times, however, those magical multipliers stop working.

Dave Swenson

Is it extortion when one party pays up even though it was never threatened?

Recently, the state of Iowa awarded $17 million in state assistance to Dow-DuPont for pledging to keep its Pioneer-related research and development activities in Johnston. In a Des Moines Register interview of Tina Hoffman, a spokesperson for the Iowa Economic Development Authority (IEDA), we were told they were sure “Pioneer wasn’t going to up and close down shop. That was clear from the beginning ….” Still, the state is spinning this to be all about job retention.

Except it wasn’t.

Dave Swenson

Elected officials are keen to flash their job creation scorecard even though local and state government officials don’t really create many jobs. The economy in the aggregate creates the overwhelming majority of jobs, and some of those jobs locate in our cities, counties, and state. For elected officials, though, if it happened on their watch, ipso facto, they’ve created jobs. Credit is always claimed.

When job “creation” (see above) becomes the measure of public service performance, however lacking in substance or result, we inevitably get phony statistics, misleading inferences, or dubious claims. Sometimes politicians cherry-pick the numbers to make the best case possible. And sometimes politicians or their willing accomplices create brand new statistics.

Dave Swenson
It’s obvious to everyone, and no one can argue with what’s literally right in front of our eyes and unarguably true: when it comes to presidential campaign spending, the vast majority of candidate effort is concentrated in Iowa, the first caucus state, and in New Hampshire, the first primary state. It stands to reason, then, that Iowa spending amounts must be huge, especially in a year when both parties have an active slate of candidates. Yet when we analyze campaign spending, that is, when we follow the money, precious little finds its way to Iowa. As I’d pondered before in my own research, what gives?

Here’s the money quote from a recent investigation by Brianne Pfannenstiel of the Des Moines Register where she looked at campaign spending in Iowa through the third quarter of 2015:

Despite Iowa’s outsize influence in the nation’s presidential nominating process, political spending is still funneled primarily to coastal states, which house major political consulting and advertising firms. Iowa accounts for just 3 percent of the $153.3 million that presidential campaigns have spent so far this cycle, filings with the Federal Election Commission show.

I took a good look at this during the last wide open Iowa Caucus.

Dave Swenson

The EPA finally announced the amount of ethanol that will be blended with the nation’s fuel supply in 2015 and the amount to be blended in 2016 (see this summary in Bleeding Heartland). Depending on where your headline writers live, this was reported as a win for ethanol or a disappointment to the biofuels industry. Here in Iowa, the Des Moines Register told us that Iowa’s ethanol producers, notwithstanding a boost in ethanol mandate levels from earlier EPA proposals this year, found it necessary to “criticize new EPA fuel standard.”

A reasonable person might wonder, what’s up? What’s up, is the ethanol industry has an insatiable demand for public support of ethanol consumption, and it views any erosions in that support as an unforgiveable betrayal.

Dave Swenson

It is an article of faith that Iowa’s businesses are tax-burdened. Ask anyone. Farmers believe property taxes are unfair, shopkeepers bemoan the burdens of eking out a profit while still obliged to contribute to the public purse, and manufacturers uniformly lament the erosions in interstate and international competitiveness they say are caused by Iowa’s archaic system of taxes. It all makes for good rhetoric, but in the main it is not true: Iowa taxes on businesses are, like Iowans, just about average, if not a little better. And Iowa’s manufacturers enjoy a particularly privileged position compared to other commerce in the state and to other manufacturers nationally.

All of that notwithstanding, the Iowa Department of Revenue recently held hearings to eliminate, using administrative rule-making powers, a set of sales taxes typically owed by manufacturing firms. Mike Ralston, President of the Iowa Association of Business and Industry, wrote in the Des Moines Register that Iowa’s manufacturers “expect and desire to pay all the taxes they owe.” But he noted manufacturers ought to not owe these particular taxes because they amounted to double taxation, a dubious claim at best.

Writing in Bleeding Heartland, Jon Muller informed us this would be incrementally more costly to the state’s fiscal accounts over time and that the need and justification for tax relief in this very narrow area of business activity was somewhat sketchy. And the sage Peter Fisher of the Iowa Policy Project, responding in the Des Moines Register to this legislative end-run, weighed in arguing that this “tax break is not an incentive; it is a gift to business.”

It is an easy task to evaluate Iowa’s overall situation regarding the full complement of production-related taxes that oblige Iowa businesses. The U.S. Bureau of Economic Analysis provides annual estimates of Gross Domestic Product (GDP) for state industrial categories. GDP at the state level is composed of all compensation to employees, gross operational surplus (i.e., returns to owners and investors), and business taxes on production and imports (mostly use, sales, excise, and property taxes). By dividing the taxes portion of GDP by the total, we get a fix on the relative total tax bite burdening Iowa’s manufacturing industry in the aggregate.

The first graphic below demonstrates Iowa manufacturers’ tax burden as a fraction of GDP as compared to all private businesses in Iowa.

Dave Swenson

We have been sold a bill of goods for much too long: local and state economic developers and their willing political enablers have convinced many of us that their earnest economic development efforts are responsible for the state’s economic vibrancy in recent years.  It is a canard that serves them, some in the business community, and various political fortunes well, but for the rest of us, their collective economic and political incompetence creates unjustifiable distortions in exactly who pays and who does not pay for public services.

Dave Swenson

Most of us don’t really know that much about the economy.  We don’t know, for example, which private sector industry group in the U.S. has the most workers (retail sales at 18.4 million), or which sector grew the most over the last decade (mining at +100%), or which sector declined the most (manufacturing  at -15%).

OK, maybe that last one is a more widely known, especially if you live in the Midwest.   And if it is, then a statement by Michael Hicks, director of the Center for Business and Economic Research at Ball State University, is truly curious. In a Des Moines Register story on Iowa’s manufacturing situation and its strengths on July 7th, he is quoted as saying the “U.S. manufacturing base is not in decline, and we have recovered from the recession.”  

Dave Swenson

Senator John Thune, from my home state of South Dakota, has a degree in business and an MBA.  He knows little of tax math, incidence, or outcomes from what I can tell. Like many mouthpieces on many topics, he doesn’t let facts get in the way of a heartfelt story, though.  And the best story the GOP has spun over the last decade or so is the tale of woe and intrigue associated with the dreaded federal estate tax, which they’ve disingenuously rebranded as the “death tax.”

Thune co-sponsored the just-passed House bill to eliminate the federal estate tax and at that time said:

For too long the federal government has forced grieving families to pay a tax on their loved one’s life savings that has been built from income already taxed when originally earned. Currently more than 70 percent of family businesses do not survive to the second generation, and 90 percent of family businesses do not survive to the third generation.

Without citing one example, Thune intimated that the federal estate tax was destroying or would destroy businesses and was terrorizing grieving survivors.

Depending on where you live in Iowa and who you interact with, you may have some quirky conclusions about how income gets made.  It’s common and correct to conclude that many folks get along with the help of public assistance: many in fact wouldn’t get along at all without public aid.  But most of us don’t have a clue how money gets made in this state, let alone who the recipients of public assistance are.  We go to annual estimates by the U.S. Bureau of Economic Analysis to get the numbers.

Here's how $138.34 billion in 2013 total personal income was divided up: Two-thirds ($91.3 billion) came from total earnings, which are wages and salaries, payments to proprietors, and the value of all employer-supplied benefits like medical insurance and retirement contributions.  Investment incomes (dividends, interests, and rents) made up 18 percent ($24.7 billion).  And transfers – payments by the federal government or, to a lesser extent, state government to individuals either in cash, vouchers, or direct assistance – were 16 percent of state income. 

Stated differently, 84 percent of our incomes came from market activity, and 16 percent came from governmental tranfers.  Market incomes trumped government payments to individuals by a ratio of better than 5 to 1.