by Michael Hicks
Only a few aficionados of military history know the name of Lucian Truscott, Jr., the general who assumed command of 3rd US Army in 1945 after George S. Patton. Such is the risk of anonymity that comes from following a superstar into office. Yet that is precisely the position Mike Pence eagerly placed himself four years ago as he replaced Mitch Daniels to the governorship of Indiana. As he leaves office to walk on the national stage, it is a convenient time to reflect upon his economic record.
I begin by emphasizing that elected officials of all stripes have minimal effect on short-run economy performance. Indeed, the state of nature involves an economy with little government interference, so mostly the best that any elected official can hope to do is to limit the size and scope of damage government inflicts upon commerce.
By the topline measures, the economic performance of Indiana during the Pence administration has been very strong. The Hoosier economy is now at full employment at 4.2 percent, and there are more than 230,000 more people working in Indiana than in January 2012. The decline in Indiana’s unemployment rate from 8.6 percent to 4.2 percent was accompanied by much-needed growth in the labor force and a return to population growth in Indiana. Though Indiana continues to lag in per capita personal income, the inflation-adjusted growth over the past four years is better than it has been in a generation. Moreover, the recent growth in per capita income has been matched on only three occasions since the end of World War II.
Rightly or wrongly, elected leaders are held accountable for short-run economic performance, and as these data clearly offer, Mike Pence has much to brag on. In my judgement he did three important things right in making the Indiana economy perform better than expected over the past four years.
First, the Pence administration continued the existing focus on strong fiscal stewardship. Budgets matter. Unbalanced budgets or those with unfunded liabilities are especially dangerous to states, and it is a hard thing to keep the many requests for extra resources in line.
Second, Mike Pence displayed very principled pragmatism on economic policy. From the very beginning of his administration, he was pressured by numerous national voices to make Indiana the model for aggressive tax cuts. But a very careful analysis of the matter revealed that course to be imprudent and he settled for a politically unpopular, but appropriate course of action on taxes.
Third, Pence was especially innovative. The extension of the Healthy Indiana Plan was, like his tax proposals, unpopular with his friends in the conservative movement. Again, after sober judgement, he chose the right, but unpopular path. But, his most innovative policies were those that will continue to impact the Hoosier economy for decades. The Regional Cities Initiative in particular and the $1 billion Entrepreneurship plan unveiled last June are two of the most innovative state-level economic development efforts anywhere in the past two or three decades.
But not all was rosy during Pence’s tenure as Indiana governor. In particular, the RFRA surely took the shine off the state’s reputation, though the evidence is clear it had no economic effect for good or ill. Still, as Pence leaves office to assume the vice-presidency, he can claim a very clear track record of success on Indiana economic policy. Moreover, though the outline of his proposals were undeniably conservative, his economic policies as governor were moderated by a pragmatic and innovative approach to thorny problems. Hoosiers will continue to benefit from many of them for years to come. More importantly, this ability to focus more on results of policy than popularity should be welcomed in Washington.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.