Friday, June 24, 2005

Is Iowa dopin' for growth?

AP story from the Gazette Online...

Report: Iowa economy growing faster than average


Associated Press - Associated Press

DES MOINES, IA - Gov. Tom Vilsack on Thursday touted a new economic report that showed Iowa's economy grew faster than the rest of the nation last year.

Vilsack said the report by the U.S. Bureau of Economic Analysis (PDF) shows that his economic development policies are beginning to pay off.

The report, released Thursday, showed Iowa's gross state product grew by 8.1 percent in 2004, compared to 4.2 percent nationally.

''We have been making steady progress,'' Vilsack said in a conference call with reporters.

He said the same report also shows that the median income in the state has grown past $30,000, but remains below the national average of about $33,000. Vilsack said if progress continues, he expects the state to reach the national average within a year.

Vilsack said state officials were still analyzing the report to determine which segments of the economy are posting the fastest growth.

''Our ag sector and the biotech economy are showing very significant growth,'' Vilsack said.

He said an initial review of the report also showed that the financial services industry contributed to an improved economy. While Iowa lost manufacturing jobs, the loss wasn't as great as in other areas of the country, Vilsack said.

The story goes on with some blah, blah, blah boosterism from Vilsack and Blouin. Nobody wants to slam the numbers; 8.1% positive change in gross state product from 03 to 04 is nothing short of amazing -- which begs the question: what happened?

Vilouin (Sounds like a good name for some nice luggage) is/are making the case that it is all about state level economic development policies. I am sure the Vilouin policies have had something to do with it; common sense will tell you that when you payout huge amounts of dollars to get corporations to call you home, you're going to see growth. Ultimately, on that score, we have to wait for the claw-backs to expire to see if that industry expansion is permanent. And that permanency will require reforming our property tax system, hog-tying, as any good parent will do with an unruly five year old, state government spending, and continually improving the tax policies we pull out of the ways & means toolbox.

The interesting little caveat in the BEA news is the fact that this report is based on a "prototype methodology", and this new methodology is not discussed in any detail in the news release. In fact, a footnote on page one of the PDF file indicates that "further details...forthcoming July 2005 Survey of Current Business article on gross state product" will better address the questions on methodology. I am not suggesting that we didn’t grow, I am sure we did, but it could be that the magnitude of growth is slightly over estimated in this new methodology, and it seems some economists might agree.

Now I sound like a crusty Iowan, sorry.

So, until we figure out the accuracy of the estimates sometime this Fall or until New York Attorney General Eliot Spitzer digs a little deeper into our financial services industry, we’ll just have to wait and see.

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