Pharos-Tribune

July 2, 2013

MARCUS: Mixed messages of income data


Pharos-Tribune

---- — “So, like how are we doin’?” Eva LaFever asks. “We’re makin’ progress? We’re slippin’ back, maybe?

“Truthfully,” I say, as if I were accustomed to lying, “we’re making progress, albeit slowly and unevenly.”

“How’d ya know? What with all the ups and the downs on the stock market, how’s a person to figure out what’s goin’ on?” Eva says.

“Well,” I say, pausing to give authority and authenticity to my comments, “every three months the Bureau of Economic Analysis in the U.S. Department of Commerce puts out quarterly reports on the economy of each state.”

“Ya don’t say,” she says.

“And the latest report,” I continue, “indicates Indiana is doing better than the nation mainly because we did not do as well in the previous quarter.”

“Are ya tryin’ to confuse me or does it just come natural-like?” Eva asks.

“Let me try to explain,” I offer. “In the last quarter of 2012 everyone correctly anticipated that payroll taxes would go up at the start of this year. So employers who were going to give out bonuses made sure they gave them out before 2012 ended, thereby avoiding having to pay those higher tax rates.

“Nationwide, personal income grew at an annual rate of 2.7 percent. In Indiana, however, where bonuses are not as frequently given or are less generous, the increase was just 1.8 percent. That put us in 40th place in the growth rate for personal income in the 4th quarter.”

“Why don’t Hoosiers get the same kind of bonus as them other folks?” Eva says with some indignation.

“Seems,” I reply, “we aren’t big in financial services and corporate offices where the big bonuses are given.”

“But ya said we wus doin’ better than the nation?” Eva complains.

“We did do better than the nation in the first quarter of 2013,” I answer. “Because the payroll taxes did go up and because the big bonuses were not being paid, personal income actually fell by 1.2 percent nationally, but was only minus 0.9 percent in Indiana. We came out of the first quarter in 11th place nationally.”

“Wow,” says Eva, “11th place is almost in the top ten. I guess this means our state is on the right track after all.”

“Eva,” I say looking directly into her bright eyes, “if a roller coaster does not go up very far, it doesn’t have far to fall.”

“Let’s look at the numbers again. We came up short of the nation on the up side by nearly a full percentage point when the bonuses were being given out. Then when the nation’s personal income fell, we were only two-tenths behind the country as a whole.

“We were short on the up side and close on the downside. That’s not a formula for advancement or a source of pride. Indiana is on a path of continuous relative decline and our business and political leaders refuse to acknowledge that truth. Instead ...”

“I know,” Eva interrupts, “but there’s no reason to get upset about it. After all, what can one person do?”

Morton J. Marcus is an economist, writer and speaker formerly with the Kelley School of Business at Indiana University. He can be reached at mortonjmarcus@yahoo.com.