The Budget Debate, Part 4, Economic Growth Pre-dates the "Miracle"

The Bureau of Economic Analysis (BEA) of the U.S. Dept. of Commerce harbors a treasure trove of useful data on the nation's economy.

For example, Minnesota ranks 14th among states as measured by per capita gross domestic product (GDP), a standard measure of income.  It is an impressive performance for a small, cold state.

Many attribute this better-than-average economic performance to the "Minnesota Miracle" of 1971, when the state legislature dramatically increased taxes to reduce the disparity on education spending across different localities.  The theory goes that this increased spending on education resulted in greater human capital, which in turn drove the economy of the next few decades.

Unfortunately, this narrative suffers from confusing correlation with causation.

Looking at BEA data, I chart the ratio of Minnesota per capita GDP to overall U.S. per capita GDP over the decades:

Year      Ratio Minnesota/U.S Per Capital GDP.

2010      105.6%
2000      107.5
1990      101.8
1980      101.4
1970        99.2
1960        94.5
1950        94.9
1940        87.5
1930        88.2

Perhaps what is most remarkable about the above data, is how far behind Minnesota was relative to the rest of the country back in the 1930's and 1940's.  The gap closed dramatically after the War, so that by 1970, Minnesota had caught up on income (>99%) with the national as a whole.  Much less dramatic has been the inching ahead since the 1970's.  Looking at the data, whatever caused Minnesota to emerge from being cold and poor to cold and relatively well-off, predates the "Miracle" by decades.

It would be more accurate to describe what happened in 1971 as a collective decision by Minnesotans to use their newly-earned wealth to pay for more government and not a case of government spending creating wealth.  So to those who advocate a "New Minnesota Miracle" as a route out of our current crisis, I suggest reviewing the economic history of our state.