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How I Think about the Economy in Iowa (and The Other 49 States)

- December 19, 2011

In response to Michael Lewis-Beck’s guest post below, the New York Times Washington Bureau Chief David Leonhardt tweets:

bq. Conclusion seems either off or old. IA’s UE rate is still 6% & risen much less than US vs 12/07.

There are two questions that I think pertain to the original NYT article Lewis-Beck was responding to.  One is how representative Iowa is.  The article’s author, A.G. Sulzberger, writes:

bq. As the first state to take part in the Republican nominating contest, Iowa has long been criticized as too much of an outlier to be permanently endowed such an outsize influence in shaping the presidential field. Too small, critics say. Too rural. Too white. But this election cycle, there is another particularly relevant way in which the state does not represent the nation as a whole: it is too economically healthy.

Sulzberger and Leonhardt are absolutely correct that, as of 2011, Iowa’s economy is doing better than the nation’s.  At the same time, part of Lewis-Beck’s point, and see especially his research with Peverill Squire, is that Iowa is actually more representative in ways that, frankly, don’t get reported enough.  In other words, even if Iowa is not perfectly representative on every dimension, people imagine Iowa to be more unrepresentative than it really is.

But the second question is, to me, more important: how should we think about Iowa’s economy and other states’ economies in terms of the 2012 election?   Here are some other relevant facts about Iowa:

* On Gallup’s economic confidence index from the first half of 2011, Iowans scored a –20.  Is that better than the overall average?  Yes, as the NY Times article finds using other polling data.  But is that number “high”?  No.  It still suggests that Iowans are not particularly confident in the economy.  Based on how the index is constructed, it means that Iowans are probably more likely to rate current economic conditions as “poor” rather than “excellent or good”  and more likely to say that the economic is “getting worse” rather than “getting better.”

* Moreover, Iowans are less confident now than they were in 2010, when the average index score among Iowans was –15.  This decline, albeit small, nevertheless coincides with a period in which the unemployment rate in Iowa didn’t really change.  Because it is trends in economic perceptions that matter, I think the director of the Iowa Democratic Party, quoted in the NYT article, is more right than wrong:<br>

While we are doing better than other parts of the country, the same issues are still facing Iowans. When they go to vote in November, it’s going to be all about the economy.

* Finally, Iowans don’t necessarily think about the economy in terms of Iowa.  In general, perceptions of the economy depend more on the national economy than on conditions in states or localities.  This goes against a lot of conventional wisdom, which imagines that people’s perceptions of the economy depend on their employment status, bank accounts, home values, etc. — or at least those in their communities.

For example, a classic political science finding is that people’s assessments of the national economy are more strongly related to their vote than are their assessments of their own personal finances.

Or look at presidential election outcomes.  Using data from 1960-1984, Thomas Holbrook found that state-level unemployment had no relationship to presidential election outcomes in the states, once measures of the national economy were included in the model.  The same is true for election-year changes in state real per capita income.

In a separate analysis of 1972-2000, Daniel Eisenberg and Jonathan Ketchum also find that the national economy outweighs the effect of state and county economies.  They write:

bq. Evidently, voters believe the president has little effect on their local economy, and they do not form their evaluation of the national economy based on surrounding conditions. This finding suggests that people form their opinions of the national economy based on non-local factors, such as the national media.

The broader point, I think, is that people are often anxious to dive into the details of states and communities, which can downplay, if only by implication, how much national forces shape elections.  As Andy has noted, states have become more similar in their partisan shifts from election year to election year– that is, the shifts (or “swings”) have become more uniform across states.  This fact also underlies Jon Bernstein’s repeated observation that battleground state reporting at this stage is premature.  More important than the economic, demographic, or cultural nuances of individual battleground states are the national trends.

To me, that’s why it’s less consequential that Iowa’s economy is better than the nation’s, and more consequential that the nation’s economy isn’t all that good.