Ohio economists divided on the best way to measure the state’s economy

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Harry Truman is supposed to have said he needed a one-armed economist because every time he asked a question of the ones he had, they responded by saying, “Well on the one hand…”

Whether the tale is apocryphal or not, economists have long been known for carefully hedging statements about the world of commerce, money and consumer behavior. Now a panel of Ohio economists is disagreeing about the usefulness of one of the most-used measures — gross domestic product.

Also known as GDP, it is the measure of the total value of goods and services produced over a given period of time.

The Federal Reserve Bank of Cleveland in March released a report saying that between the fourth quarter of 2021 and the third quarter of 2023, Ohio GDP grew by just 0.5%, the fifth-worst of any state. Contractions in the the state’s two biggest leading sectors — manufacturing and the finance, insurance, and real estate sector — were mostly responsible for the poor performance, the report said.

But how meaningful is that statistic when devising economic policy for the state?

In a survey conducted by Scioto Analysis last month, 17 economists were about evenly split when asked whether GDP was overused in policymaking and whether other measures would be a better alternative. Eight said it wasn’t, seven said it was and two were uncertain.

In the comments section of the survey, Rachel Wilson of Wittenberg University said other measures that consider environmental and social factors should augment GDP when formulating policy.

“GDP was invented in response to the great depression,” she wrote. “It is necessary but insufficient. There are other alternatives like the Better Life Index or Genuine Progress Indicator . These other measures put more weight on goods and services that contribute to well-being, such as volunteer work and higher education, and deducts impacts that detract from well-being, such as the loss of leisure time, pollution, and commuting.”

Bob Gitter of Ohio Wesleyan University said that he believed that state leaders actually look at consequences of GDP — not GDP itself — when they do their work.

“I don’t think policymakers look at GDP, per se, but rather employment and wages which are correlated with GDP,” he said.

However, Ohio policymakers often seem to consider other things.

The state’s leadership has undertaken a number of hugely expensive policies that benefit wealthy individuals and corporations on promises they’ll grow the economy — and they’ve stuck with them even when those promises don’t materialize.

For example, the state forgoes about $1 billion a year on a law that slashes state taxes on those who have the wherewithal to form LLCs.

The program continues despite years of underperforming expectations . A 2022 analysis found that the wealthiest Ohioans overwhelmingly got most of the benefit from that program.

There’s also JobsOhio, for which Ohioans have foregone more than $1 billion in liquor taxes. Ohio’s poor economic performance comes despite the high-dollar program that hands money to businesses — often for doing things they were going to do without the incentives .

And then there’s straight-up corruption, including the bribery scheme in which an Akron utility spent $61 million in bribes to get a $1.3 billion, ratepayer-financed bailout . Despite the fact that federal authorities said rampant use of dark money made the conspiracy possible, Ohio policymakers have done nothing in the four years since the scandal broke to bring transparency to such money, while other states have.

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