Does the Iowa Economy Matter for the Iowa Caucus?

When the two immutable laws of election year go head to head -- "It's the economy, stupid" and "All politics is local" -- they produce a corollary that might strike you as a paradox: It's all about the national, not local, economy

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The debate over who wins Iowa is loud enough without journalists getting all "meta" about it, but here we are again, hemming and hawing about why, as a country, we insist on inscribing the first chapter of our election narrative in a tiny Midwestern state with less than one percent of the nation's population that fails every conceivable test as a cross-section of the country. Among the claims: It's too rural, too white, with too much farming and too few tall buildings, and, worst of all, this year it's too economically healthy, as A.G. Sulzberger charged in his story for the New York Times.

Exhibits A through D for the case against the "American-ness" of Iowa's economy: (A) The state's unemployment rate was 6% in October 2011, 3 percentage points below the national average. (B) Its outsized agriculture sector was buoyed by high crop prices, high farm incomes, and rising land prices. (C) Its capital, Des Moines, was recently named one of the 20 strongest cities in a Brookings Metro poll that measures jobs, growth, and home prices. (D) Its other largest cities, Iowa City and Dubuque, both have advantages over cities in the Sun Belt, since they rely on local industries like universities and insurance and avoided the crush of the housing bust. Both cities have unemployment rates under 5%, which is below the national average ... from 2005.

Let us stipulate, then, that Iowa's economy is an outlier. The big question is why haven't more Iowans noticed? Most residents in Gallup's economic confidence index said the economy was poor and getting worse in 2011. If their state's so resilient, why do Iowans seem just as focused on the economy as they plan out their caucus vote?

There are two explanations. One is that Iowa's strengths mask some real economic pain. It's true that since 2004, Iowa land values nearly doubled due to demand for farmland. But the state also get smacked in the mouth with manufacturing's long recession. Six out of 10 jobs lost between 2007 and 2010 were in manufacturing, according to CNN. One in eleven 20-somethings are out of work. The same Brookings survey that named Des Moines one of the recession's top survivors also recently reported that it was the only large Great Lakes metro with stalling employment in early 2011.

The other answer is this: It's the national economy that voters pay attention to when they elect national leaders. "People's assessments of the national economy are more strongly related to their vote than are their assessments of their own personal finances," John Sides wrote in a post at The Monkey Cage. He taps a study that found that state-level unemployment had no relationship to presidential election outcomes in the states. Same goes for real income per capita by state. Another analysis concluded:

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.

So, is Iowa a microcosmic gem of the United States, or an outlier elevated to national attention by an antiquated nomination process that nobody actually likes? Maybe one, or the other. Maybe both! Or maybe, it doesn't matter. When the two immutable laws of election year go head to head -- "It's the economy, stupid" and "All politics is local" -- they produce a corollary that might strike us as a paradox: "All politics is the national (not local) economy, stupid."

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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