Hey Wisconsin, what happened?

Last Friday, I dug into some economic comparisons between Minnesota and Wisconsin. Data showed Minnesota performed better than Wisconsin during the Great Recession and has greater strength in the recovery.

One reader, though, suggested that the recession and post-recession years were too small a data sample to declare Minnesota the economic winner. So I went back looking for some long term comparisons on the economies of both.

Well, from 1980 to 2000, the two states were neck-and-neck in key economic indicators. But then something happened in 2000. Wisconsin tailed off compared to Minnesota and the rest of the U.S. and has continued to lose ground.

Here's a look at the the coincident index for Minnesota, Wisconsin and the U.S. from 1980 through 2012 (click on the chart for a larger view).

The index, produced by the Federal Reserve Bank of Philadelphia, is a good apples-to-apples comparison, combing four indicators (nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and inflated-adjusted wages) into a single statistic.

For 20 years, both states saw nearly identical growth in the index -- no matter which political party was in charge.

In those years, Wisconsin was led by two Republican governors (Lee Dreyfus and Tommy Thompson) with a Democrat (Anthony Earl) sandwiched in between. Minnesota was led by two Republicans (Al Quie, Arne Carlson), a DFLer (Rudy Perpich) and Jesse Ventura, Independence Party.

Wisconsin, though, started slow in 2000 and the index shows a downturn in the 2001 recession that had little effect in Minnesota. Wisconsin stumbled in the first few years of that decade while Minnesota took off again.

Here's a chart with the economic index for Minnesota and Wisconsin since 2000:

In that period, Wisconsin had three GOP governors (Thompson, Scott McCallum and Scott Walker) and one Democrat (Jim Doyle). Minnesota had Ventura, the independent, one Republican (Tim Pawlenty) and one Democrat, current governor Mark Dayton.

As I said in the last post, the data don't end the discussion about taxes and spending or the effects of fiscal policy on business decisions.

But looking at the data, I'm wondering: How much does fiscal policy really matter to a state's economy? And what's happened to Wisconsin?

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