After 40 years of relatively smooth sailing, Minnesota's economy has faced some rough seas in this young century, due to a series of economic shocks combined with underlying economic changes.
Since the 1960s, the service and retail sector has grown faster than manufacturing, and investment capital has become increasingly mobile in search of favorable tax climates. More recently, remote sales by Internet and catalog merchants have made it more difficult for local retailers to compete on price while delivering a blow to state sales-tax collections.
These winds of change -- exacerbated by the economic fallout that followed the 9/11 terrorist attacks, recession and woes in the nation's housing and credit markets -- have reached gale force. Add in a demographic wave that is about to wash over us, and we face an economic storm of epic proportions.
To return Minnesota to a course of prosperity and avoid being swamped, we need to tweak our dated business-tax rules in ways that will help encourage job growth and business investments in today's fast-changing, highly competitive and increasingly global economy.
Education has long provided a sturdy keel for Minnesota's growth. For most of the late 20th century, the state outpaced the U.S. average. Nation-leading graduation and employment rates drove a growing economy and increasing incomes while powering Minnesota to high rankings across a range of social and economic factors.
From 1960 to 2005, average personal income grew 6.8 percent a year in Minnesota, faster than most states outside the southeast, according to State Economist Tom Stinson. In 2007, even after more than five years of economic turmoil, the state's gross domestic product remained 8.8 percent above the national per capita average.
But the tide has shifted in recent years.
From 2004 to 2007, Minnesota lagged behind the national economy. Personal income growth per capita was 13.5 percent, placing us 47th among all states. Our state GDP grew by 2.6 percent, less than half the U.S. average, placing us 42nd among all states.