Cultivating an economy

CARROLL, Iowa - In the swaying curtain of green fields outside town, Russ Ranniger hums along in his Deere tractor, plowing the same soil his father did, sleeping in the same 1881 wood-frame house he was carried into as a newborn 60 years ago. In nearly four decades of farming, he knows how to measure success.

Good crop prices? Check. Confidence (and money) to buy new equipment? Check. The past five years? "The best farming days of my career."

Howard Drees, a third-generation contractor in Carroll, gauges prosperity by his crowded work calendar. These days, he's so busy with mechanical and electrical projects he's hired an outside company to help and is searching for skilled workers.

These are good times in much of Iowa, partly due to a booming farm economy and a May jobless rate - 5.1 percent - that would be the envy of most parts of the country. Crop prices are strong, land values are soaring and farm incomes are up dramatically in recent years. The only cloud on the horizon? The threat of drought, which has sent ripples of anxiety through corn and soybean country.

In Carroll County, the unemployment rate was 3.5 percent in May. "Most people by and large know we've got it good," said Jim Gossett, head of the county economic development office. "We do feel lucky that we were not fighting so hard for jobs. But we have a different fight - and that's finding workers. And I wouldn't trade the problem we have for the other one."

The irony? This prosperous state may be crucial in deciding who will win the presidency of a country still reeling from recession. It is anybody's guess how a fairly healthy economy at home and a sputtering recovery outside Iowa's borders will play at the ballot box - whether the president will get credit, blame or both.

What is certain is that Iowa matters.

This small state holds big sway in the race for the White House. President Barack Obama and Mitt Romney, deadlocked in recent polls, are blanketing the airwaves early with TV ads, scrambling for the state's precious six electoral votes.

Iowa was magical for Obama four years ago; his win in the first-in-the-nation caucus propelled him to the front of the Democratic pack at the start of primary season and set him on his way to the White House. Four years later, the luster seems to have faded and Republican Gov. Terry Branstad has made a habit of saying: "We launched him and we can sink him."

And yet, this state hasn't been particularly lucky for Romney. In 2008, his $10 million campaign here fizzled with an embarrassing second-place finish, marking the beginning of the end of his truncated presidential bid. Then this past January, a single-digit win turned into a double-digit loss after a recount.

This fall, no one expects a rerun of Obama's 10 percent cruise to victory in 2008 over Republican John McCain. The contest is likely to be similar to Iowa's razor-thin margins in the last two contests: Al Gore in 2000 and George W. Bush in 2004 both won by less than a percentage point.

Registered independents will be pivotal. They outnumber registered Republicans or Democrats in Iowa.

How they all view the state's prosperity will be critical, though some are skeptical it will translate into good will because of a widespread antipathy toward federal government - which, in turn, is personified by Obama.

"Just like the general that's on a horse running in front of the troops, you're the first one who gets shot in the war," says Rick Hunsaker, director of a regional planning agency. "I think the president takes a lot of heat. I just don't know what that's going to mean in the voting booth. ... It's so sad that things are polarizing. You don't hear people out there say, 'These are the president's weaknesses, yet these also are his strengths.' It's either you're all bad or you're all good and nobody is that way."

Art Neu, a former lieutenant governor and local lawyer - and a Republican who credits Obama with doing "an exceptional job given what he stepped into"- says that in today's environment the president could even take a hit if the dry weather turns into a drought this summer.

"If the economy suffers because of the crops, I think that's going to go against Obama," he says. "It's not his fault. When people are mad, when things are bad, they strike out. It's not rational. It's tough to be an incumbent during a recession even though you weren't the one that made the recession."

Iowa was spared the massive housing foreclosures and double-digit jobless rates that wracked huge swaths of the nation during the recession. But some communities, especially manufacturing areas in the eastern part of the state, suffered layoffs and plant closings and have struggled to recover.

The state has reaped the benefits of the thriving agricultural economy, with farmers investing in big-ticket items such as equipment and buildings. That's helped keep a lid on unemployment, which peaked at 6.3 percent during the recession, high only by Iowa standards.

"We have lower unemployment because historically we have had high migration," says Dave Swenson, an Iowa State University economist. "We put the people we can to work. Those we can't, we say 'take a hike.' They don't leave because we don't love them. They leave because we can't use them."

"There is a tremendous amount of demand for Iowa-raised talent," he adds, with accountants, health care workers and other professionals relocating to Midwest cities such as Kansas City, St. Louis and Minneapolis.

Iowa tends to be viewed by outsiders as an "American Gothic" landscape of barns, two-lane blacktops and an endless horizon of lush green acres. But the state's No. 1 industry (in gross domestic product) is manufacturing - this is home to Pella Corp., Deere & Co., factories and meatpacking and pork processing plants. No. 2 is insurance and No. 3 is farming.

Iowa made a big push after the farm crisis to diversify beyond agriculture into insurance, banking and health care. The shift occurred in Carroll County, too, (population 20,000) which has a Pella plant, companies that produce jet fuel nozzles, fire and trash trucks, a winery and a giant warehouse that serves convenience stores.

Agriculture, to be sure, remains a huge business. About 86 percent of Iowa soil is in farms, according to Swenson. Most Iowa full-time farmers rent at least half their land, which has posted a dramatic increase in value.

The average cost of an acre of farm land, for instance, skyrocketed from $2,432 to $6,708 from 2000 to 2011, according to a survey conducted by Mike Duffy, an Iowa State economics professor. In Carroll County, the average acre last year was $7,921 - though some recently sold for as high as $12,000 an acre.

Crop prices are up, too. A bushel of corn that was $2.22 in 2001 was $6.15 last year. And while the average farm income jumped nationally more than 50 percent since 2000, in Iowa, it was more than triple that, Swenson says. (Those numbers are not adjusted for inflation.)

Add to that some trade muscle. This year, Iowa signed a $4 billion soybean contract with China. It came in conjunction with a visit from Chinese Vice President Xi Jinping, who'd first traveled to Iowa in 1985.

As powerful as Iowa's ag economy is, what many people don't realize is that one reason the state is doing well is "it benefits tremendously from federal programs," says Steffen Schmidt, an Iowa State political science professor. That includes tax breaks, crop insurance, subsidies for wind power companies, ethanol mandates for fuel blending and government-supported biofuel and biotechnology programs.

That should boost the president in Iowa, he says, but "the Democrats seem incapable of making that narrative. They don't seem to know how to make any political gains out of that ... they've abandoned the field to the Republicans. ... The Republicans have made a case, which is widely accepted, that government is bad and that government spending needs to be cut back."

Schmidt argues that all levels of government have been essential to the state's health. "The thing that concerns me most," he says, "is we're not recognizing all the things our government supports that make it possible for private enterprise to be so successful."

Iowa's good economy, he adds, could mean social issues such as gay marriage and immigration (the state's Hispanic population increased from 2.8 percent to 5 percent from 2000 to 2010) may become more important for some voters. The state has a strong social conservative Republican base, and in 2010 three Iowa Supreme Court justices were ousted after they supported a decision legalizing gay marriage.