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The reason it's conservative, whereas the rest of the midwest is either liberal or swing (Michigan, Wisconsin, Iowa, Ohio) is because of the state's unique political makeup.
Southern Indiana is quite Southern - similar to Kentucky and rural Tennessee.
Central and Northern Indiana are where it gets kind of interesting. As a whole Indiana actually isn't as conservative as most Southern states - it's just very Republican. Having lived in Missouri, I'll tell you that most Missouri Republicans are scarier than Indiana Republicans even though Missouri as a whole is a swing state.
The reason the state is so Republican is that Central and Northern Indiana are largely Midwestern-Conservative. They're similar in their politics to much of central Ohio, Michigan outside of Detroit, Eastern Wisconsin, Western Iowa, and Southern Illinois. Remember that the Midwest is actually quite conservative outside the major cities and urban areas. It's just that it's a different kind of Conservatism than the South. It's not as evangelical - more mainstream protestant (Lutheran, Episcopalian) plus Catholic. The thing is Indiana doesn't really have metropolitan areas comparable to the other midwestern states, so the more liberal nature of cities doesn't really rub off on the whole state. Indianapolis is a mid-size metro area which are generally less liberal, and the city's leaders tend to be main street Republicans - mainly pro-business, not really that socially conservative.
In other words, despite the Southern nature of southern Indiana, Indiana as a whole should probably described more as a Republican state than a Conservative state - it's more similar to, say, New Hampshire, then South Carolina. Although the Klan was very powerful in the state in the early part of the century, the state was never dominated by Dixiecrats - it has long been a Republican state from well before the Southern realignment.
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