The myth of Ohio's economic miracle

The myth of Ohio's economic miracle

Kasich talks about the state's comeback, but some residents haven't experienced it.
By NANCY COOK
03/13/16 07:38 AM EDT


John Kasich touts Ohio’s comeback story on the campaign trail, saying he brought this Rust Belt state back from the economic brink, creating jobs, slashing tax rates and cutting government spending.

The problem is that vision is unrecognizable to many Ohioans, especially those struggling to make it in the state’s gritty urban centers, such as Cleveland, Cincinnati and Toledo — all ranked among the nation’s most economically distressed big cities.

Cleveland, host of this summer’s Republican convention, is the No. 1 most economically distressed large city in America, with 53 percent of adults not working, according to an analysis by The Economic Innovation Group, a nonprofit research group.

“I am mystified when he talks about fixing the economy,” said Amy Hanauer, executive director of the left-leaning think tank, Policy Matters Ohio. “Ohio added the smallest share of jobs out of the 38 states, including the District of Columbia, with job growth from 2007 to 2015. It is interesting to me that he has managed to portray the economy as being really good because it is not.”

Kasich’s survival in the GOP presidential sweepstakes hinges on whether he can deliver a native-son victory in this bellwether state. But the disconnect between the Ohio miracle he describes on the campaign trail and the reality of some voters’ lives could cost him that home-state advantage.

Most polls show the two-term governor trailing GOP front-runner Donald Trump, albeit by just a few percentage points. Although Kasich was elected governor twice and has high favorability ratings, some complain his campaign has exaggerated his economic record.

“I want Ohio to succeed as much as anybody, but you can’t just cherry pick numbers and call it a comeback,” says Gavin DeVore Leonard, state director for One Ohio Now, a coalition that advocates for expanded public services and fair budgets.

To be sure, this heavy manufacturing state has rebounded after being hit hard by the recession. But that was part of a national economic recovery and it left behind many Ohioans, especially the low-wage and manufacturing workers who have flocked to Trump in states like Michigan, where Kasich campaigned so long he joked he should pay taxes.

Kasich “deserves some credit for the economic recovery because he has vigorously pursued job creation, but I’m not sure he deserves quite as much credit as his campaign has claimed,” says John Green, a professor of political science at the University of Akron.

Others say Kasich singled out one data point from Ohio’s employment numbers to cast himself as the ultimate job generator, instead of as someone who benefited from the tailwinds of an improving national economy.

And while he cut income tax rates twice and eliminated the state’s estate tax, he also raised sales and cigarette taxes — levies that hit the pocketbooks of all Ohioans, especially low-income ones.

“We were in the abyss” after the governorship of former Gov. Ted Strickland, says Kasich campaign spokesman Rob Nichols. “The fact that the economy got better under Gov. Kasich is indisputable."

Jobs

Job growth did accelerate under Kasich’s watch but he took office at the beginning of the national economic recovery and as the national economy improved, so did Ohio’s.

Ohio’s jobs picture began to pivot the year before Kasich took office, when the number of employed Ohioans started to rise and unemployment began to fall, according to data from the U.S. Bureau of Labor Statistics. In the 12 months before Kasich was sworn in in January 2011, the state unemployment rate fell from 11 percent to 9.2 percent.

Since he’s been governor, the state’s employment picture has continued to improve, paralleling the national recovery. (The national unemployment rate now stands at 4.9 percent, whereas Ohio’s was at 4.8 percent in December 2015, the latest data available at the state level).

“It’s hard to paint a picture of economic dynamism, or complete economic devastation that can be pinned on the governor,” says Susan Helper, a professor of economics at Case Western Reserve University in Ohio and former chief economist for the U.S. Commerce Department under the Obama administration. “National and global forces are the main things that are responsible, especially for short-term unemployment rates.”

Still, conservative politicians give Kasich the credit for placing the state on firmer financial footing.

“Overall, Ohio’s economic environment is sound,” says Republican House Speaker Cliff Rosenberger. “It’s like an apples and oranges comparison to the leadership who was here before,” referring to the previous Democratic administration.

Ohio’s rate of job growth has been much lower than the nation’s since the recession began in 2007, according to an analysis done by the Democratic-leaning think tank, Policy Matters Ohio. The group points out that 11 out of the state’s 12 most common jobs pay less than $40,000 a year.

Other signs of Rust Belt decline are evident: The state’s employment numbers peaked in 2000 with a little over 5.6 million jobs—and have never returned to that level, according to the Ohio Department of Job and Family Services, a state agency.

Automakers and auto part suppliers make up the biggest base of local manufacturers.

But unions like the local UAW hate Kasich for criticizing the government-backed bailout of Chrysler and General Motors in 2009. Yet now, they say, he takes credit for Ohio’s job creation, powered in part by the auto recovery.

“If the auto industry had not come back, we would not see these jobs come back,” says Ken Lortz, who oversees Ohio and Indiana for UAW Region 2-B which includes roughly 46,000 members in Ohio. “The governor has been in office since 2011, and I have yet to have a conversation with him.”

Kasich also created a new, private state entity called JobsOhio, responsible for the state’s economic development. The entity has been controversial among both liberals and the state auditor because Kasich exempted it from public record laws, meaning that Ohioans have no idea about the deals it cuts with taxpayer dollars to entice businesses.

State economists and academics wonder whether Kasich has done enough to diversify the state’s economy. “We used to refer to Ohio as the Rust Belt, but it’s no longer the Rust Belt because all of the old industries have rusted out,” says Green, the political science professor. “Clearly, there is a lot more to be done and sustained job growth is necessary. We’ve had a hard time for a long time in managing that.”

Budget

One of Kasich’s favorite campaign talking points is that he inherited an $8 billion hole yet managed to balance Ohio’s budget. That figure was actually a forecast by Kasich’s budget director, who had anticipated stagnant state revenues despite the economic upswing the state was beginning to experience.

Both the national fact-checking operation Politifact and the Cleveland Plain Dealer estimate the budget shortfall before Kasich took office was somewhere between $6 to $8 billion.

But Kasich repeated the $8 billion figure so often that it became an accepted truth in Ohio and on the campaign trail.

“The long and short of it is that we were staring down a huge shortfall, and there was no way to fund all of those things at the same level,” says Andrew Doehrel, president and CEO of the Ohio Chamber of Commerce, who reached out to POLITICO at the request of the Kasich campaign.

Kasich also boasts about balancing the budget but the state constitution mandates a balanced budget, so he is hardly the first Ohio executive to pass a balanced budget with the help of the state Legislature.

Taxes

On the tax front, Kasich deserves credit for cutting taxes—though that is hardly as black and white as he portrays it.

His administration cut income tax rates by 10 percent in 2013 and by another 6.3 percent in 2015 and eliminated the estate tax. However, it paid for those cuts by increasing the sales tax (a move frowned upon by budget experts for disproportionately hitting lower-income people) and doing an end-run around the Republican-dominated state Legislature to expand Medicaid, which resulted in an infusion of billions of federal dollars from Obamacare.

Conservatives universally applauded the slashing of the income tax rates, as did local manufacturers, many of which structure their companies so they file taxes through the personal income, and not the corporate side of the tax code.

"We viewed the cuts as a business stimulus,” said Ryan Augsburger, chief lobbyist of the Ohio Manufacturers' Association.

Republicans in the statehouse rejoiced over the tax-cut package and the fact they were able to slash taxes by $5 billion -- with the top tax rate the lowest it’s been since 1982, says Republican House Speaker Cliff Rosenberger.

Liberal advocates pointed out that the wealthiest Ohioans saw the biggest gains, with a $17,000 average reduction in their tax burden, whereas the taxes of low-income people stayed roughly the same or slightly increased, thanks to the higher sales tax.
“Overall, the tax environment in Ohio has decreased,” Rosenberger says. And because the expansion of Medicaid and its accompanying federal dollars paid, in part, for the tax cuts, Republicans have found some peace with it — even those who vehemently oppose Obamacare.

“I don’t agree with him taking federal government money” for expanding Medicaid, says Ohio Senate President Keith Faber, a Republican. But taking federal money ultimately saved the state millions, he said. “Candidly, the governor was right. He took it and we put it into tax cuts and workforce training.”

Liberals give Kasich huge praise for pushing the expansion of Medicaid against the wishes of his own party with the help of a hand-picked health board. The move brought health insurance to roughly 500,000 low-income residents and pumped over $6.5 billion into state coffers over the course of two and half years.

“It has made a tremendous difference in people’s health and in the amount of money it has saved the state,” says John Corlett, the former Ohio Medicaid director under Strickland, who now oversees a nonpartisan think tank.

The irony is that it’s far easier for Kasich to talk about Ohio’s resurgence than his role in helping to implement a piece of Obama’s signature, sweeping health care reform policy.
http://www.politico.com/story/2016/0...-kasich-220652