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s Ohio Gov. John Kasich continues to fight an underdog battle for the GOP presidential nomination, he’s made his economic know-how a keystone of his pitch in debates, campaign appearances and ads.
Kasich has argued that his experience as a U.S. Representative in the 1990s and his time as Ohio’s governor show he knows how to create jobs. He’s promoted a plan for boosting the U.S. economy with a familiar combination of budget cuts and tax cuts that he says will spur economic growth. But how well has Ohio actually fared under such measures?
The sixth GOP presidential primary debate, held Jan. 14, was crunch time for Kasich as he looked to bolster his chances in early primary states Iowa and New Hampshire. He took the opportunity to talk up Ohio’s economy.
“Our wages are growing faster than the national average,” Kasich said during the debate. “We’re running surpluses. And we can take that message and that formula to Washington to lift every single American to a better life.”
Later, he circled back to the heart of it all, plugging tax cuts as a recipe for wage growth in the state. “And now in Ohio, with the same formula, wages are higher than the national average,” he said.
But data shows that throughout much of Kasich’s tenure, Ohio’s economic growth has lagged behind the nation’s ongoing economic recovery and failed to extend opportunities to many residents.
In 2015, for instance, wages in all but three of Ohio’s 88 counties were below the national average of $1,048 a week, according to data from the Bureau of Labor Statistics. Sixty-three of those counties had wages below $800 a week.
While Columbus, the state capital, recently made news because wages there were growing faster than anywhere else in the country, experts say that’s a unique situation and many other places in Ohio are seeing stagnating wages and low job growth.
Ohio trails other states in job creation, according to data from the Bureau of Labor Statistics. The state currently ranks 31st out of the 50 states and Washington, D.C., and has been near the middle or below it for most of Kasich’s tenure. Studies like one released late last year by progressive-leaning Policy Matters Ohio show that the state has yet to replace all the jobs it lost in the Great Recession and that wages still haven’t recovered.
Part of that has to do with the lagging performance of the industrial sector of the economy, which Ohio has historically relied upon for employment.
“Job growth in the state has been slower than the national pace since the mid-1990s. This is not a new phenomenon related to the Great Recession,” Cleveland Reserve Bank President Loretta Mester told a group this summer in Columbus. Mester said the pace of economic recovery in the state was quicker than in past recoveries but that it hadn’t been keeping pace with gains made across the nation.
Meanwhile, many in Ohio are already bearing the brunt of the state’s low-performing economy.
A 2014 study by researchers at Harvard University and the University of California at Berkley found that of the nation’s largest 50 cities, Ohio’s major cities were all in the bottom quarter in terms of economic mobility, or a family’s chances of making it to the top fifth of income earners from the bottom fifth within a generation. Columbus ranked 44th, Cincinnati 43rd, Cleveland 40th and Dayton 39th on the list. Though residents fare slightly better in other parts of the state, low-income people still had just an 8.5-percent chance of making it into the upper middle class in the Lima area, which boasted the highest statistical chance of any place in Ohio.
There is an upside to Kasich’s budgetary approach. The state is running a large surplus, though some economic experts note that Kasich has been aided by a national economic wind at his back and hundreds of millions of dollars in federal money given to the state for its Medicaid expansion, education, transportation and other expenditures the state would have otherwise had to make.
Further complicating an analysis of whether or not Kasich’s model for Ohio can and should be replicated across the country is the fact that he’s proposing to cut deeply into those same federal funds.
Kasich says his formula for success in Ohio — something experts call supply-side economics that involves cutting taxes on businesses and high earners in hopes of generating investment and new jobs — comes from his time in Congress.
Kasich, first elected a U.S. Representative for Ohio in 1982, rose to national prominence in the mid-1990s as part of a GOP majority in both the House and Senate led by House Speaker Newt Gingrich. That group of conservative lawmakers made aggressive attempts to enact deep reforms to the nation’s spending, efforts Kasich takes credit for.
“I was in Washington when we had a balanced budget; had four years of balanced budgets; paid down a half-trillion of debt,” Kasich said in last week’s debate. “And our economy was growing like crazy.”
Kasich was there, but many experts say the economic boon those years created goes well beyond the balanced budget act.
From 1997 to 2001, the years when the budget was balanced under President Bill Clinton, Kasich was head of the House Budget Committee and thus can claim much credit for the Balanced Budget Act of 1997. However, many economists argue that the act actually did little to balance the budget.
Budget deficits had been falling for years by that point, a consequence of massive economic growth that had already begun, coupled with tax increases in 1993 that Kasich opposed. Further, the act mostly set limits on the federal government’s discretionary spending that weren’t put into place anyway.
Even fiscally conservative economists concede this.
“We have a balanced budget today that is mostly a result of 1) an exceptionally strong economy that is creating gobs of new tax revenues, and 2) a shrinking military budget,” libertarian economist Stephen Moore of the Cato Institute wrote in 1998.
Ironically, the surplus that came in the late 1990s today touted by Kasich would not have existed if House members at the time had gotten their way in terms of tax cuts. Most, including Kasich, supported moves cutting income taxes on corporations and high earners, legislation that Clinton vetoed. Those looking for such tax cuts had to wait until the George W. Bush presidency.
Kasich has argued that deficit reduction and economic growth “require tax cuts, because that sends a message to the job creators that things are headed the right way,” he said during the Jan. 14 debate. “If you cut taxes for corporations, and you cut taxes for individuals, you’re going to make things move.”
Further, tax cuts haven’t always boosted economic growth, and approaches like the one Kasich touts haven’t always worked out on the state or federal level. In addition to the deficit created during the George W. Bush years, which some economists say was exacerbated by the Republican’s deep income tax cuts, some states are now also grappling with the legacy of extreme supply-side economic policies.
In Kansas, for example, Gov. Sam Brownback and the state legislature have faced a nearly unprecedented budgetary crisis resulting from deep cuts to income taxes for businesses and high earners the Republican governor ushered through a few years ago. Those cuts didn’t increase economic activity the way they were expected to — Kansas lost some 4,000 jobs in a single month last May, even as neighboring states and the nation as a whole gained jobs.
By the end of the last fiscal year, the state was facing an enormous $600 million budget gap. Brownback’s response was to slash some $50 million in state spending and raise sales taxes. Eventually, Brownback says, he would like to eliminate income taxes altogether and support state government functions with sales taxes.
Ohio is in better economic shape than Kansas — it has seen some increase in jobs and better budget prospects as the nation has climbed out of the Great Recession — but many point to the Sunflower State as a cautionary tale about the same supply-side economic approaches Kasich touts. ©
This article appears in Jan 20-27, 2016.