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Economic Effects

Following promises of miracles, Ohio’s weakening economy could hurt Gov. John Kasich’s re-election bid

By German Lopez · January 8th, 2014 · News
news1_kasichtaxcutsIllustration: Julie Hill

Ohio’s weakening economy could damage Gov. John Kasich and other Ohio Republican incumbents’ chances of reelection in 2014, even if state officials are not to blame for the downturn, as some economists claim.

For Republicans, the economic threat is all too real as groups from all sides — left, right and nonpartisan — cast increasingly grimmer projections about Ohio’s economy relative to the rest of the nation.

In November, the state released federal data that showed Ohio’s unemployment rate during September and October had risen past the national unemployment rate for the first time in years. Ohio’s unemployment rate remained higher than its national counterpart in November’s data.

The bad news was further magnified on Christmas Eve when the Federal Reserve Bank of Philadelphia noted Ohio was among only two state economies in the nation that worsened between October and November — particularly bad news for an economy with an already negative trend over the past three months.

More bad news arrived after the Buckeye Institute, a conservative think tank, found Ohio’s private-sector performance dragged in November in a culmination of poor long-term trends.

“Ohio dropped from 26th to 34th nationally in terms of private sector job growth since January 2010, growing at a 5.4 percent rate,” the Buckeye Institute noted in a statement. “Ohio currently ranks 47th nationally for private sector job growth since January of 1990, growing at 7.8 percent (top ranked Utah grew 92.4 percent over the same time span).”

Analysts on the left — who typically stand in contrast to the Buckeye Institute’s agenda — echoed the conservative organization’s bad job numbers.

“Since the 2005 tax overhaul, Ohio has had third worst rate of growth in the nation, and our rate is fifth worst over the past 12 months,” said Hannah Halbert, workforce researcher for left-leaning think tank Policy Matters Ohio, in a statement. 

The bad economic news follows various statements from Kasich surrounding the “Ohio miracle,” the governor’s colorful designation for the state’s robust recovery out of the Great Recession. 

Kasich repeatedly said his tax cuts, along with a privatization scheme that effectively handed over control of business tax credit recommendations to the privately run JobsOhio, would continue Ohio’s supposedly miraculous growth. But, based on the most recent economic data, the state’s growth has so far failed to live up to Kasich’s hype.

For Democratic gubernatorial challengers Ed FitzGerald and Todd Portune, both of who could face off in a May primary, Kasich’s failed promises provide a political advantage.

The political logic is simple: If Kasich took credit during good times, he should take credit during bad times, too.

Vladimir Kogan, political scientist at Ohio State University, estimates that the economy is the third biggest driver in state elections, after political party affiliation and any spillover in national politics.

“When the economy is doing well, the incumbents do better. When the economy is not doing so well, there’s fewer incumbents that choose to run for reelection, and among those who do run, they do less well,” Kogan says. 

Citing research from Texas Gov. Rick Perry’s 2006 election, Kogan points out that much of what campaigns and candidates spend their time and money on — television advertisements, for example — rarely make a long-term impact with voters.

“Overall, the campaign itself isn’t going to have a huge effect. It’s going to only move people at the margin,” Kogan says.

Instead, voters tend to look at external factors, particularly the most recent events and economic trends.

“Voters usually have a short memory,” Kogan explains. “It’s not about what did you do in office, but about what have you done for me recently.” 

For Kasich, that means voters will seldom pay attention to the economic growth that followed his election in 2010. When voters make a decision in November, they’ll be looking at the state of the economy right outside the polling booth.

At the same time, Kogan and economists widely acknowledge that, from a high-level perspective, state officials hold marginal influence over Ohio’s economy in the short-term.

“They can certainly do things at the margins to make the economy better or worse depending on public policy, but, particularly at the state and lower levels, they’re operating in an international market that they can’t control,” says Janet Harrah, senior director of Northern Kentucky University’s Center for Economic Analysis and Development.

As an example, Harrah cites population growth, which she claims state officials can do little about.

“A large portion of our economy nationally is driven by population growth. This part of the country — Ohio, Indiana, Kentucky — the population has not been growing as fast as the U.S. average,” Harrah says. 

At the margins, Harrah says state officials can take steps to make Ohio’s business environment stable and more inviting. That’s where partisan debates — over tax cuts, local government funding, education programs and so on — can come into play. Beyond that, she says state officials can do little to move a state economy.

Michael Jones, research director at the University of Cincinnati’s Economics Center, agrees that state officials’ influence is overstated, but he cautions that there are some exceptions and possible effects in the long-term.

For example, JobsOhio could influence economic trends over time by encouraging more businesses to come to Ohio and establish factories and offices. Until then, it’s difficult to objectively gauge JobsOhio’s success or failure as an economic development tool.

Tax changes can also immediately shift consumer spending, according to Jones.

“Any type of policies in which consumers see an increase or decrease in their personal spending is going to have short-term impacts,” he explains. 

Still, if tax cuts reduce revenue and effectively force spending cuts elsewhere, Jones admits they could actually drive growth down in the long run.

In other words, even when state officials can make an immediate impact, the full effect is usually unknown until years down the line — sometimes long after a state official has been voted out of office or reached term limits.

Despite economists’ warnings, the political science research shows it’s unlikely voters will change how they evaluate candidates for office any time soon.

In fact, the issue can be even worse for political candidates who are punished for policy areas in which they have little to no influence over, such as those running for attorney general, secretary of state and other executive positions that are obscure to many voters.

“Sometimes they’re influenced even more (by the economy) because voters know even less about those candidates,” Kogan claims.

It might be unfair, economists and political scientists acknowledge, but that’s just how democracy works at the state and local levels.

“That’s in some ways the irony,” Kogan says. “What determines state elections is almost completely divorced from what these state officials are actually responsible for.” ©

 
 
 
 

 

 
 
 
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