Kasich pledges to right economic ship of state

Republican gubernatorial candidate John Kasich, left, and Mike McAlear of Service Spring Corp. speak during a discussion in Millbury last month. THE BLADE/DAVE ZAPOTOSKY Enlarge | Photo Reprints

COLUMBUS - "Where do you go when the water rises?"

John Kasich asks that question early in his recent book relating his rediscovery of faith in the wake of the auto-accident deaths of his parents in 1987. But it could just as easily be asked of him as he urges voters to hand him the reins of Ohio state government at a time of double-digit unemployment and warnings of a massive budget shortfall next year.

"I think of Ohio as a boy when I used to come across the border to go to Vermilion with my family on vacation," the Pennsylvania native said. "My Uncle Harry used to say that Ohio was the Promised Land because it was youthful and opportunistic. I look back on those days when things were really happening. I think about re-creating the strong-growth days."

On the campaign stump and in interviews, the energetic former state senator, congressman, Fox News talk show host, and financial firm manager from suburban Columbus talks broadly about how he'd accomplish that - eliminating the state personal income and estate taxes, modernizing and shrinking state government, and reforming Ohio's workers' compensation system.

But ask specifics about how and when he'd follow through with his plan and where he'd reduce state spending to offset the potential loss of revenue, and the path becomes less clear.

"All the specifics on this are all being constantly worked," he told The Blade in a recent interview in his downtown Columbus

campaign headquarters.

"I will lay out a program whenever I feel I'm satisfied with the program, when we understand the revenue, when we've worked this effectively," he said.

Thirty years after moving to Columbus as a political science student at Ohio State University, the 58-year-old Republican former congressman is seeking to convince Ohioans he's the right man to run the state after nearly four years under Democratic Gov. Ted Strickland.

In the last Quinnipiac Poll in late June, 52 percent of voters said they hadn't heard enough about Mr. Kasich to form an opinion of him. So the race is on to define Mr. Kasich in the minds of voters before the Nov. 2 election.

Is John Richard Kasich the former regional manager of failed Wall Street giant Lehman Brothers, who collected huge bonuses while average investors lost their shirts, and whose slash-and-burn policies would doom the state before economic recovery can take hold, the image that Mr. Strickland portrays?

Or is he the conservative, pro-business deficit hawk and family man who would right the ship of state in the wake of a governor under whom about 376,000 jobs have disappeared, the picture Mr. Kasich paints?

"I think it's kind of sad," he said. "I've been a victim of attacks for well over a year. If it wasn't Lehman, they'd figure out something else. They're in attack mode. Isn't it surprising to you that you haven't heard them say one good thing about themselves? Seriously, anything? If I didn't have anything good to say about myself, I don't think I would run."

Mr. Kasich grew up in McKees Rocks, a blue-collar industrial town on the shores of the Ohio River just outside Pittsburgh. The son of a mailman, Mr. Kasich honed his oratory skills as a church reader, skills he'd later use in politics and on the paid speech circuit.

He served in the Ohio Senate from 1979 to 1983 and then the U.S. House of Representatives until 2001, his tenure in Washington overlapping with that of a certain congressman from rural southern Ohio, Mr. Strickland.

He was chairman of the U.S. House Budget Committee in 1997, when the Republican Congress ushered through and Democratic President Bill Clinton signed the nation's first balanced budget in nearly 30 years. He and his wife, Karen, live in Westerville, north of Columbus, with their twin daughters.

On the campaign trail, Mr. Kasich likes to compare himself to James Rhodes, even as he was proposing to privatize the Department of Development that the late four-term Republican governor established. Mr. Strickland calls such a comparison "laughable."

"Jim Rhodes certainly believed in using government to create jobs and to build our state," he said. "I never heard Jim Rhodes talk about privatizing Social Security. Jim Rhodes put a lot of state resources into programs that create jobs, put people to work, build airports, all of those things.

"Jim Rhodes believed that government had a responsibility to look out for people, families, and communities," Mr. Strickland said. "I think I'm much closer to Jim Rhodes' philosophy of jobs and progress than John Kasich is. John Kasich believes totally in looking out for really wealthy people."

After his time in Congress, Mr. Kasich turned to the private sector, going to work as Columbus manager for Lehman Brothers, the powerful investment firm that epitomized Wall Street. While the firm collapsed during his tenure in 2008 under the weight of toxic mortgage-backed investments and creative bookkeeping, he insists his tenure there was a valuable one.

"I wanted to learn about business," he said. "I learned how private equity works. I learned how private venture capital works, how CEOs and boards of directors make decisions. I received a wealth of knowledge about what drives our economy. If there's anything we need in politics today, it's people who understand business."

It's Lehman's bankruptcy that the Strickland campaign wants voters to envision when they think of Mr. Kasich. The governor reminds Ohioans that the state's pension funds lost hundreds of millions when Lehman went under even as Mr. Kasich was collecting a $400,000 bonus as recently as 2008. That's the only year for which Mr. Kasich has allowed reporters to glimpse his tax returns.

Mr. Kasich, however, downplays his influence with the firm.

"I was on the banking investment side," he said. "I wasn't making these financial decisions. I wasn't anywhere near that. I was over here to do [initial public offerings], private placements, debt deals, and whatever else we can do to help companies be stronger. The management team didn't call me up and ask me my opinion."

Mr. Kasich made introductions of Lehman investment personnel who pitched deals to two of the state's five public pension funds. Although the retirement systems lost money with Lehman, they've said the proposals that resulted from Mr. Kasich's introductions never led to investment buys.

"I got hammered," Mr. Kasich said. "I lost money. What do I think? All of the firms were guilty of too much leverage, and I think a lot of the firms were guilty of too much hubris. When people start getting greedy, you pay a very high price."

A little past the midway point of its two-year, $50 billion budget, Ohio's finances are relatively stable. But the plan is stitched together using federal stimulus dollars, raids on tobacco-settlement funds, debt refinancing, and a suspended income tax cut, prompting sources inside and outside of government to predict a potential shortfall in the next budget beginning July 1, 2011, of as much as $8 billion.

Neither Mr. Strickland nor Mr. Kasich has been clear as to how they would tackle the problem. Mr. Kasich flatly rules out tax increases and that, in his mind, includes any effort to broaden the tax base or close loopholes.

But Mr. Strickland is quick to note that the man who wants his job has called for eliminating the personal income tax, which represents about 45 percent of all state revenue, as well as what's left of Ohio's estate tax.

Mr. Kasich hasn't given up on either. But he's refused to embrace the 10-year timetable for eliminating the income tax proposed by House Republicans, and he's offered no timetable of his own.

"You can't do that without reforming government and shrinking your overhead," he said. "It's a process as we're able to make the state more competitive from a tax environment. That's not enough if you don't get the bureaucrats off people's backs, if you don't improve their ability to find the market and to get good financing. It's all these things put together."

First, he said, lawmakers must follow through with their promise to restore the fifth and final 4.2 percent increment of a total 21 percent income tax cut that was "delayed'' for two years to plug a hole in the current budget.

"That would be a start," he said. "That's not the end-game. As you generate more revenue, as you move the needle to bring more folks in here, you're in a position to be able to do more."

And the plan to eliminate the estate tax, which generates roughly $275 million a year, 80 percent of which goes to local governments?

"We're trying to figure out the sequence of how we do that," he said. "First of all, we'd like to know exactly what the revenue is. … The estate tax is killing small business. It drives people out because they can't in some cases pass on ownership of their companies to their families.

"It's all of these things that have to be kind of attacked," Mr. Kasich said. "Everything isn't soup yet."

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.

24.14675 120.1573

During a trip to Toledo, John Kasich, left, shakes hands with Peter Petersen. A former state senator, congressman, businessman, and Fox News talk show host, Mr. Kasich is reintroducing himself to Ohioans. THE BLADE/AMY E. VOIGT Enlarge | Photo Reprints

"Where do you go when the water rises?" John Kasich asks that question early in his recent book relating his rediscovery of faith in the wake of the auto-accident deaths of his parents in 1987. But it could just as easily be asked of him as he urges voters to hand him the reins of Ohio state government at a time of double-digit unemployment and warnings of a massive budget shortfall next year.