Ohio's Scorn of Stimulus Means Obama May Pay for Keeping Pledge

The state is ground zero for the debate over the U.S. government's economic stimulus plan

(Bloomberg) — A construction crew lined the main road heading into Wilmington, Ohio, choking traffic and kicking up dust one August afternoon as workers rebuilt sidewalks in the late-summer heat. Projects like this and other ventures funded by last year's $814 billion economic-stimulus package generated about 21,000 jobs in Ohio in the second quarter of 2010 alone.

For Dan Stewart, it hasn't been welcome news. "From the time they put up the first arricades, downtown has been dead," said Stewart, 60, who runs a bookstore a block from the Clinton County courthouse. "The orange barricades said, 'Wilmington is closed.'"

The electorate has grown so angry and disillusioned that even a federal project delivering jobs has become the object of ridicule in a county where as many as 3,000 people were thrown out of work when the local DHL unit of Deutsche Post AG shut down last year. That's a bad sign for Democrats seeking to retain control of the U.S. Congress.

This year's elections are becoming a referendum on President Barack Obama and the U.S. overnment's historic intervention in the economy, and Ohio is ground zero for that debate. The issues roiling the nation — unemployment, the housing slump, slow growth, deficits — dominate here. The $1 billion surplus the state government ran in June 2005 turned into a $1.13 billion deficit last year, according to data compiled by Bloomberg. Ohio has lost about 400,000 manufacturing jobs in the last decade, 40 percent of the factory workforce. And more than a quarter of all subprime mortgage loans were delinquent for 90 days or more in the second quarter.

Nationwide Pattern

Ohio has so many close state and federal races that any pattern seen here is likely to reflect a broader national trend in the contests for control of Capitol Hill this year. "It's a mixture of old and new, rural and urban, industry and agriculture," said Stuart Rothenberg, editor and publisher of the nonpartisan Rothenberg Political Report, which handicaps congressional and gubernatorial elections.

Obama will underline Ohio's importance tomorrow, when he visits Cleveland to talk about the economy and urge Congress to permanently extend a research-and-development tax credit for businesses, according to two administration officials. He's already visited Ohio nine times since he became president, more than any state except New York.

Ohio is key because it's a reliable predictor of national moods just as it is of consumer sensibility for companies that come here to test-market products: The state has voted for the winner in the last 12 U.S. presidential elections.

Political Crosscurrents

Political crosscurrents framing races throughout the country are also on display, from Tea Party anger to supporters of Obama frustrated by the pace of "change." As many as five congressional seats held by Democrats are at stake. Among them, U.S. Representatives Steve Driehaus and Mary Jo Kilroy, both first-term Democrats, must coax the students and black voters who propelled them into office back to the voting booth, without Obama on the ticket.

Democratic Governor Ted Strickland faces a tough re-election, having to overcome an economic tide that has erased almost 400,000 jobs since he took office in 2007. And Republicans need to retain the seat held by retiring Senator George Voinovich if they want to boost their chances of winning control of that chamber from the Democrats. Their candidate, Rob Portman, the top international trade official under former President George W. Bush, is vying to succeed Voinovich in a state that continues to lose jobs overseas.

Rust Belt Legacy

These battles are taking place in a state of 11.5 million people that has struggled to discard its Rust Belt image. Politicians tout Toledo, one of the three largest solar-panel manufacturing centers in the country, and technology-innovation hubs at Wright-Patterson Air Force Base in Dayton and the Battelle Memorial Institute in Columbus.

A state once famous for Firestone Tires and Youngstown steel has become a consumer-products hub, anchored by Cincinnati-based Procter & Gamble Co., Kroger Co. and Macy's Inc. The Cleveland Clinic attracts biotechnology investments.

And JPMorgan Chase & Co. is the single-largest private employer in Columbus, Ohio's capital, trailing only the state government and Ohio State University. "There is a whole series of huge, potential manufacturing industries which we end up being world leaders," Obama said during a town-hall meeting in Columbus last month. The bond markets view Ohio as a safer bet than California or New York or other Midwestern states, such as Illinois and Michigan. The cost of insuring the state's bonds against default for five years is less than half that of insuring similar debt in California and Illinois.

Can't Overcome Headwinds

Still, the emergence of a new economy hasn't enabled Ohio to overcome the headwinds the country is facing. The jobless rate in Ohio was 10.3 percent in July, compared with a national average of 9.6 percent. In June, more than 625,000 people filed for unemployment. Personal income has dipped since its June 2008 peak. Quarterly home sales are down about 20 percent from their peak in the third quarter of 2005.

And building permits have been on a steady decline since June 2005, sliding more than 70 percent by last July. NCR Corp., maker of the first mechanical cash register, struck a symbolic blow at the old economy in June 2009 by announcing plans to leave Dayton, its home since 1884, for an Atlanta suburb.

"We've seen the last of our industry," said James Hines, 49, a small businessman from Chillicothe. The economic travails have pinched local governments, making it harder for politicians to provide relief. In 2005, state income-tax revenue totaled $10 billion. Last year, it was $8.5 billion.

Blaming Democrats

Republicans are trying to capitalize on the state's troubles by arguing that Democrats have failed to reverse the national slide. They cite the approximately 300,000 jobs lost since Strickland took office declaring "a new day for our state." John Kasich, a Republican former congressman running against Strickland, filmed a television ad at the old DHL facility in Wilmington in which he tells a group of onetime employees, "What we see here at DHL, really, we see all over Ohio."

Democrats lay blame at the feet of Republicans and Bush. They accuse Portman, another former Republican congressman, of forcing jobs overseas when he served as Bush's trade representative from 2005 to 2006. Strickland reminds voters that Kasich, after leaving Congress, worked as managing director of investment banking in the Columbus office of Lehman Brothers Holdings Inc., whose September 2008 collapse accelerated Wall Street's financial meltdown.

'Seven Signs'

"If Rob Portman wins Ohio as the trade representative for George Bush, it is, in fact, one of the seven signs that the world is coming to an end," said Chris Redfern, chairman of the Ohio Democratic Party. Redfern's Armageddon may come true. Portman had almost $8.9 million in the bank at the end of June, according to Federal Election Commission data, about seven times the amount held by his Democratic opponent, Lieutenant Governor Lee Fisher.

Still, there are voters who don't think Democrats should bear responsibility for all the problems.

"You can't blame Strickland for everything," said Rick Perry, 51, a retired contractor from Chillicothe as he sat near the horseshoe pit at the Ross County Fair. "He did everything he said he would do," from cutting the budget to streamlining services. "But when he did it, people didn't like it."

'Afraid of Socialism'

Perry said he didn't vote for Obama in the 2008 presidential election because he's "afraid of socialism," though he backed Democrat Strickland in 2006. He's not sure what he'll do on Nov. 2.

Obama's frequent visits to Ohio are intended to help voters like Perry make up their minds.

He made a trip to Columbus last year to tout the passage of the stimulus plan a few weeks after he signed it into law. In May, he was in Youngstown highlighting a federal transportation grant. In June, he was back in Columbus to talk about the 10,000th road-building project financed by the bill. And last month, he sat around the kitchen table of a Columbus family listening to people express their concerns about the economy.

At the end of May, the president's approval rating was 46 percent, according to the most recent Ohio Poll conducted by the University of Cincinnati. That was a 17-point drop from a year earlier.

No White Horse

One voter whose support he's held is Karyn Cotton, 60, of Cincinnati, who said Obama deserves credit. "People had expectations that he was going to ride in on this white horse and make everything okay," said Cotton. "He's doing the best he can." She's eager to show her support for the president in November by voting for Democrats. Obama's popularity in the state in 2008 drove thousands of first-time voters to the polls, particularly blacks and college students.

Natasha Whitney, 35, was among those infrequent voters who backed him in 2008. The black mother of two from Columbus said she's not sure if she will vote in the congressional elections. She's applying to school to become a medical assistant and is worried she won't find work once she finishes. "We need jobs," Whitney said. "It's kind of moving slow."

Ground Zero Wilmington

Nowhere is the anxiety over jobs greater than in Wilmington, a town of 12,000 that sits a few miles off Interstate 71 in southwest Ohio, about 50 miles from both Cincinnati and Columbus. A pawn shop and bail bondsman do business along a main road otherwise dominated by banks and law offices. Some storefronts are vacant. As traffic snarled along South Street into town last month, a sign told drivers the project was sponsored by the American Recovery and Reinvestment Act, otherwise known as the stimulus plan.

Two businesses have closed since the road work began, said Stewart, who operates "Books 'N' More" with his wife, Marla. He and Marla were forced to lay off two employees and have pared inventories to limit costs as foot traffic slowed to a trickle. The one full-time employee who remains only works 24 hours a week, Stewart said.

Sandy Gilton worked at the DHL facility in Wilmington for 10 years before the company's parent signed a joint-operating agreement with United Parcel Service Inc. and closed the hub it operated in town with ABX Air Inc. An estimated 3,000 residents of Wilmington and surrounding Clinton County lost their jobs, catching the attention of both Obama and Arizona Senator John McCain, the Republican presidential candidate, during the 2008 campaign. Now, Gilton, 43, runs a consignment store, Next to New Apparel & Accessories, and is struggling to keep the business going. "You've got to pay the bills," she said from behind the cash register.

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