In the Republican presidential race, John Kasich has been among the most-credentialed but least-noted candidates. He spent nearly two decades in the U.S. House, where he rose to chair the Budget Committee and helped negotiate a deal with Bill Clinton's White House to eliminate federal deficits for the first time since the 1960s. Now he's serving his second term as governor of Ohio.
Kasich has lagged in national polls, fundraising and in Iowa's caucuses earlier this month. But his surprise showing in New Hampshire — where he rode a strategy built around town hall meetings with a positive message to finish second behind Donald Trump — has given him a glimmer of hope as the campaign heads toward the Midwest in early March.
He sat down with me in a Charleston, South Carolina, hotel on Thursday to discuss his economic agenda and his prospects. What follows is a condensed, edited transcript of our conversation.
HARWOOD: Let me get a reality check from you on some of the economic discussion. Candidates are giving voters a story about why their economic problems exist. Bernie Sanders says Wall Street's business model is a fraud.
KASICH: I don't even know what that means. What does he mean it's a fraud? Wall Street's there to provide some of the glue to make that economic system churn. Did we have problems there? Of course. Is there too much greed? Of course. Are there rules and regulations that are necessary? Of course. But what's he think we should do, abolish Wall Street? I mean, it's so absurd. You talk about Donald Trump talking in broad generalities.
HARWOOD: What makes you different in this race so far is that instead of anger you're talking empathy. You don't have the standard rhetorical hooks, the apocalyptic vision of the abyss that we're falling into under Clinton and Obama. It's all problem-solving. Doesn't everything we've seen about this campaign suggest the market for that is just pretty small in 2016?
KASICH: I think I finished second in New Hampshire, didn't I? Beat everybody else except Trump. If that's where the market is, then they're probably not buying me. But I don't think that's where the market is. I don't think people want to live in the dark.
Veterans have concerns. People who are working have concerns, about the strength and viability of their own job. Moms and dads are worried about their kids' future. What kind of a life are they going to have? Are they going to have kids, and a car, and a nice home — you know, a really good life?
We don't wanna be acting like we're going off the cliff, because we're not. It's better to fix things. If we dwell on the negatives and not on the positives, how we going to get out of this? How we going to change things and answer the concerns of these people?
I think my candidacy represents hope to people. I talk to them about the need for them to solve problems in their neighborhoods, to bring our communities together again. That's kind of a message of what it was like when I was a boy. Because there's not somebody on some white stallion going to come galloping into town and fix all the problems that we have out there — the problems of education, and training, and drugs, and a disconnectedness that we find. But, I mean, it all starts with a conservative series of proposals to raise the economy. Then it's more than that.
HARWOOD: I was at one of Ted Cruz's rallies in New Hampshire, and he said, "You know what?" Bernie's right. The economy is rigged." Crony capitalism. Trump talks about corporate bloodsuckers.
KASICH: What does he mean by that — specifically? Does he say that the rich are stealing from the poor?
Here's the way I look at it. Our challenges are a couple-fold. One is, there isn't any question that the Fed having a zero interest policy while the average folks had their money in a bank and got no interest — that was very bad policy on the part of the Fed. And it's true that companies bought back stock, because they could — they could take on debt, which they could write off. Buy back stock inflate the value of their stock. And people of means could buy their stock. There's no question that widened that gap.
But I believe the single biggest cause of income inequality in this country is the fact that people don't have the skills to command the pay based on the skills they have. Which brings up the question about our fundamental effectiveness of education today, and providing the skills to our people to make sure they can have value as a worker. I don't disagree that sometimes trade has not been good.
HARWOOD: When Trump talks about the economy he says the problem is Mexico, China, Japan. Is that our core economic problem?
KASICH: No. I think our core economic problem is we don't have a policy that creates economic growth because we overregulate, overtax and can't balance a budget.
Look, I was involved in some of the greatest economic growth that we've seen in modern times.
In Ohio we've turned the entire state around with the policy of common sense rules, regulations, lower taxes and a balanced budget. I mean, we're up 400,000 jobs. Our wages are growing faster than the national average. That formula works.
I'm not gonna tell you that sometimes people like the South Koreans will not dump, or sell their products in the U.S. at a cost below what it took for them to make them. And when they dump it, and they take American workers — we've been to slow to raise this issue. It needs to be raised quickly, and resolved quickly. But, I mean, to blame these other bogeymen — you can just beat up Mexico all day long, but if you can't balance a budget, have common sense regulations, help small business and cut taxes you're just not going to get what you need.
HARWOOD: Let's go back to the Wall Street bogeyman. In this campaign people have used the fact that Hillary Clinton got speaking fees from Goldman Sachs as a black mark against her. Ted Cruz borrowed against retirement funds from Goldman — a black mark. You got hit by Chris Christie's super PAC for being a Lehman Brothers banker who was part of the problem before it all went down. Are you not concerned that if you rise higher, that basic connection, John Kasich, Lehman Brothers, because of how average Americans feel about Wall Street, is going to be crippling for you?
KASICH: I don't really know how average Americans feel about Wall Street. You know, they ran this against me when I ran for governor, and I won. They've tried this on me since I've been in the race. And I'm rising in the polls.
When you run a two-man office in Columbus, Ohio, that would be like blaming a GM dealer in Spartanburg (South Carolina) for the collapse of GM. It doesn't work. People aren't silly about things. It's so crazy. If I had bankrupted Lehman Brothers from a two-man office in Columbus, Ohio, I should be pope, not running for president.
The fact is that my stint there was to really go out and understand how business works. I met with CEOs, boards of directors, spent time in Silicon Valley understanding how that whole place moves, the way that boards of directors make decisions, and financial services, and in the industrial sector. I learned a lot.
HARWOOD: I was talking to Mohamed El-Erian, who's a leading figure in American finance. He said finance has gotten too big at the expense of the real economy — what we need is heavy-duty investment in infrastructure and job training. Yet in your economic plan you're talking about pushing those things back to the states, which aren't going to be inclined to make investments as large as Washington.
KASICH: On infrastructure, I believe the states can keep more of the federal gas tax money and they can use that for infrastructure issues. You get your state dollars combined now with an increased amount of federal dollars, which is what we've been pushing for in Congress for 15 years. Then the states have more resources, and not all the crazy rules and regulations. Stop sending your money to Washington. Let it stay here.
In terms of basic infrastructure in the cities, the communities, frankly that gets to be about bonding and about what a state's debt level is. You have capital bills in all these states. Clean out all the pork barrel. Put it in where you have to have it. And if you need to do more, which we will do, send more money to local governments to deal with their local infrastructure problems. But you can't be bailing all these things out in Washington with a $19 trillion debt.
HARWOOD: You've benefited from the development of a major energy industry in your state. Let me ask you about how you balance the needs of a sector, and maybe a state, versus the national economy. Oil prices are way down right now. For consumers that's great. You go to the pump it's much cheaper to fill up your car. But it's caused instability in the market. Are you concerned about that? Do you want to do something to stabilize oil prices?
KASICH: I'm for low oil prices. I think frankly the situation with the American stock market is an awful lot like the 24-hour news cycle. There must be children running this stuff. I'm serious.
What we've seen throughout history is, just because oil prices come down doesn't mean you have less economic activity. It's like it's a knee jerk, not to the fundamentals of the market, but things that may happen on a day-by-day basis. The market is so jumpy. This economy is rickety and rockety, you know, and returns are not going to be that great. But that can be fixed if you get back to the formula that drives economic growth.
HARWOOD: You've got a tax plan that takes the existing system and goes to the top Reagan rate of 28 percent. Given the extended difficulty we've had raising middle-class incomes, why isn't it time to in essence turn over the table on tax policy, and do something totally different? For example, Ted Cruz has got a value added tax. Every economist you talk to says if you could get to a value added tax, it would be better for growth.
KASICH: Not every economist says that. Most of them are freaked out that you would bury everything by slight increases — over, and over, and over again — to ratchet up the taxes in this country. Look, this is not a mystery, John. I know the formula. I did it in Washington. I've done it in Ohio. And we can do it again.
We keep looking for something new. We are overregulated. A lot of the regulation is killing small business. We're overtaxed. We keep raising taxes. And the Congress has an insatiable desire to spend. You get those three things in line, and work on something that you mentioned earlier in the interview, which is workforce training. That's back to that education system. You get that done, and this economy's gonna be doing very well. We'll be back to very significant growth.
HARWOOD: If you look at national polls now the top three candidates are Trump, Cruz, Rubio. What we became used to thinking of as credentials — somebody who's run a big state — why in your party this year is that not valued more than it has been so far?
KASICH: Well, I think it is. It's just that there's a lot of people in this campaign still. Take for example Donald Trump: What's he at, you know, 30 percent? That means 70 percent aren't buying. I think this is all going to narrow down, and then I think we're gonna see a judgment that will value somebody that has had success.
They don't want some fuddy-duddy. They don't want the status quo. You know, the establishment people try to put me in the establishment lane? That's a joke. The establishment fears me, because they don't tell me what to do. I play my own tune. Over time people will see. We're rising now. Nobody expected that.
I think people are upset. They're worried: 'Is somebody gonna fight for my job? Are my kids going to have a decent tomorrow? And what about all this debt they have?' These are real concerns.
HARWOOD: Isn't the reality though, when you look at the proportions, that there are two lanes in this race: A truck lane that Donald Trump is in, and people riding bicycles in the other lane and you're one of them.
KASICH: What do you mean I'm riding a bicycle? I'm not worried about it. All I'm concerned about is having enough time to meet as many people as I can meet, and having the resources to be able to put my message on television. When there's so many states coming at once, you can't just do town halls in every state. We think we're going to go all the way up to the convention because money's coming in. We're rising.