Can Panasonic help Kelly overcome inflation’s nationwide drag on Democrats?

When a voter asked Kansas Gov. Laura Kelly last week about the possibility of a looming recession, she responded in part, “bring it on.”

The remark, Kelly’s campaign says, was intended to put an exclamation point on a positive economic record the Democrat and her supporters say is unmatched in recent state history.

The governor’s supporters have highlighted that unemployment is at a record 2.3% low and that, just a few years after a severe budget crisis, Kansas has funneled $969 million into a rainy day fund. The state has also paid down $1.1 billion of pension debt.

But inflation is at levels not seen in 40 years, sending the cost of food and other everyday items soaring with a 9.1% increase in consumer prices over the last year. Gas prices have risen sharply, though they have fallen somewhat in recent weeks. Supply chain woes have confounded businesses. Blame on President Joe Biden shows in his 33% approval rating, lower than any president has seen since George W. Bush.

Governors have little direct control over inflation – or the national economy at large – and in another time Kelly’s comment might have been a quickly forgotten gaffe. However, amid one of the most competitive races for governor in the country it was quickly turned into a six-figure TV ad campaign.

Get Families Back to Work, which shares an address with the Republican Governors Association, has already dropped more than $100,000 to buy airtime to highlight the remark on stations in Kansas City, Wichita and Topeka. The ad uses the incident to call Kelly “out of touch.”

“Since Joe Biden and Laura Kelly took control, gas prices have doubled, inflation has gone through the roof and you’re paying more for everything,” the ad says.

Kelly and her allies are fighting back with a full court press promoting news that Kelly’s administration landed the biggest economic development deal in state history.

“I would look to Republicans and say, ‘tell the truth.’ Because she’s doing a magnificent job with our economy,” said state Rep. Jerry Stogsdill, a Prairie Village Democrat.

“I’ve seen their commercials. They are just absolute distortions of the truth,” Stogsdill said. “They try to tie her in to Joe Biden because they have no plan of their own or because the plans they’ve had over the past 10 years have been disastrous for Kansas.”

But Mike Kuckelman, chairman of the Kansas Republican Party, said Kelly should be faulted for not criticizing Biden and allowing Kansas’ workforce to shrink.

“I think Gov. Kelly trying to pass off to the voter, the electorate, that the economy is great is going to fall on deaf ears because when they’re standing at the gas pumps they don’t believe that,” Kuckelman said.

On Wednesday, Kelly announced Panasonic will build a massive, $4 billion battery plant for electric vehicles in Johnson County that’s eventually expected to employ 4,000 people. The announcement follows a months-long effort to court the corporation.

In May, the governor signed bipartisan legislation that will gradually eliminate the state sales tax on food. Kansas has among the highest tax rate on groceries in the nation, but the first rate reduction won’t occur until January. The tax, currently 6.5%, won’t fully end until 2025. Kelly pushed for a complete and immediate elimination of the food sales tax and for $250 rebates for all Kansas taxpayers but the proposals were rejected by the GOP-dominated Legislature.

The twin accomplishments illustrate the challenge facing Kelly in the campaign. It’s one of timing.

Both the Panasonic plant and the food tax reduction may very well bolster the Kansas economy and improve the lives of Kansans, but they will take years for their full effects to be felt. Meanwhile, high inflation is happening right now – and causing pain for Kansas families.

Voters cast their ballots in November. Inflation will likely remain elevated for months, even if interest rate hikes by the Federal Reserve are successful in cooling rising prices without tipping the economy into recession.

Kansas Attorney General Derek Schmidt, Kelly’s likely Republican opponent, and other Republicans have placed the blame for the current situation at Kelly’s feet by linking her to national Democrats, chiefly Biden.

“Laura Kelly’s message to (struggling Kansans) is ‘bring it on’ because the government’s doing fine. My message is this - we need a governor who will stand up against Joe Biden’s failures, not welcome them to Kansas,” Schmidt said last week.

But in a statement Kelly’s campaign spokeswoman, Madison Andrus, said Kelly’s understanding of the challenges that come with inflation showed in her efforts to eliminate the food sales tax, reduce property tax and balance the state budget.

“Governor Kelly was discussing how her fiscally responsible leadership has led to the largest investment in the state rainy day fund in Kansas history, so the state will not have to cut funding for critical services like schools, law enforcement, and infrastructure even on the rainiest of days,” Andrus said.

Inflation presents risks for incumbents

Economically Kelly has a lot going for her, said Bob Beatty, a Washburn University political scientist, but that won’t necessarily insulate her from a red wave anticipated as a result of a rocky economy. Panasonic’s timing, Beatty said, is perfect because the project isn’t far enough along for major issues to have cropped up.

“When there’s bad national economic forces they can hurt any incumbent, regardless of party,” Beatty said. “Much of her campaign is based on trying to convince people that Kansas is in good shape economically.”

Governors have no power over inflation, said Donna Ginther, an economist at the University of Kansas who has worked with the Kelly administration in the past.

“This is a worldwide phenomenon driven by supply bottlenecks,” Ginther said. “It’s incredulous for people to blame a governor for inflation.”

Where Kelly does have control, Ginther said, the governor has been a good “steward of the public purse” by stabilizing state agencies decimated by budget cuts and driving job growth in the state. The state’s job is to provide services and Kelly has ensured that can continue to happen, she said.

Republicans contend Kelly’s policies actively made the situation worse or, at the very least, that she should have used her platform to push back against Biden’s economic policies.

In a statement Schmidt pointed to lower workforce numbers in Kansas after the pandemic and the approximately $700 million paid out in fraudulent unemployment claims. He sought to take credit for legislative action to increase the rainy day fund and pay down debt.

“The heavy-handed COVID lockdowns destroyed nearly one-third of small businesses the governor declared ‘non essential.’ Kansas lags nearly 20 percentage points behind the nation overall in post-COVID job recovery,” Schmidt said in a statement. “And still, Kansas government keeps growing at a breakneck pace that will make the next economic crisis even harder to manage.”

A Kansas Department of Labor report from June showed the state has recovered about 77% of jobs lost during the pandemic compared to 96% for the country as a whole. Schmidt has previously highlighted the statistic in calling for an elimination of income taxes on retirement benefits.

Alan Cobb, president of the Kansas Chamber of Commerce, said that, while Biden deserves some blame for inflation, it was a hard issue for state leaders to fix. He said labor shortages were an across the board challenge but that Kelly and lawmakers had taken positive steps.

“The challenge is if you do something this legislative session today or last year it takes a while to kind of set in and see the results,” Cobb said.

Kelly bets big on Panasonic deal

In stark contrast to the partisan criticism, Wednesday’s Panasonic announcement was a drawn out celebration, lauding Kelly and Lt. Gov. David Toland, for landing a project proponents say would change Kansas’ economy for the better and permanently. The project is projected to bring around 4,000 jobs to the state with a 26 to 1 return on investment.

It was pointed to as proof of the administration’s ability to succeed and do so on a bipartisan basis.

“Democrats are the party of business,” Rep. Stephanie Clayton, an Overland Park Democrat, said. “We provide that baseline solid schools and quality of life and unquestioningly, that is why businesses choose to locate here.”

The Biden administration even jumped into the celebration with National Economic Director Brian Deese sending a press release calling the plant an example of the president and vice president successfully bringing manufacturing jobs back to the United States.

Senate President Ty Masterson, an Anderson Republican, acknowledged that the project was a win for Kelly but downplayed its usefulness as a campaign winner.

“Victory has a thousand fathers. We’re all going to claim victory, and I know we’ll see this in campaign ads,” Masterson said. “It’s bigger than that. This is generational for Kansas. There were those that said we shouldn’t do that because you’re gonna give her a victory but the truth is the victory is for all of us.”

Kelly’s marquee economic development achievement, landing Panasonic, isn’t expected to be completed until 2024. While some construction jobs could be created in the coming months the project’s full impact and any reach beyond Johnson County won’t be seen for years.

Sen. Molly Baumgardner, a Louisburg Republican, noted that Panasonic was yet another project aimed at the state’s most populous region rather than rural and western areas in need of growth. But Johnson County has proven to be a battleground key to any successful Democratic bid at the governor’s mansion.

State Rep. Sean Tarwater, a Stillwell Republican who helped get the incentive package passed in the Legislature, said he believed the project would exacerbate Kansas’ existing labor force and inflation issues, not solve it.

“This administration has done nothing to help inflation but they’re certainly doing a lot to fuel it,” Tarwater said. “They’re spending a lot of money and now we’ve just added another hypothetically 5,000 jobs that’s going to drive the cost of labor way up.”