Editorials
Friday, November 6, 1998

Who’s the problem,
Dems or business?

BASKING in the glow of his come-from-behind victory, Ben Cayetano was willing to concede that the Democrats had to work harder to "connect" to small business. Then the governor showed how far out of touch with small business he is. Small businesses, he said, "must decide if they want to be part of the problem or the solution. Let's work together."

That is turning reality on its head. It is the Democratic Party that is the problem, that has piled up the taxes and regulations to the point that Hawaii is rated one of the most anti-business states in the country. It is the Democratic Party, with its heavy reliance on the support of organized labor, that has alienated small business, not the other way around.

After letting workers' compensation claims soar to the highest level in the nation, the Legislature finally heeded employers' appeals and changed the law to reduce costs. The governor correctly cited that reform as one of his achievements.

But Cayetano's Economic Revitalization Task Force infuriated small business operators by recommending an increase in the general excise tax to help pay for cuts in income tax rates. The idea was that tax breaks for Hawaii residents would offset the excise tax hikes leaving the burden to be borne by tourists.

Small business operators, struggling to survive in a stagnant economy, saw the excise tax boost as another cost that would have to be passed on to their customers and hurt sales. The governor took the excise tax recommendation to the Legislature, where it eventually died after a battle that consumed most of the session.

Cayetano now says he wants to bring small business back into the Democratic fold, but not at the "sacrifice of working people." In other words, the union influence on the Democratic Party is as strong as ever.

That is why it is difficult for the Democrats to make the reforms needed to achieve a more efficient government, such as privatization, and to ease the tax and regulatory burden on small business. That's why it's hard for them to become part of the solution, not the problem.

Boris Yeltsin’s tenure

BORIS Yeltsin cannot run for re-election after his term as Russia's president expires in mid-2000, even if he were physically up to such a campaign. That ruling by Russia's Constitutional Court finally has put to rest speculation that dwindled with the 67-year-old Kremlin leader's continued poor health. Yeltsin's ability to govern through the remainder of his term remains questionable. However, his delegation of powers to his new prime minister appears to have created political stability that is crucial as Russia deals with its financial crisis.

The court ruling hardly caused political shock waves. Yeltsin is recuperating at the Black Sea resort of Sochi from exhaustion and high blood pressure. His poor health has been evident since his election leading up to a quintuple bypass heart surgery two years ago. He has all but ruled out another term for some time.

Under normal conditions, a good argument could be made for Yeltsin to step down. However, Russia has been embroiled in an economic crisis since August, when the Kremlin announced a devaluation of the ruble, a moratorium on foreign debt repayment and a restructuring of government bonds. Yeltsin removed free-market reformists from his government and appointed Yevgeny Primakov, a former Soviet spymaster and manager, as prime minister.

Primakov has been slow to act, and the International Monetary Fund has held up further loans to Russia. The government seems to be backpedaling on privatization, printing more rubles, which will lead to hyperinflation, and bailing out insolvent industries and banks, which will discourage foreign investment. Still, even in ill health, Yeltsin is not about to see Russia abandon the trail to a market economy that he blazed, and Primakov has promised he will not betray Yeltsin's legacy.

According to the Russian constitution, a decision by Yeltsin to resign would trigger a new election in three months. That circumstance would be destabilizing as the IMF and the United States try to both assist and prod Russia toward reforms during this difficult period. Russia is in no condition to cope simultaneously with the most important political transition and worst financial crisis in its democratic infancy.

Protest over Spratlys

SENATOR Inouye, who is one of the best-informed members of Congress on defense matters, recently told Star-Bulletin editors that the Navy keeps a warship stationed at the Spratly Islands in the South China Sea to show that the United States is watching developments closely. The reason is that the islands are claimed wholly or in part by six countries and are a potential flashpoint threatening Asian stability.

That concern was underlined by a protest lodged by the Philippines, accusing China of strengthening its position on a reef in the islands by sending military and cargo ships to the area. A Philippine protest note called Beijing's action a "security threat" and demanded that China dismantle structures built on the reef.

This has been a source of tension between the two countries since 1995, when Manila accused Beijing of building what it said looked like naval support structures.

The Spratlys consist of 190 mostly barren isles, reefs, atolls and sand bars scattered over an area of 150,000 square miles. They are believed to be rich in oil and gas and are claimed by China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei.

A flareup of violence over the Spratlys might not directly involve U.S. forces but could greatly complicate Washington's efforts to maintain peace in the region. The U.S. should be urging both Manila and Beijing confidentially to cool it.

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