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On Politics Richard Borreca |
Hawaii may be
on the cusp
of good timesHawaii, on precisely no one's list as the economic miracle of the millennium, is now one of the coveted spots for economic growth.
Good times appear to be coming our way. Of course, part of the reason we look so good is because we used to look so bad. Percentage changes are tricky, but no one is denying that something is happening. The authoritative Governing Magazine, published by Congressional Quarterly, lists Hawaii as No.1 among the 50 states in the percentage change in unemployment reduction.
And Hawaii places second for state economic momentum, an index that the magazine uses to average the most recent one-year changes in employment, personal income and population. Nevada comes in first and Massachusetts is last.
"Even the Wall Street Journal was forced to admit that Hawaii is only one of two states which forecast economic growth," notes former Gov. Ben Cayetano in a recent e-mail.
While not claiming to be a disinterested economic observer, Cayetano calculates that his own efforts helped steer the state to the new good economy.
Successive cuts to the state's income tax, tax credits for buying a new home, home renovation, $1 billion in state construction authorizations, plus new low interest rates all helped, Cayetano argues.
Lowell Kalapa, Hawaii Tax Foundation director, who has never heard a Cayetano economic postulation that didn't trigger an attack of hives, begrudgingly admits that the tax cuts put money in people's pockets, but calls the construction tax credits "outright subsidies for those lucky enough to slip under the wire."
"Actually the construction tax credits could not have come at a worse time given the spurt that low-interest rates gave construction industry activity," Kalapa adds.
Thanks to government, there are lots of hidden costs in new user fees, higher property taxes and transportation increases, to be passed on to consumers, Kalapa warns.
Paul Brewbaker, Bank of Hawaii's chief economist, adds that Cayetano "and the Legislature also managed to give government employees 3, 4, or 7 percent annual raises when the annual inflation rate in Hawaii was 1 percent." By 1997, Brewbaker says, Hawaii was already starting to look pretty good.
"So the governor can take some credit, but I'm inclined to think that the economy overwhelmed anything really accomplished by (state) fiscal policy change as opposed to vice versa," Brewbaker says.
Somewhat ominously, Brewbaker adds that "the two most remarkable things about Hawaii's economy right now are that Hawaii can take a slam like 9/11 and keep on trucking, and that people in Hawaii aren't even thinking about it being closer to the end of this cycle than the beginning."
University of Hawaii political scientist, Ira Rohter, who is also co-chairman of the Hawaii Green Party, says all the talk about Hawaii's Teflon economy misses the mark.
"Our economy is hardly doing great. Serious damage to human services, health and education programs took place under the Cayetano administration and Democratic Legislature, and our wages are low, our cost of living high," Rohter says.
Carl Bonham, University of Hawaii economist and member of the state's own Council on Revenues, says Cayetano or legislative tax cuts may have played a small part, but Hawaii's economy is sound and does well all by itself.
That is the same theory pushed by another UH economist, Chris Grandy, in his new book "Hawaii Becalmed, Economic Lessons of the 1990," who contends that Hawaii's open economy is moved by global or national events, not by local government. Grandy, however, does warn that while government can do little to help, it can do much harm if it tries to rearrange the basic local economy.
"Bad policy can markedly undermine Hawaii's economy," Grandy warns.
It may be that in the long view, the politician who keeps his or her hands off the economy, will be the politician with the brightest economic legacy.
See the Columnists section for some past articles.
Richard Borreca writes on politics every Sunday in the Star-Bulletin. He can be reached at 525-8630 or by e-mail at rborreca@starbulletin.com.
