StarBulletin.com

Stimulus funds have helped in short term


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POSTED: Tuesday, May 11, 2010

The stimulus packages approved by Congress in the past two years have not brought the country out of the recession, but most economists agree that it has kept the unemployment rate - the major economic barometer - from being higher than it is. City Councilman Charles Djou, a Republican congressional candidate, is wrong in pronouncing the stimulus laws a failure, and his alternative of reducing taxes would only worsen the economy.

Djou's views on economic policy are far apart from those of both Democrats - Senate President Colleen Hanabusa and former U.S. Rep. Ed Case - he faces in a special election by mail-in now under way. Democratic front-runner Case, a fiscal conservative or moderate, says the nation's economy “;would have deteriorated pretty rapidly had we not had the stimulus.”;

The Federal Reserve lowers interest rates to spur the economy in normal times, but those rates had neared zero when the Bush administration agreed in 2008 to a strategy of tax rebates. It did not work because much if not most of the extra money was merely saved or used to pay credit card debts.

That led to President Barack Obama's signature last year on a $787 billion combination of public works projects, middle-class tax cuts and assistance to local and state governments. Hawaii received

$1.3 billion, of which $129 million saved hundreds of teaching jobs in the islands' public schools - 300,000 nationwide - and minimized the number of Furlough Fridays. The total directed to Hawaii is expected to reach $2 billion.

We cannot fault Djou for voting in the City Council to put Honolulu on the receiving end of the stimulus money. Several high-profile Republican governors - South Carolina's Mark Sanford, Louisiana's Bobby Jindal and, before quitting the job, Alaska's Sarah Palin - accepted portions after vowing not to do so.

Republican Gov. Linda Lingle appreciates the importance of the stimulus, which she says “;has been a big help to us”; because, “;unlike the federal government, we can't print money.”; Most of the money that has gone through the state has been spent on extended unemployment benefits to 70,000 Hawaii residents.

President Obama said last week that the economy's 290,000 added jobs total last month was the largest in four years; the unemployment rate rose from 9.7 to 9.9 percent because it included workers who had dropped out of the workforce but, due to “;better prospects,”; are now job hunting again, being counted in the arithmetic.

Economist Paul Brewbaker, chairman of the state Council on Revenues, notes that the effect of the stimulus is “;less than completely observable,”; but economic signs point to a continuing slow recovery. If so, critics will say it could have been faster, but that is politics.