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Unraveling the Mysteries of Public Finance Not Top Priority

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By Lowell L. Kalapa

While the economy and what to do about turning it around remains largely unaddressed by our political leaders, the other critical issue facing elected officials and their constituents is the lack of confidence in government.

Indeed this is the issue that is keeping the second largest economy in the world from making a comeback of its own. No matter how many times political leaders have attempted to lower taxes or find some other incentive to stimulate the economy, consumers have refused to respond. When Japanese officials announced that taxes would be cut after an admittedly horrendous attempt to impose a new sales tax, consumers merely took the tax savings and put it into the bank.

Japanese officials had hoped that consumers would take the tax savings and run out and spend it on products. This buying frenzy was, in turn, supposed to create demand for products and thereby require increased production. Instead, the money went into the banks or postal savings accounts and even more Japanese workers were laid off.

Again, Japanese officials tried to stimulate consumption, but instead of giving consumers a tax cut, they proposed issuing coupons or vouchers that would be exchanged for goods or products. Again, the whole idea was to get consumers to go out and spend these vouchers or coupons on products which in turn would require increased production and increased employment.

Alas, the Japanese have more ways than one to skin a cat. Instead of using coupons or vouchers to purchase consumer products, the Japanese created a black market for the coupons, exchanging the coupons for a fraction of their value in cold hard cash.

Why can’t Japanese leaders persuade consumers to spend? Well, apparently the Japanese consumer has become cynical about the ability of their elected officials to do get the job done right. There is a real lack of consumer confidence that the government will be able to turn the economy around. Thus, the Japanese citizen is looking for a lot more security by stashing away savings in the face of possible unemployment.

It is an almost too familiar scenario for taxpayers in Hawaii. After a nearly decade long struggle, Hawaii taxpayers are tired of hearing the same old excuse, that the Asian economic crisis is the underlying reason for the state’s economic woes.

That excuse can only go so far before taxpayers realize that the rest of nation is going great guns. All people talk about these days on the national broadcast waves is how production is up, home sales and construction are at an all time high, and how the Dow has surpassed the 10,000 mark. So why is it that Hawaii leaders seem to be sitting on their hands waiting for the Asian economy to turn around?

Can it be that Hawaii’s leaders really don’t know what to do or for that matter that they are so wedded to the status quo that they are unwilling to make change? Indeed at the state level, it seems like business as usual. Officials refuse to down-size government and continue to hide the true cost of government.

One example is a bill that was submitted by the commerce and consumer affair department this year that will collapse many of the funds into which registration or licensing fees are deposited to pay for the respective licensing activities. However, with this new legislation, all of those funds will now be collapsed into the department’s “compliance resolution fund.” As a result, the fees that businesses pay for registration of their company’s documents will now go into this fund along with fees for licensing of realtors and the examination of banks and other financial institutions.

While the department argues that this is to allow the department of commerce and consumer affairs to be self-sufficient, it will also allow the department not to be accountable to the respective professions and industries it regulates. So will realtors know if they are actually paying for a bank examination or will the banker know if they are paying for the licensing of a professional? The State Auditor has already criticized the department for raising business registration fees so high that those fees produced collections of $20 million in excess of what it takes to operate the business registration division.

This little shell game is just one more example of why taxpayers in Hawaii do not trust their government. It is one more way that public officials are able to circumvent being held accountable. It is one more way of raising more taxes. It is one more reason why public officials cannot lead.

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