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Visiting an Old Refrain: It’s the Economy

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By Lowell L. Kalapa

Everyone acknowledges that this has been the longest economic downturn in the history of the state and there doesn’t appear to be an end in sight – although some “spin-masters” would like us to believe that Hawaii has turned the corner and things are looking up.

Unfortunately the 800-pound gorilla, known as government, continues to block the light coming through the end of the tunnel for a variety of reasons. Apparently, many in government believe that they must preserve the status quo. That status quo means preserving the jobs on the public payroll, insuring that constituents are protected at all costs for they cannot speak for themselves, and nickel and diming taxpayers with user fees and charges. Things are so bad at both the state and local level in Hawaii that elected officials and administrators are so preoccupied with keeping the day-to-day operations going that they have lost sight of the larger picture.

Indeed, where voters thought that lawmakers and the administration had gotten the message that the biggest problem to be addressed is the economic outlook, there were relatively few achievements in this area. Perhaps the most significant proposals that will help the economy, like the de-pyramiding of the general excise tax, were short-changed because lawmakers could not deal with downsizing government. As a result, these changes will take seven years before reaching full fruition.

What is more disturbing is that instead of removing some of the hidden barriers to business, lawmakers added even more obstacles to the bumpy path that business must travel on the way to setting up shop in Hawaii. For example, despite the growing concern that the cost of health care is spiraling out of control, lawmakers added additional types of health care that must be provided by health plans. While the idea may have sounded humane and caring, no one asked how much this would add to the premium of the prepaid health care requirement.

Meanwhile in another arena, representatives of the construction industry berated lawmakers on the need to provide more opportunities for new construction projects. In fact, the bill that might impel lawmakers to convene a special session is a proposal that would provide an income tax credit for the construction or renovation of hotel and resort related facilities. While hotel owners also would like to see a tax incentive to help them modernize their facilities, if it is construction activity that lawmakers want then they need to look no further than their own backyard.

In this case the “backyard” is the Honolulu harbor facilities which are leased by the state. While many of the lessees of harbor facilities in Honolulu harbor would like to upgrade and modernize their warehouses and storage facilities, they aren’t able to do so because nearly all of the tenants are on month- to-month leases. Why would anyone want to invest millions of dollars in new harbor facilities when they could be kicked out of that facility the following month? Or for that matter, why would a bank want to lend a customer who is on a month-to-month lease the money necessary to finance a large renovation or construction project?

In the mean time the warehousing and storage facilities at Hawaii’s major port continue to deteriorate and the construction industry continues to moan about the lack of any new construction projects. A major reason for this inability to grant long-term leases at Honolulu’s harbor facilities is that three state departments continue to argue over who has jurisdiction over Honolulu harbor. Shall it be the department of transportation, the department of business, economic development and tourism or should it be the department of land and natural resources? While these departments fiddle, the businesses on the docks and those in the construction industry burn.

So while government continues to bicker with itself and finds other ways to perpetuate the status quo, the bigger picture is being obscured. Elected and administrative officials need to chant the mantra “It’s the Economy!”

And the best way that government can help to move the economy forward is to downsize so that a reduction in taxes and user fees can be achieved, and most importantly, government must get out of the way of business. If not, all may be lost.

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