Great Lockdown Crash of 2020 a wakeup call for Hawai‘i

Warren Buffett once said, “You only learn who has been swimming naked when the tide goes out.”

That includes states. And now that the tide has receded, it’s easy to see that Hawai‘i has been swimming naked for years. Without any savings to buffer it from the economic collapse brought on by the state’s rash coronavirus lockdown policies, the Aloha State is exposed like the emperor without any clothes.

Hawai‘i’s leading industry, tourism, has virtually disappeared. Unemployment is at historic highs. Hundreds, if not thousands, of businesses have permanently closed. State and county tax revenues have evaporated. Budgetary finagling is rampant as Hawai‘i officials seek loans and other forms of relief from the federal government to cover their short-term obligations.

Even before the Great Lockdown Crash of 2020, the state had been on a spending spree, repeatedly busting through its useless legal spending cap, steadily eating into its rainy-day fund and allowing its numerous unfunded liabilities, such as for its public-pension and health-benefits programs, to balloon. It also was constantly adding new taxes and piling on new regulations.

The protectionist Jones Act also adds to Hawai‘i’s exceptionally high cost of living. Groundbreaking research by the Grassroot Institute of Hawai‘i released in July found that the 1920 federal maritime law costs Hawai‘i about $1.2 billion a year, including about $1,800 per average family, and 9,100 lost jobs.

But mostly, Hawai‘i’s dire situation has been self-inflicted, with its various state and county lockdowns only making things worse.

Little surprise that thousands of residents have been fleeing for the mainland for years. In the wake of the COVID lockdown, that tempo is expected to increase: University of Hawai‘i researchers estimated in June that up to 30,000 residents will be leaving over the next two years.

So what is to be done? Certainly not what Hawai‘i officials have been doing so far.

Besides borrowing and moving funds around within the state budget, and despite staring at a $2.3-billion state budget hole brought on by the worst financial disaster in the state’s history, lawmakers approved $150 million in raises for state employees. Yes, while much of the private sector in Hawai‘i is basically unemployed because of the state-imposed lockdown, state employees who have been getting paid all along were gifted a raise.

One good thing that came out of the latest state legislative session was the lack of any new tax increases, which was amazing.

Looking ahead, Hawai‘i lawmakers should be looking at tax decreases, regulatory rollbacks and less state spending.

They also should be looking to revive tourism, the lifeblood of Hawai‘i’s airlines, hotels, restaurants, tour companies, dinner cruises, farmers, bars and many other businesses. There has been a lot of talk about how to do this, and plans are still being hammered out.

To create construction jobs, lawmakers should consider land-use and zoning changes to allow for more housing. Only 5% of Hawai‘i’s land is available for housing. Expanding that by just 1 or 2 percentage points would be a 20% to 40% increase. On land already developed, zoning reform could facilitate more “infill” housing.

As outlined in a new Grassroot Institute of Hawaii’s “Road Map to Prosperity,” Hawai‘i lawmakers also could exempt food, medicine and health care from the state’s general excise tax, temporarily suspend some occupational licensing requirements, remove restrictions on home-based businesses and cottage foods, reduce regulations on short-term rentals, enact tort reform to protect businesses during the reopening period from coronavirus-related lawsuits, and make permanent the emergency measures that expanded telehealth and allowed out-of-state doctors to practice in Hawai‘i.

Hawai‘i lawmakers also could finally reform the state’s public pension system, currently underfunded by $14 billion. And they definitely should reassess the Honolulu rail project, the price tag for which has ballooned from $3 billion in 2006 to over $9.2 billion, making it the most expensive in the world per capita.

At the federal level, Congress could reform the U.S.-build requirement of the Jones Act, since U.S.-built vessels cost four to five times more than ships on the world market. That reform alone would save Hawai‘i $532 million a year, according to the Grassroot Institute of Hawai‘i’s study.

These are just a few of the things our policymakers could do to help Hawai‘i get back to work. Hawai‘i’s residents need greater flexibility and more opportunities to cope with the state’s radically changed economic landscape. But if our lawmakers stick to their old habits, Hawai‘i will continue to flail naked in the shallows.

•••

Dr. Keli‘i Akina is president and CEO of the Grassroot Institute of Hawai‘i and an at-large trustee of the Office of the Hawaiian Affairs.

12 Comments
  1. Patrick Flores October 4, 2020 7:48 am Reply

    Doctor, you offer a very fitting diagnosis and plan of treatment, very much needed in this state.


  2. Kauaidoug October 4, 2020 8:28 am Reply

    One construction project that should go ahead is the telescope on Mauna Kea. Pay raises during this pandemic is not acceptable when UI is off the charts.


  3. Tu October 4, 2020 8:39 am Reply

    Did Hawai join China’s belt and road initiative … because it sure sounds familiar.


  4. Pamela H October 4, 2020 10:17 am Reply

    Property taxes were raised, article states none were raised. I own a rental condo and live in CA, thanks for making my investment worthless this year, I’m selling as soon as prices return and I’ll never return. Talk about how ungrateful you are Kauai citizens towards mainland and other parts of the world. You could only limit access being islands.


  5. Mark Coleman October 4, 2020 4:19 pm Reply

    Aloha, Pamela. FYI, property taxes are controlled by the counties. Keli’i Akina’s commentary was referring to what happened in the state Legislature, which has no authority over property taxes.


  6. commonsense October 5, 2020 9:12 am Reply

    Pamela H. It is unfortunate your ‘investment’ is worthless, but Kaua’i properties should be for Kaua’i residents. Kaua’i is not here to make non-residents money. That is what is changing the islands energy, peoples actions and the whoa is me mentality. Everybody is paying more, not just you.


    1. Pamela H October 5, 2020 8:48 pm Reply

      Oh I knew there would be someone like you to answer my post as you have. If you don’t want vacationers then stop approving resorts and rezone existing ones. Return your lands to sugar and cane fields and see how your locals like their new lifestyle without tourist dollars. The only way I could afford a residence on island is to have rental income.


  7. Paulo October 5, 2020 11:05 am Reply

    For those who weren’t satisfied enough by the loss of US jobs due to NAFTA, then you will love repealing the Jones Act which requires ships to be built in the US, owned and crewed by at least 75% US citizens, if they are shipping between US ports.

    It is unconscionable that Dr Akina goes so far as to claim the Jones Act is a cause of lost US jobs. In going to his ‘Grassroot Institute of Hawaii’ site to see exactly where he got his bloated figures for his claim of how much the ACT is costing Hawaii, there was nothing but claims based on no facts whatsoever.

    Shipping is a small fraction of the costs of buying goods in Hawaii. The cost of goods in Hawaii has historically been high because as an isolated state ,consumers were trapped. More recently a few big box stores and internet shopping helped reduce that somewhat.

    But for those who would rather pay the lowest bidder to build, own and crew our ships, then you will happy to believe this claim and instead pay shipping costs to China, South Korea or any other country who will not pay a living wage with no guarantee that our goods will become even noticeably cheaper.


    1. Mark Coleman October 5, 2020 3:41 pm Reply

      Paulo, Thank you for going to the Grassroot Institute of Hawaii website to see what was the basis for Keli’i Akina’s statements about the Jones Act. Apparently, however, you overlooked the groundbreaking study that he mentioned in his article, “Quantifying the cost of the Jones Act to Hawaii.” Feel free to go back to the website and download a copy. Based on various statistical scenarios, it concludes that the Jones Act costs Hawaii about $1.2 billion a year, including $1,800 per average family and 9,100 lost jobs. As Dr. Akina mentioned in his The Garden Island commentary, eliminating the U.S.-build requirement alone would save Hawaii about $532 million a year, or almost $300 per resident. He didn’t say anything about jobs, but the report estimates that the U.S.-build requirement alone costs Hawaii about 3,860 jobs.


    2. Dt October 5, 2020 6:07 pm Reply

      I believe the jones act causes higher prices. I know I am just one voice, but it is time that those in favor of it’s appeal stand up.


  8. LTEreader October 5, 2020 11:43 am Reply

    Pamela H:
    Property taxes are assessed the preceding year ie: 2019 for 2020. Did anyone know about this pandemic in 2019? Did anyone know you wouldn’t be able to rent your condo in 2020 because of this pandemic? Surely you already know those answers.
    As for Kauai citizens being ungrateful? Making your investment worthless this year? Really? The vacation rental business has been thriving for almost a decade, once Obama cleaned up the financial disaster Bush left. I don’t know how long you’ve owned your condo, however anyone with common sense would have offered it to a ‘long term’ Management company to rent on your behalf, or had adequate funds stashed for emergencies because they DO happen (even Suze Orman recommends having at least 8 months in your account at all times).
    Kaua’i residents are already struggling (financially and emotionally) in an effort to contain COVID, and not overwhelm our extremely limited medical services. It’s a shame you’re too selfish to see that, however with the negativity towards us you’ve just displayed you won’t be missed Karen.
    Aloha!


  9. Coral Isles October 6, 2020 1:21 pm Reply

    Dr Akina’s article was the most succinct and clear assessment I have ever read. I hope you might republish it in case some readers missed it… Front Page!


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