Friday, July 24, 2009


Give this man an abacus and ask him to use it

by Larry Geller

I’ve been pointed to a PowerPoint presentation on furloughs and layoffs prepared by a well-known Hawaii economist. I’ll get to that in a moment, and of course give you a link to it. But first, I have a few things to say.

I’ve suggested before that Hawaii could use computer modeling to evaluate alternatives to tourism as the main driver of our island economy. I’m pretty sure a decent model would have ruled out Act 221-type tax breaks to encourage a high-tech industry if nothing else but tax breaks is the incentive. But I don’t have any alternative ideas to plug into such a model even if we had one. Tourism may be what we’re stuck with as the best bet.

I mean ordinary stay-in-the-hotel-or B&B-and-swim-in-the-ocean type tourism, not the “space tourism” we are spending $500,000 of taxpayer’s hard-earned money to get into. Who has modeled that and determined that it is a good investment? Where are the projections for the public to see? Or is it just a whim based on pie-in-the-sky ideas that were presented to the Legislature? A whim, like where Mufi’s rail should go, not based on any needs assessment or study or planning. Just a whim, in the latter case, of a City Councilman from Salt Lake.

We just don’t know how to plan. The Governor is no better, having the responsibility to balance the budget but leaving the solution first to the Legislature and then to the unions to come up with.

Raising taxes, either a very regressive excise tax or a more equitable increase taking back at least part of the tax breaks the rich have enjoyed, is an option, but one that our Republican governor won’t entertain, much less plug into a computer model. Heck, the computer might discover that the Robin Hood plan is the best one. Or not, we don’t know, because we’re not shown the numbers.

Ok, on to the PowerPoint presentation I mentioned (thanks to Jeanne Ohta for pointing me to it).

Here it is, prepared by Dr. Lawrence W. Boyd at UH. There are buttons you can push at the bottom of the screen to see notes or widen it, etc.

From an economist, I expected more than just numbers. There are plenty of numbers, from the Council on Revenues and from the Governor’s office. And a very useful revelation: the Governor’s cuts are 25% larger than the Council’s estimates. This is good.

Slide 13 is also important, referring to the current plan. I assume that any spoken narrative accompanying the slides would give some detail:

 So What’s Wrong?
    Magnifies problem
    Damages private sector economy and recovery
    Harms government output, efficiency
    Legally dubious on several levels
    Constitutionally does not have the power
    Withholds special funds, federal funds, etc.
    Changes budget, and priorities, across an entire biennium

But the presentation leaves me wanting more. It peters out in this last slide:

    Avoid this as much as possible
    Minimize rather than maximize problem
    Cuts or tax increases.
    $200,000,000 reduction in expenditures and/or tax increase annually
    If needed to fund FY 2009 shortfall use surpluses from Rainy Day fund and Hurricane Relief Fund
    Spread these broadly. Reduce expenditures throughout entire budget.

What I want is to see the numbers run for that tax increase. I want to see alternatives. I want to see them because they can give direction. How much of a tax increase is needed to bring in that $200,000? 1%? 2%? What are alternative scenarios?

I call for taking back tax breaks from the rich, but I don’t have numbers that I can give you to show if or how it would solve the problem. Maybe it doesn’t work. What I really mean is that we should evaluate those tax increases.

That’s what we have economists for. That’s why economists have computers. Even Republican economists have computers. If Boyd doesn’t like the tax increases, maybe he can show me why they won’t work. If he does like them, he has failed to make his case.

So we continue on whims, on beliefs, or worse, on belief systems. The Governor won’t tax the rich. I say “do it!” Neither of us can prove that our position is the better one, or find useful alternatives. Me, because I’m not an economist, I don’t have the training or experience.

The Governor can do it because she has the capability of commissioning the work. But she won’t, because she’s a Republican? That just doesn’t compute.


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