For years, leaders within government and the business community depended on the umbilical cord to federal funds secured by Hawaii’s congressional delegation to the point that many of them now have no clue how to ensure economic and financial prosperity for our community.
Anytime Hawaii ran into a bump in the economic road, leaders got on the phone to Washington and asked for a federal bailout. Who needed to worry about the business climate when federal dollars for the state were always available? With the change in dynamics and the loss of seniority, leaders within both government and the private sector now have to deal with the apathy of the last 50 years — nothing has been done to make Hawaii an attractive place to do business.
That is not to say that Hawaii is not an attraction to global investors such as the Japanese of the early 1990s. But to those investors, the attraction is that Hawaii is a great place to make a quick buck because of public policies and the law of supply and demand. This is true of real estate which is available for development. In an environment where less than 5 percent of the total land mass is zoned urban, the value of what is zoned urban can only go up. This is why during the last recession, when the housing market in the rest of the country took a nose dive, real estate values in Hawaii hardly declined at all. There was less activity, but the overall value of real estate in Hawaii did not falter.
What state and local officials need to recognize is that if Hawaii is to prosper, attitudes and laws governing Hawaii’s business climate must change.
Hawaii repeatedly ranks at the bottom or near the bottom as a place to do business. Community leaders should want to do something to change that perception. However, for those businesses which are long established in Hawaii, they probably prefer the status quo. After all, they don’t want to upset their apple carts. What they don’t realize is that unless there is a strong and vibrant community, Hawaii will eventually end up in an economic abyss.
Political leaders may point to their economic achievements over the past decades, but those efforts were nothing but short-term fixes about which they could write glowing press releases. These efforts took the form of tax incentives, including tax credits for high technology, that lawmakers promised would attract high paying jobs — high paying jobs lawmakers turned around and taxed at the highest rates in the nation.
Then there are tax credits for film productions that are here today and gone tomorrow. Sure those productions send residents all atwitter as we swoon over the latest star in this episode or that, but are those productions creating permanent jobs? If so, does it mean that taxpayers will have to continue shelling out hard-earned dollars to subsidize them?
Then there is the tax incentive for the development of alternative fuels which initially focused on ethanol as a means of supporting the sugar industry — after years of beating up on the sugar industry. And when that didn’t work out, switching the tax credit to the more generic “biofuels.” Of course, all of these efforts came at a cost to current and future taxpayers as someone had to pay for the cost of keeping government running.
Instead of resorting to gimmicks, policymakers at all levels need to examine how government has impeded the nurturing of the business climate in Hawaii. While some elected officials deny they have created roadblocks that each business encounters in its attempt to succeed, the evidence is there — from labor laws, to permitting requirements, to the delays making decisions because employees don’t want to take the responsibility for possibly making the wrong decision. In fact, this latter trait is emblematic of those in THE public sector where no one seems to realize that not making a decision is indeed a decision to do nothing.
Leaders in both the public and private sectors need to realize the days of depending on a constant flow of federal dollars to bail out the state’s economy are over. It is now time for policymakers to get down to work and address the hurdles that prevent businesses from succeeding and creating jobs that workers need now and into the future.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.