It’s the Economy, Stupid 
​by Tom Yamachika 

“It’s the Economy, Stupid” is a catchphrase made famous by Bill Clinton when he ran for president in 1992 and won.


Recently, we have been getting lots of news about our economy here in the islands, and none of it has been good.


The national site WalletHub has pegged our economy 48th out of 51 (including DC).  We eked out a victory over only Mississippi, Louisiana, and Alaska.


The University of Hawaii’s economics organization, UHERO, also came out with a somber assessment.  “Over the past year,” it said, “there has been a broad slowing of growth across the four counties. To varying degrees, each has seen a falloff in tourism activity and a slowing of employment growth in a number of sectors.”


The Department of Business, Economic Development and Tourism publishes a quarterly forecast.  The most recent one for Q2 2019 predicts modest growth in the gross domestic product for the state, with annual increases a little less than 4%.


In the meantime, our county governments are passing record-busting budgets.


The City and County of Honolulu recently passed a budget 8.8% higher than last year, which included tax hikes on hotel and resort properties and in non-owner occupied “Residential A.”  The Mayor’s chief of staff was quoted as saying, “The additional revenue will be used to remedy Honolulu’s unfunded healthcare and retirement liabilities, and to prepare us for future rail operations and maintenance.”  Prepare us?  Uh-oh, it looks like we have more revenue woes to come.


Maui County passed the largest budget in county history, including tax increases in almost all property classifications including residential.  The budget proposes to spend $823.5 million, 8.6% more than fiscal 2019.  “The council opted for economic investment in Maui County, rather than austerity,” the council chair stated in a news release.  That’s easy to say when the money being invested isn’t theirs.


Kauai adopted a $278 million budget, a 7.75% increase over the prior year.  “With a new Mayor and Administration onboard, the Council carefully set out to provide the Administration with the tools needed to innovatively improve systems, services, and functions Countywide,” the County Council said.  Now someone needs to use the tools.


And the Hawaii County Council passed a $585 million budget, which is more than 13% over last year, adding 95 positions.  “We’re demonstrating to our constituency and taxpayers that we’re watching the bottom line,” one council member is quoted as saying.  Maybe someone needs new glasses.
So, let’s now ask the question.  If the economy isn’t growing as much as the rate government is spending, what’s going to happen?


There is an engine in our society which we call the economy.  Businesses provide goods and services to people and other businesses.   Those businesses can’t do it alone, so they employ people.  The businesses themselves need goods and services to perform, and their employees need meals, shelter, and other goods and services.  Our tax system takes a piece of each of almost all these financial transactions.  So, if our economic engine is running and spinning, our government is taking in money.  That taking acts as a brake on the engine, but if the engine is running fast enough it won’t slow down so much.  But what happens if the engine is just sputtering along and government demands more anyway through tax rate hikes?
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Lawmakers, if you don’t know the answer to that question, just listen to a few of your constituents who were forced to dip into savings, sell household goods or the family home, or even leave our sunny shores for greener pastures—or at least pastures where the taxes are lower.  If it gets bad enough for them, they might exact retribution at the ballot box.  Like how George H.W. Bush lost to Bill Clinton because of “the economy, stupid.”

Just three months ago, the Hawaii State Auditor released the latest in a series of reports over the years on the Hawaii Deposit Beverage Container Program, known as HI-5.  That report, No. 19-08, basically said, “Look.  We’ve issued four audit reports on the program, every two years beginning with 2013.  In each of the reports, we rely on the distributors and redemption centers to be honest and police themselves.  There is no verification or enforcement.  You might think people are honest, but in three out of the four reports we found discrepancies, meaning either that distributors paid the fee on fewer bottles than they distributed, or redemption centers asked for and received more money from the State than they were entitled to.”


To illustrate the point, the 2019 report detailed the story of one staff worker who worked for the accounting firm contracted to help with the report.  He went to a redemption center, dropped off some glass bottles, and was paid 61 cents.  The redemption center altered the receipt log and received a little more than 69 dollars instead.  A few days later, he went to the same redemption center with three pounds of plastic containers and was paid $3.95.  That receipt log was also altered, with the State paying out fifteen bucks.

“The Department of Health has been aware of this flawed payment system since 2006,” the report summary says, “but has done little to address it either with changes to the program or through enforcement inspections.”

When the Auditor’s report came out, it received attention not only from the local press but also national media.  And the Legislature was in session at the time.  Wasn’t it a great time to ask the Legislature to give the Department of Health some resources to put financial controls on the program and perhaps throw in the hoosegow some of the bad actors who had been stealing taxpayer money?
When you read the budget summaries from our legislative folks, however, such as blog posts from the House Majority on House Bill 2 and on the remaining executive budget, there is no mention about fixing the leaks in our bottle bill program.

And, when perusing the news releases from the Department of Health, the Department doesn’t seem to mind publicizing red-placard closures of food establishments as examples of its robust inspections and enforcement on the Big Island and Molokai, but no mention whatsoever is made of the redemption fraud even though the Auditor gave DOH evidence on a silver platter.
Does DOH just not care about millions of taxpayer dollars possibly being stolen from under their noses?  “Fraud is a serious and real risk for this program,” Director of Health Dr. Bruce Anderson stated in a February 21 letter attached to the audit report.  Yet we have heard nothing at all about changes to the program or about wrongdoers getting punished.

Perhaps this apathy is breeding distrust of the program.  Redemption rates for eligible beverage containers are hitting the skids, as this chart shows: