 Welcome to Think Tech Hawaii and this show is the state of the state of Hawaii. I'm your host Stephanie Stoll Dalton. This show reports on key local and national events and issues that impact our state and we invite guests who have expertise and informed viewpoints on on these topics and their impact on the state. The show's coverage includes small business issues, the economy of the state, government, politics, law, public health policy, safety, transportation, education and and many others. Viewer's topics and suggestions or recommendations are are very welcome and can be sent to the program's website at ThinkTechHawaii.com. Today's show focuses on Hawaii's economy under or now in the wake hopefully of COVID-19 as fiscal relief comes to the islands in the latest Corona Aid Relief Economic Security Act or the CARES Act. And what is this relief and how will it impact Hawaii? Is it enough to revive state and city county budgets? In other words, will it be in Hawaii's Goldilocks zone and make everything just right again or close to it? So today my guest is Associate Professor Colin Moore from the University of Hawaii at Manoa where he's the Director of the Public Policy Center. Dr. Morris expertise is in public policy and governing including close study of Hawaii and publications relating to its circumstances and he can enlighten us on how the state, city and county benefits from this relief. So welcome Professor Colin Moore. Thanks great to be here Stephanie. Mahalo for joining us today. What we're here is to talk about this relief pack, this relief act and if this is the best news Hawaii said and is it in what I'm referring to as the Hawaii's Goldilocks zone and that is is it just right for us? What does it look like to you? Sure well maybe I can just describe it a little bit. It is certainly great news because whether it's enough we can talk about but without this the state of Hawaii would be in desperate straits. I mean we would have be furloughing public sector workers slashing school budgets in this state has been is among the hardest hit of the COVID pandemic because our economy is so closely connected to tourism and industry that basically collapsed during this period and we have one of the highest rates of unemployment in the country and all of that of course takes a huge hit to the state budget. So the expectation is that Hawaii is going to get six billion dollars from this package which is an enormous amount of money. Now not all of it's going to go directly to the state so about two point two billion dollars of that is going to go to state and county government so maybe I can just break this out a little bit. So the counties are going to get big chunks of money and that's very important so it'll it'll go all the way from Hawaii which gets 13 million to Honolulu which will get 365 million. Unemployment assistance is a big chunk of this to shore up our unemployment fund and that of course is connected to the expansion of unemployment benefits that's about 575 million. A big chunk of this is for rental and mortgage relief that's about 250 million and so this will we've had a rental assistance program this helps keep people in their units and helps keep landlords being paid which in Hawaii actually is very important because not only do we have tremendously high cost of housing here we don't have a lot of corporate landlords and so a lot of our local landlords are sort of mom and pop landlords who own a few properties and really have had a tough time weathering this because of course you know they don't have huge corporate reserve funds to continue to pay their mortgages so that's going to help. 150 million will go to various health care systems some of this will be a slight reduction in the price you'd pay for health care they're covering Cobra if you've lost your job during this period. Then I think any parent would be happy to hear that Hawaii schools are getting a lot of money so there's 634 million going to schools that and that I mean it's mainly DOE schools and Stephanie before we started we were talking about how much money would go to UH and I just found the number right before we got on it's actually 158 million and that would that goes to support the whole UH system so all 10 campuses of the University of Hawaii system including the flagship Manoa campus and this I mean as someone who is employed by the University of Hawaii that is a great relief to me personally but I mean this is a sort of time where students who are not employed can come back to school and universities need those resources to keep offering classes and providing tuition and support for those students. The last few chunks are about 80 million going to Native Hawaiian programs that's split between health care and education and then some money for small businesses vaccine distribution and then finally the last big chunk is the 1.7 billion that'll be distributed in those $1400 stimulus checks to Hawaii residents. And yeah that that makes up what are they about 17 percent of the total the stimulus right checks I think they are yeah and does this mean I'm glad to clarify the dire straits that this date is in I think you know it certainly that's been publicized but I mean it's really been taught on a lot of people so these questions about is this enough or sincere and is the city county going to get a decent allotment I know you said there's allotment for the state and also for the city county is that going to be enough to get us back to par on the budget or are we staring down tax tax increases you think. I think it depends on how quickly our economy recovers I think it's enough to fill some holes right now and it's more than enough for that I mean this is this will provide many for for other projects I mean but I think the question is can our economy recover in time to be back on track when the stimulus runs out I think that's the big question in my mind because I don't think we're going to get another big stimulus I mean this is a huge amount of money but this is probably all we're going to get I mean certainly in terms of money that would go directly to cover public sector budgets and so Hawaii this is you know this could be a little dicey because our we had a huge decline in our GDP obviously that affects tax revenue and and we've this will help us be okay probably for the next year or so but the question is is tourism going to come back if that doesn't happen then we're going to continue to have these problems paying for our public sector paying for our schools and I know not everyone likes tourism and I think you know part of this maybe on a different program we can talk about how to reinvent tourism in Hawaii but the truth of the matter is that's still the biggest part of our economy and certainly the one that has declined the most during this pandemic so we had about 500,000 visitors in 2020 that's about a fifth of the of the number in the same period in 2019 so we are way way way way down and people are coming back but I think it depends on the speed they return and the real unknown question is how this will affect international travel so I think a lot of economists and I agree with them expect that tourism will rebound from the US mainland relatively quickly but the international tourists particularly those from Japan who spend much more money per tourist than mainland tourists I don't think that's going to come back any time soon probably not within the next year or so so that's a long answer to your question but it's enough right now but it may not be enough in the future okay because they'll be seeking further afield destinations and rather than just Hawaii well I think it's probably just because they won't be able to leave they won't be able to travel internationally oh because of their count their country's rules right right or our country rules or our country rules okay well you know I these are such good important points and very informative and given that 11 percent and given the point that this is it for undoubtedly this is it for handouts if we want to call it that for relief but 11 percent of the act is dedicated to to the relief checks which is a nice piece and certainly citizens will benefit from having that additional funding but no is is that at the level of really helping them and especially given we're not going to have this happen again so and if the economy doesn't rebound so what what do you think about that 11 percent and those relief checks what do you do you think is going to happen to those in the hands of of the citizens are they going to save them are they going to pay their rent what are the circumstances you think out there well I think that yeah that's a great question I mean you have to remember it'll be of course the $1400 is also in addition I mean that's on top of for people who are unemployed the expanded and augmented unemployment benefits so I mean one of the odd things we saw during COVID because of these relief packages is that poverty actually declined in the United States which is an unusual thing to have happened but because people were benefiting from augmented employment and the stimulus checks they that actually took some very poor people and brought them up a little bit now that's obviously not sustainable that won't last beyond these stimulus packages but it has had a huge difference I think the I mean made a huge difference I think the fear is that what happens when this ends and we still have a relatively high unemployment rate because it's going to end the other the other thing that's going to help a lot that has gotten some attention but I want to make sure I emphasize here is the the change in the child tax credit and this may become something that's permanent so there's a one-year boost in the child tax credit which would provide 3600 for parents with children each child under six three thousand for each child under 18 and that is a huge amount of money because unlike the way this was previously structured not only is it more money but all of the money these are refundable tax credits which means that even if you don't pay any money in income taxes you're still going to get the credit the credit in in the form of a check from the government for to support your children and so that is another huge boost to the family budgets of poor folks or even middle-class folks because this extends up relatively high so I think that's that's very interesting and it does relate to some criticism I wanted to bring up of this relief package and that was from Larry Summers who's an economist a Harvard professor and he was very critical of this unemployment insurance boost because he sees that that is the kind of thing that that maybe characterizes a lot of the payments of the funding in the in the ad which is it's well more than is needed and that most of the payments out of unemployment insurance have been above the levels of earnings before this whole catastrophe began and that he doesn't see it as enough of an incentive to get back to work and he doesn't see that as the best way to target the money what do you think about that criticism yeah I mean there are some valid points there I mean I think one of the most valid points is that is why are you giving extra money to people who didn't lose their job why are we sending $1,400 checks to people who are not unemployed who who haven't really seen any adverse economic effects of this crisis you know I think there's probably something to be said for that but I think that this has touched all families in a variety of ways from parents with children who had to figure out ways to cover their kids child care during this so I'm I understand that point it doesn't worry me a whole lot I think the one one part of this that I don't think is valid is this concern that if you increase unemployment people won't go back to work there isn't any evidence that that's really true you know that people have been returning to work when their jobs are available because people are smart they know this isn't going to last forever and they know that if they have an opportunity to return to work they should probably take that so although that that's kind of theoretically could be true I haven't seen any strong evidence I mean maybe with some people I mean there's always you know the individual cases are always distinct but overall I don't think that's been a problem you know and that's the the real critique summers and others have along with this of course is that this is going to overheat the economy that it's way more money than you need this is all financed by debt $1.9 trillion is an enormous amount of money that's going to lead to inflation and a lot of other bad consequences and I think that's really the debate that's the real that that is the potential danger here I just tend to think that the costs of not doing something far outweigh the potential risks of having some inflation yeah well Larry Summers yes did mention that I wanted to say that he did praise the child care the child care um credit that he's giving and the tax the tax credit and he sees that as something that's a matter of changing public social policy that we're doing something about leaving child poverty he saw that as highly praiseworthy and I guess that's about the only thing he saw is praiseworthy the bill because he mentioned that employment insurance and also this issue of inflation and that not enough was done to target these payments to target this money to destinations that will strengthen the economy and the capacity of people to to manage you know their resources better and and to prepare to defer this inflation going forward so he seemed to have a pretty negative tank on the the long-term value of this it's kind of a more of a short-term fix and he doesn't see that this a massive large-scale effort should have been given made into just mostly a short-term fix do you do you see it as a short-term fix too or well about his point about the long it's part I mean obviously it's yeah sure it's partly a short-term fix um I think that um I mean other economists would say that the risk of not doing enough is far greater than the risk of doing a little too much and providing a little too much money and I think that was the lesson a lot of these economists took from the great recession that not enough was done there wasn't enough investment of course Larry Summers was an architect of that um you know he's an esteemed economist although he takes a more conservative position on this I think that um you know that the argument that this should have been more targeted I think that in a crisis situation like this that it takes a long time to do that I mean you need to start programs it's an implementation challenge to to figure out how to target that money to specific industries you'd want to invest in um and so I don't think he's wrong I think that over the long term that is what we want to see but I think in this emergency situation just giving people money um uh is is pretty effective um and you know this is this is a debate between um in the field of economics right now I mean the the Summers folks who think it is a little too much and are much more worried about inflation and are understandably worried about just giving money to people who perhaps don't need it um and those who say look we just need to stimulate the economy we need to keep everyone afloat um and let's let's not worry about this right now let's just inject a whole lot of money into the economy and you know I think there's a little bit of a generational divide there the younger economists are a little less worried about this and some of the more progressive economists like Paul Krugman are less worried about it but it's not to say that Summers doesn't have a point I just I tend to think that the biggest danger is not doing enough right now I see yeah I I guess um Summers might be referring to a lost opportunity in fact I think that's what I did hear read or hear him say that we're going to look back on this and not uh regret that it was done that it is done is good but that it wasn't done with enough purpose to get us a leg up you know going forward and he also was concerned about competition with the Chinese I didn't quite understand where that came in but anyhow he was he was um well I mean all of this is quarterback stuff you know the day after um and so where was all all of these recommendations during the prep period and certainly um the the politics uh of it don't get mentioned so much anymore we're just talking about it from what it is now and what it turned out to be without considering the gigantic crusher that was coming um to get something done and to have this use this opportunity as best could be done under the circumstances but I I'm wondering about the um the relief for some of the and here in Hawaii for instance um between um city county and state and maybe I just don't understand this very well but doesn't city county mayor Blanger he doesn't he have to rely on the state to provide fundings where he may still have a shortfall and is that is that lessened now that he would have to work with governor e gay um to to meet me the budget needs what what do you think is the situation there uh between the county and the city and the state absolutely I mean some of this is all I mean that like we said before the 365 million dollars is already targeted to local county government relief this is for Honolulu county um and so that money will come directly to the county he doesn't have to go hat in hand to the governor to ask for it precisely how that happens I can't answer um but it will go to the county because this is earmarked for local government um according to the formula that they've used based on population that's why Honolulu gets what it gets and some of this is due to the unemployment rate too um so yeah this is a big bailout for for mayor Blanger I mean there was the the county the city and county were hit very hard as a result of this um and they don't have a lot of places they can go to increase taxes the state can and you saw these proposals in the ledge now they've mainly been um abandoned to raise tax income taxes on Hawaii's highest income earners the city and county could go to property taxes but here in Hawaii that is a politically difficult thing to do because we have very low property taxes but that's partially because the value of people's houses here is so high even though their income isn't particularly high and so raising property taxes in Hawaii is always a politically difficult thing to do because you could have someone who makes a relatively modest income but whose family home is worth a million dollars and so they're not in a position to pay those property taxes and so that always puts the city and county in a tough spot um because they can't um politically very difficult for them to raise property taxes yeah well I I would think uh yeah so this truly is a relief for Hawaii and um and it's very it seems likely that the tourists are still going to come back here I mean as you said you know we were doing what 30,000 a day or something we're getting off these planes and ships and and uh transports and I think that um the cope this COVID relief also has a big hunk of money going to the airport to to to cover the COVID maintenance and operations and expenses that they they've had enormous expenses and then of course they also have some going into heart so would you say that maybe we're close to the Goldilocks zone here on getting it just right from I think I mean I I I wonder if you see that as remarkable I mean let's let's talk for a minute about how remarkable this is I mean this is uh one of the largest expenditures ever made in the United States um I mean we're talking about world war two level spending that's not something that has happened in the past I mean it is um and it's politically relatively uncontroversial I mean that is the other shocking thing this is public opinion is very much for this um although it wasn't a bipartisan package the it is largely supported by the public the Republicans really haven't made much of it as a political talking point they've sort of moved on to the cultural politics things because this is so widely supported so we are we're very lucky I mean could there be problems with this with inflation absolutely um but this state in particular was hit very hard um and um was in desperate need of these funds I honestly don't know what we would do with without this sort of bailout there isn't an immediate solution and we could benefit too from what the bill that might be on its heels which is this proposed two trillion dollar infrastructure investment now that would be targeted um that would be spread over a much longer period of time but you mentioned improvements to the airport I mean and some money for heart um we could be seeing more and more of that um if this infrastructure bill is passed as well which I think some form of it likely will be well I guess I'm saying that um it doesn't matter what I think but it seems that the specifics of of these funding um gives um are just what we need I mean and uh certainly for something like heart which is so oppressed and I just it is it is remarkable and then to have it be as big as it is so to have Larry Summers come out and be you know so critical and he was on with who is that other um the other um major um economist who um has been so um so positive about this it's Paul Krugman and he's um just seen that this is such a a big expansion that's so important and timely and something that you know we really need so it was interesting to see the two of them together one being so critical and the other being you know so positive and and unresponsive to the the the Larry Summers criticisms do they usually line up that way when they in in their economic policies and theory and now and policy analysis is that how they line up is Krugman being more Krugman is more progressive for sure um I mean he definitely is more progressive I'm both and um Summers is a bit more conservative they're both Democrats I mean I would say that they're both on the progressive side of the economics profession although Summers is is more conservative than Krugman for sure um I mean this this question about inflation is something no one really can answer I mean it's it's I don't want to dismiss Summers as concerns because they're legitimate um I mean 10 years ago people would have said this is going to lead the huge inflationary pressure but that didn't happen after the great recession it didn't seem to have happened after the first stimulus package so there's actually a theory called um um modern monetary theory that tries to understand why these running these big deficits don't seem to matter right now but I think that overall I mean Krugman's position and a lot of economists positions on the left is um the worst thing we can do is provide enough money to just keep everyone on life life support but not a huge injection of money to stimulate the economy and get things going again and yes there could be some inflation yes there could be problems with this but the cost of not doing um the the cost of doing too much is much greater than the cost of not doing enough and I've been surprised at the relative consensus and support among most economists I mean that's why Summers has gotten a lot of attention is that he's one of the few who's really pushed back well I I'm not sure what you can say anything briefly about this but exact most of us probably don't really understand how inflation comes about is there any really quick way you can say something about how something like this could actually lead to inflation as it did and for the free and war or something like that but what do you know is there a way to get a handle on that sure I mean inflation is always is can be a little mysterious and a little complicated and actually um it but I'll say quickly basically the idea is if you create more money then there's more money to spend which can create upward pressure on the price of goods and on wages um and then it can just lead to this there's a spiral that increases the price of goods which increases the price of wages which lowers the value of money um that can be really bad for people on fixed incomes or property um but that hasn't happened and so it it is like a lot of things in economics there's there's a lot that's understood but there are some things that are still a little bit mysterious and I mean the other thing that would increase inflation pressure is that the price for U.S. Treasury bonds go up goes up the the interest rate there and that often is is what leads to it but that hasn't happened either Treasury bonds are still very very cheap and so this is this is a real question in economics why this hasn't happened but and it's really it's partially unique to the United States and a few other major economies I see okay and that's why the interest rates can go up and that's why we had such a difficult time in the 70s okay all right well I I've enjoyed the talk very much I've learned a lot thank you very much Colin um who's are alone so I'll need to wrap it up um and uh I'll just say I'm 70 so Dalton and this is the state of the state of Hawaii show and we've been talking now remotely on zoom our favorite method uh with Dr. Colin Moore uh about the federal cares act the most recent uh aid relief aid that's coming to Hawaii and what is its impact on Hawaii I'll see you in in two weeks again um on the next state of the state of Hawaii so mahalo for your attention everyone and aloha