Editorial
Vital debate: How much government?

We join a lot of expert observers in questioning part of the latest forecast by the state Council on Revenues — and we don't mean the pessimistic part, in which the economists predicted a whopping $310 million shortfall in state revenues over this year and next.

No, we're skeptical about the optimistic part, in which they say growth in tax collections will resume after July 1, and grow by 5 percent in the year that follows.

Our gut hunch is that Gov. Ben Cayetano is on the right track when he says that "What we're seeing is the beginning of an economic meltdown." Our fear is that we'll be in dire straits over an uncomfortably long term.

If we're wrong, at least we'll have erred on the side of caution.

We've wrestled with a similar projected revenue shortfall before, with decidedly mixed results.

Cayetano dealt with a $350 million projected two-year shortfall in 1995 partly by some painful attrition of government jobs and the wholesale raiding of state special funds. We say mixed results, because state government is now about as big as it was before the 1995 cutbacks; the special funds raided then are tapped out; and the University of Hawai'i, the hardest hit by cutbacks, was nearly consigned to mediocrity when it ought instead to have been recognized as an important engine for our economic recovery.

But the 1995 problem wasn't really solved until the economy began to recover.

The problem today is worse, first because the economy is contracting sharply now, whereas it was merely flat then. We didn't have the alarming job losses then that we're seeing today.

Although state government arguably is still too big for the economy that must support it, the difficulty today is that laid-off government workers aren't likely to find new jobs.

Much the same old tools for coping are available today: another round of attrition and the raiding of special funds (now coveted is the Hawai'i Hurricane Relief Fund, which many argue belongs to the homeowners who paid into it).

The Republicans favor major downsizing through attrition, with the savings returned in the form of big tax cuts to people who presumably would stimulate the economy by spending, not saving, it. The Democrats hope to preserve the present size of government by tapping the hurricane fund to supplement slipping tax revenues. They would stimulate the economy instead by a modest increase in capital spending.

Our greatest fear is that none of the measures being discussed so far recognizes the depth of the problem, reflecting a dose of wishful thinking about rescue by a near-term recovery. Right now, that's a luxury we can ill afford.