Posted on: Monday, February 4, 2002

EDITORIAL
Economic sunshine no cause for celebration

The economic news from the Mainland is definitely good.

By some accounts, the national recession has ended. While the economy is not cooking as it was a couple of years ago, it is at least showing positive growth. That's a far rosier picture than many economists were expecting.

This news is bound to play on the minds of state lawmakers who are forced to write a state budget in the face of huge shortfalls. Gov. Ben Cayetano paints a bleak picture that shows deficits without substantial cutting or use of set-aside money such as the Hurricane Relief Fund.

In fact, he has presented lawmakers with a scenario that calls for both special-fund raids and across-the-board cuts.

Legislators have all but rejected the hurricane fund idea and are scrambling for alternative sources of income. Some may be tempted to look at the national figures and say that we will be rescued once the turnaround washes up on our shores.

This would be shortsighted for several reasons.

The first is that economic changes on the Mainland don't usually show up in the Islands until months — often many months — later. Thus, even if the end of the recession is real, it will be some time before that impact is felt here. And the recovery is not the kind of growth spurt that is likely to produce robust new demand for our primary product: tourism.

Because remember, the primary indicator of Mainland economic conditions locally is the condition of tourism. And travel from the Mainland United States has already returned to near pre-Sept. 11 levels. Thus, there is not a great deal of rebound to be found in this sector.

More seriously, the economy in Japan (which Hawai'i has more closely tracked than the Mainland economy in recent years) is still firmly in recession. That's unlikely to change any time soon. Those who think a second Japanese "bubble" will bail us out are whistling in the dark.

The bottom line in all this is to greet word of a national economic turnaround as positive news, but not news that will impact Hawai'i's economic condition or state tax collections any time soon.

The task at hand remains as it was: Write a budget that can be supported by the Hawai'i economy as we know it now.