COMMENTARY
Cayetano responds to Mainland critics
By Gov. Ben Cayetano
During the 1998 election, Forbes Magazine published a not-so-subtle, politically motivated attack piece that branded Hawai'i "The People's Republic." A few weeks ago, Forbes did it again, launching its 2002 pre-election attack piece that took a big poke at Hawai'i as a place in which "Fidel Castro would feel right at home."
Having read the Forbes article just before the Memorial Day weekend, I wondered how the war veterans in states like Iowa and Nebraska — where farmers receive huge federal subsidies to not grow crops (a practice that would have made Adam Smith cringe) would react if Forbes described their states as a potential second home for Fidel Castro.
The reaction in Hawai'i was typical. Too many people here assume the attitude that "if it comes from the Mainland, it must be right."
In a recent Honolulu Advertiser opinion piece, Mike Fitzgerald, recently hired CEO of Enterprise Honolulu, cited three studies as proof that the Forbes article was right in saying the business climate in Hawai'i is bad.
Fitzgerald cited the 2001 Development Report Card of the States, a study that gave Hawai'i a "D" for overall performance. Poor Alaska was given the same grade. No matter how one cuts it, a "D" is not good.
But wait a minute. The same study showed that Texas — abode of business-loving, free-trade champion President George W. Bush — flunked out. Yep, Texas was given an "F"! And the study gave Hawai'i and California a "C" for quality of life while Idaho got an "A." Figure that out.
Fitzgerald also cited a study done by the Progressive Policy Institute, using it to support his suggestion that Hawai'i ranked near the bottom in business climate. Yet this study placed Hawai'i 26th overall, or average — not great, but hardly the dismal showing described.
In some areas, Hawai'i scored high: Hawai'i ranked third in the entire nation for implementing technology in schools and 10th in the nation for work-force education. Last month, the PPI completed a new study on e-commerce — and guess what? Hawai'i ranked seventh-best in the nation.
Studies can be a useful tool to help improve Hawai'i's economy. But they should not be used as an ax to bash our state or discourage businesses from investing in Hawai'i.
As it did in 1998, Forbes attacked Hawai'i for its high state income taxes and general excise tax. Forbes is singing the same tune it did during the 1998 election. There are many ways of lying, and misrepresentation by omission of facts is one of them. Forbes lied. Forbes gave the impression that nothing has been done since 1998.
Over the last five years, Hawai'i's personal income tax has been cut from 10 percent to 8.125 percent, which now puts Hawai'i lower than California (9.3 percent), Iowa (8.98 percent) and Oregon (9.0 percent).
Hawai'i's 4 percent general excise tax — once estimated as the equivalent of a 12 percent sales tax because of the "pyramiding" effect — was de-pyramided by law. Today, the GET is estimated to be the equivalent of a 6 percent sales tax, much lower than the sales taxes in many other states.
At a National Governors Association conference four years ago, the governor of Michigan spoke glowingly about how Michigan cut its state taxes by $2 billion over a six-year period. This was about the same time we also approved a $2 billion tax cut over six years. Well, compare a $2 billion tax cut over six years for Michigan, and its population of more than 10 million people, to the same cut shared by Hawai'i's 1.2 million people, and it's clear Hawai'i's people got a pretty good deal.
This did not go completely unnoticed. The Cato Institute, a respected, conservative think tank that organizations like Forbes are fond of quoting, gave Hawai'i — the so-called People's Republic — a "B" for cutting taxes and limiting the growth of state government. And by the way, our top 6.4 percent corporate income-tax rate is lower than that of 32 other states.
Bloated state government? Not according to the highly regarded American Legislative Exchange Council, which recently ranked Hawai'i the third-lowest in the nation for growth of state government from 1990 to 2000.
Tired of studies? Me too. So let's look at the realities of doing business in Hawai'i.
Recently, one of my Republican friends — I do have them — asked me why Hawai'i did not enjoy the same economic growth as the Mainland over the past decade. I told him it was for the same reason that while the Mainland states suffered a terrible recession in the decade before that, Hawai'i's economy was booming.
Remember when California paid its state workers with IOUs? Or when homeowners walked away from mortgages in Houston after the oil industry collapsed? Remember the tragedy of hundreds of thousands of American autoworkers losing their jobs at General Motors, and watching members of Congress use sledgehammers to smash a Toyota in front of the White House in a symbolic but frustrated protest against Japanese competition?
Well, this little island state is heavily influenced by what happens in Japan and Asia. And while the Mainland was in a terrible recession, Hawai'i's economy was still strong and growing. People who want to do business in Hawai'i must understand this reality.
Hawai'i is a service-oriented economy. One reason Hawai'i scores low in most of these Mainland studies is because they include categories like manufacturing and trade, where we always score virtual zeroes.
This is why we are pursuing some of the great opportunities for business in service industries — healthcare, high tech, biotech, higher education and diversified tourism, like eco-tourism and business tourism. Growing these industries will help diversify Hawai'i's economy.
Another reality of doing business in an island state is transportation costs. Except for products like gasoline, which we can produce as cheap or cheaper than in California, most product costs are higher in Hawai'i. Land costs are higher too — no different from land-poor places such as Hong Kong.
A big part of higher business costs stems from state and county laws that are intended to protect and nurture those assets that make Hawai'i a pretty special place to live and work.
Visitors rave about Hawai'i's beautiful environment. Well, it would not be that way if Hawai'i followed the lead of places like Houston. In Houston, developers can build a multimillion-dollar mansion next to a service station. We are not willing to pay that price.
Hawai'i is the only state that mandates that employers provide and pay for part of a health insurance plan for all full-time employees. No question this is a big cost to business — but the recently passed law to oversee health insurance rates is just one step in the endless search for ways to reduce that cost.
Hawai'i's mandatory health insurance law is supported and widely accepted by Democrats, most Republicans and the overwhelming majority of our people. It's one reason why Hawai'i has been consistently ranked as one of the healthiest states in the nation. People live longer in Hawai'i than in any other state, and it's not just because of the weather. Mandatory health insurance is a cost most are willing to pay — and it's here to stay.
Let's be frank. There are some in Hawai'i who do not share our desire to preserve and nurture our way of life. Others think we are backward to hold stringent requirements designed to protect our environment and our culture. Still others think workplace protections and things like mandatory health insurance are too burdensome for business — or that it's simply too bad if the oil companies gouge us for everything they can get.
Many of these people believe that all of the answers to our problems can be found by copying what has been done on the Mainland. They continually trash Hawa'i public schools as "shameful" or the "worst in the nation" — even when national surveys indicate otherwise. They wear our people down with negativity, and they divide us.
In all matters, I believe we need to trust our gut. We are the ones who have chosen to live here, to raise our children here, to do business here and to build a life here.
Years ago, in a State of the State address before the Legislature, former Gov. John A. Burns made it very clear he was concerned about Mainland influence on our way of life. John Burns was not born in Hawai'i; he came here from the Mainland. But Burns understood the differences between Hawai'i and the Mainland. He chose to make Hawai'i his home, and he dedicated his life to preserving our unique heritage and building up our people.
"To be perfectly candid," he said, "I sense among some elements of our community ... a subtle 'inferiority of spirit,' which is totally unwarranted and which becomes a social and psychological handicap in life."
Burns believed our people are equal, and in his judgment, "superior in many ways to their counterparts anywhere."
"The undercurrent and uncertainty simmering beneath our affluent surface," he said, "has been articulated in expressions of concern that Hawai'i stands in danger of losing its unique character. These concerns are well founded. They should be squarely faced. And it is my view that we should seek the answers to this problem positively, not negatively."
Timely advice from a true son of Hawai'i.
