Unclear how economy will affect '02 elections

By Kevin Dayton
Advertiser Capitol Bureau Chief

As in 1998, Hawai'i's economic climate will be one of the key issues in the race for governor, with Democrats and Republicans delivering vastly different messages on who is responsible for where things stand.

Gov. Ben Cayetano insisted things were getting better in 1998. Advertiser library photo

While no one questions that the economy will be a central theme this year, candidates and political strategists concede that it's a more slippery issue than in 1998, when the national economy was booming and Hawai'i's was hitting bottom.

Today, Hawai'i is enjoying pockets of prosperity and comparisons to the national economy have narrowed.

O'ahu home prices last month reached their highest levels in six years, and sales and prices have been increasing nearly every month for the past year. The Hawai'i jobless rate in April was 4.4 percent, well under the national unemployment rate of 5.7 percent.

And despite a steep drop after the Sept. 11 attacks, visitor arrivals from the Mainland have recovered to near the levels of a year ago, although arrivals from Japan have remained 20 percent to 30 percent below last year's levels.

"If things are going well and people are, for the most part, prosperous, there is much less impetus to make changes. It's kind of, if it ain't broke, don't fix it," said Jim Loomis, founder of the advertising and marketing firm Loomis Inc., which has represented Democrats such as Honolulu Mayor Jeremy Harris and U.S. Rep. Neil Abercrombie.

Republicans contend that things are most definitely "broke."

House Republicans recently cited U.S. Census figures that show the number of poor people here grew by 43 percent in the 1990s, with poverty in Hawai'i growing more than in any other state. Lingle said the figures show that when inflation is figured in, incomes here actually declined slightly from 1989 to 1999, and that some real estate prices still haven't returned to the levels of a decade ago.

While Lingle and other Republicans contend that the business climate remains grim, they may have a harder time making their message stick this time around. Missing from the equation is the frustration and desperation expressed by voters in 1998. In political terms, that may be a critical difference between then and now.

Four years ago, Hawai'i was struggling through its eighth year of economic stagnation, and was staring enviously at the Mainland's soaring economic expansion.

The real estate market was moribund. Unemployment was 1 to 2 percentage points higher than the Mainland throughout most of 1998. The number of local construction jobs dropped 4.7 percent in 1998, the industry's fifth straight year of job losses.

Linda Lingle says Hawai'i's economic situation is getting worse. Advertiser library photo

At the heart of Gov. Ben Cayetano's re-election campaign in 1998 was a simple mantra: The economy was getting better. He repeated it over and over, while Lingle insisted he was wrong.

Lingle's message for 2002 is that things haven't changed.

"I think it's very bad because things have lingered and just sort of stagnated, and the longer that continues, the more it reinforces the reputation that you can't make it in Hawai'i, that it's not friendly to business," Lingle said. "Certainly none of that has changed."

Loomis said that pitch makes perfect sense for any party that is out of power, and wants in. The Republicans must convince the public that things are awful, and will improve if the GOP wins, he said.

"I think it is self-serving for the Republicans to do that, and were the roles reversed I'd probably do the same thing," Loomis said. "Obviously (the economy) could always be better, but generally I think people are reasonably well off, and I'm just not sure it will sell to the extent that it may have in '98."

University of Hawai'i economics professor James Mak said the events of recent years seem to have altered how people look at the state economy.

"In 1998, there was a sense that if we change the government, change the leadership, we might be able to turn things around," Mak said. "I think there's less of that now."

In 1998, the Cayetano administration called together the Economic Revitalization Task Force, which floated proposals for new policies such as tax cuts for residents and investors and more money for tourism marketing, steps that were supposed to "fix" the economy.

The idea was that if Hawai'i government adopted the right policies, spent money in the right areas, it could improve its situation. And until the Sept. 11 attacks, the state economy had been growing at a respectable pace.

The attacks created yet another complication for the Republicans. With Wall Street nervous and the entire national economy wobbling, it's harder to blame Hawai'i's Democratic leaders for all of the state's economic troubles.

"Today, I think that fewer people are willing to say that we could undo the 9/11 effects ourselves," Mak said. "It's not that the economy is not that bad. The economy still shows no robust growth, so I can't say it's a happy state of affairs. But if you ask most people, I think most people say that in view of 9/11, we're doing much better than we thought we would be."

Democratic gubernatorial candidates Lt. Gov. Mazie Hirono and D.G. "Andy" Anderson said the voters know the economy has improved since 1998, but said the Sept. 11 attacks focused new attention on the need to diversify beyond tourism.

"The tenor of the last campaign was really one of blaming," Hirono said. "I think Linda's strategy was let's just blame the Democrats for everything, and I don't think that kind of strategy is going to be too effective this time.

"I hope that people are going to recognize that it's not helpful to just blame an entire party. Just doing a simple, sloganistic campaign is not going to work."

Anderson and gubernatorial candidate Ed Case, a state representative and attorney, said their private sector work experience will be a benefit in the campaign because the voters are looking for candidates with business know-how.

Whether the economy will drive voters to one party or another may depend on how those voters fare personally this year.

Kedric Dean, collection manager and part-owner of Collection Management Services of Hawai'i, said he sees more unemployed people falling behind on their bills now than in 1998. A longtime Lingle supporter, Dean said his friends and associates agree with him.

"My personal feeling is, they see a shining light there," Dean said. "They feel that she can provide something which we have been lacking."

Not so with Eric Schultz, 38, a Wai'anae carpenter. Schultz said he was working as a carpenters' union apprentice in the Villages of Kapolei in 1998, and today is on his own, working side jobs or small projects. He is single, and said he finds enough work to pay the bills.

Schultz said he tends to vote for candidates of the Democratic Party "because of what it stands for, for the people."

"I think things are OK now, the way it's going," he said.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.