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The Honolulu Advertiser
Posted on: Friday, February 3, 2006

Invest tax surplus in poverty solutions

By Alan Curtis

Gov. Linda Lingle's announcement that Hawai'i's gross state product has grown 4.7 percent would traditionally be reason to celebrate.

But that measure masks a disturbing reality for approximately 150,000 residents who languish in poverty, many of them working several jobs and not making ends meet. The rate of poor children is as high as 19 percent in some areas, according to Census Bureau figures.

Housing prices are skyrocketing, and rising fuel prices augur tough times for many of Hawai'i's residents. The cost of living in Hawai'i is 30 percent above the national average, and homeownership is the lowest in the nation.

And while tourism is booming, the increasing monopoly ownership of hotels has decreased the number of local owners with a vested interest in Hawai'i's quality of life and fairness to the employees who make that dream vacation a reality. It's still unknown if the hotel chains will work with the unions to assure adequate paying jobs with fair benefits to all of its workers. There is no doubt that these companies can afford to.

The United States has one of the largest gaps between CEO and worker salaries in the world. In 1980, the average corporate CEO earned 42 times as much as the average worker; by 1998 the CEO was earning 419 times as much, and that disparity is continuing to grow. It's time to narrow that breach in Hawai'i and across the country.

The state's economic surplus provides an opportunity to contribute to long-term economic growth and relief for Hawai'i's families, but only if the solutions that are proven to work are applied.

The Eisenhower Foundation has, for over 25 years, invested in what has proven to reduce poverty, develop our youth, educate the truly disadvantaged and train them to become an integral part of the community. The foundation's investments in human capital are based on scientific evaluations of real programs in states around the country, including Hawai'i, where we are replicating Delancey Street, the best model for training ex-offenders in jobs that significantly reduce the odds of their returning to prison.

It's indisputable that poor families have little purchasing power. Bringing these families into the economic mainstream can mean an influx of capital into the local economy. What doesn't work are "supply side" tax breaks based on the false rhetoric that giving more money to the wealthy will spur investment and "trickle down" to everyone.

Examine the national model. During the height of supply-side economics, from 1981 to 1991, the national debt increased from $800 billion to well over $3 trillion, child poverty increased by 22 percent, and wealth inequality grew at unprecedented levels.

Columbia University professor Alan Brinkley has suggested that, during the supply-side 1980s, the debt and the need to finance it, was used intentionally to undercut support for what works not by discrediting successful inner-city investments, but by sacrificing them to deficit and debt reduction.

From 1993 to 2000, supply-side policies were rejected. In 1993, taxes were raised to cut the federal deficit. One supply-sider predicted the tax increase will kill jobs, kill businesses and, yes, kill even the higher tax revenues that these suicidal tax increases hope to gain. Instead, America experienced the greatest economic boom in its history, and poverty was markedly reduced.

While the governor's tax proposal targets most of its tax dollars to average families in Hawai'i, there are other investments that could prove more effective in improving people's lives. Spending on real solutions such as Head Start which has a large waiting list both nationally and in Hawai'i healthcare, youth development and education will stabilize the economy while reducing dislocation. The good news about jobs created by investment in local human capital is they can't be outsourced to anti-democratic nations like China where independent unions are illegal and sweatshops are widespread.

There is a compelling moral factor that should not be forgotten: It is immoral to have tens of thousands of children suffering in poverty, or thousands on a waiting list for Head Start. It is immoral to have people who can't afford to get sick or pay their rent or meet the expense of an education.

Instead of the tax breaks, which provide a one-time influx of a relatively small amount of funds to a working family, reducing the tragic specter of poverty and inequality should be the top priority and ultimately will lead to a better economic situation for all of us.

Alan Curtis, president of the Milton S. Eisenhower Foundation, wrote this commentary for The Advertiser. Reach him at info@eisenhowerfoundation.org.