“Hawaii is in a recession.”
That pronouncement was made in a livestreamed interview Friday by Paul Brewbaker of TZ Economics, a private consultant and one of the state’s top economists.
“Are you kidding? GDP has been falling for five years. GDP was falling before the pandemic,” he said, referring to the state’s gross domestic product, which is the monetary measure of the market value of all goods and services produced and sold.
“And after the pandemic, it’s still falling.”
Brewbaker, who formerly was the chief economist for Bank of Hawaii, said the state’s bureaucratic red tape, including the cost and length of permitting processes and environmental reviews, is at least partially to blame.
As examples of “all this crazy stuff that’s going on,” he used the completely built but idle Honua Ola Bioenergy power plant in Pepeekeo, and the decommissioning of functioning telescopes atop Maunakea in the hopes of getting the Thirty Meter Telescope built.
“You can build a renewable energy plant. You just can’t operate it,” Brewbaker said. ” You cannot build a telescope next to a telescope. What? That’s how Hawaii rolls now.”
“Hawaii has some really, really deep issues that are completely independent of the U.S. business cycle,” he continued. “Hawaii and the U.S. marched hand-in-hand through the longest expansion in history during the 20-teens, 10 or 11 years of steady economic growth, until the east rift eruption of Kilauea in 2018. And then Hawaii just took a right turn, got off the freeway.
“The U.S. went through the pandemic, got knocked down, came right back, and is now on the same track that it was prepandemic. Not Hawaii. Hawaii was going down before the pandemic, took the hit, came back at a lower level GDP, and is still kind of twisting in the wind, drifting downward. That’s on us. That’s Hawaii.”
Brewbaker said the Hawaii’s inflation rate, at 5.2%, is a full percentage point less than the U.S. as a whole and continues to decline, despite high food and retail prices.
“Inflation in Hawaii has been falling for a year,” he said. “I know stuff is way too expensive at the supermarket. It’s freaking ridiculous. But … prices and inflation are not the same thing. Inflation is the rate at which prices are rising. The rate of inflation has never gotten as high as it has on the mainland.”
Brewbaker said competition is usually the key to keeping prices low, but using the price of milk as an example, he noted local dairy farmers shut down because they couldn’t compete with the price of mainland milk.
“Are you telling me that at $6 a gallon, you can’t grow a cow?” he asked, rhetorically. “Well, you can’t grow a cow, because cows poop and, all of a sudden, nobody likes cow poop. You know what I mean? It’s all environmental crisis. You talk to the dairy guys, how come they don’t raise dairy cows? You know, it’s all the environmental costs. Then you have to mitigate that, so it’s expensive.
“And then, there are transportation costs. You know, the price of putting a container on a barge and taking it to Hawaii? I don’t even know if it’s higher than putting it in a truck and driving it across the interstate. So … it’s not the Jones Act. I mean, go look at Amazon.com, right? The prices are the same wherever you are, so talk to the hand about the Jones Act.”
The Jones Act — more properly the Merchant Marine Act of 1920 — is a federal law requiring goods shipped between U.S. ports to be transported on ships that are built, owned and operated by United States citizens or permanent residents. Critics such as U.S. Rep. Ed Case, a Hawaii Democrat, cite the Jones Act as a major factor for the high prices of goods in Hawaii.
Brewbaker also is skeptical that recent interest rate hikes by the Federal Reserve from almost zero in 2022 to 5% now will cause a nationwide recession.
“Is the U.S. headed for a recession? It’s like ‘Waiting for Godot,’ the play,” he mused. “There’s going to be a recession next quarter, right? I’m still waiting.
“We’re in a different post-pandemic world. We’re trying to gauge whether unprecedented, in four decades, interest rates (are) going to do a slam dance on the economy. And it turns out, not so much, right? People are still boogieing, and there’s two jobs open for every person unemployed.
“It’s a weird situation the economy faces, partially because of the post-pandemic changes, some of which were unexpected. But you should’ve seen that e-commerce was gradually going to displace, more and more, brick-and-mortar retail.”
Email John Burnett at jburnett@hawaiitribune-herald.com.
