Hawaii losing economic strength, economist says

Inflation has stabilized in Hawaii, but what is of concern to one of Hawaii’s leading economists is the state’s gross domestic product, which over the past five years has fallen way behind the national economy.

“Inflation (in Hawaii) went up for a year, then it came down. It’s over. Stop talking about it,” said Paul Brewbaker, principal of TZ Economics, who spoke about a host of economic issues facing Hawaii during the Honolulu Star-Advertiser’s “Spotlight Hawaii” live ­stream program Monday.

Hawaii’s inflation rate has dropped to about 2%, he said, adding that Hawaii inflation in May was lower than in 2017.

“Are prices still high? Hell yes, it’s Hawaii,” Brewbaker said.

He said his concern is that Hawaii’s economy has been shrinking 1% per annum, after inflation, for five years, since 2017, before the pandemic as well as after.

Brewbaker said while Hawaii and the nation are both growing real GDP at about 1.8% per annum, the earlier shrinkage in Hawaii’s real GDP has contributed to a 15-percentage-point gap between the nation’s current real GDP and Hawaii’s real GDP.

Why is this important? Because GDP measures the size of an economy and how it’s performing, and more broadly signals whether an economy is doing well.

“The good news is Hawaii seems to be back on track. We had confirmation that in the later part of last year, the first quarter of this year, we joined in. But we haven’t jumped all the way back to where Hawaii would have if it had just kept on going, and that’s a deeper problem: what happened in 2017?” Brewbaker said.

He said in round numbers Hawaii’s economy is $100 billion, so the loss is about $15 billion, though it’s not quite that bad relative to where it would have been if Hawaii’s economy had kept growing to $110 billion.

“It’s a big chunk of economic activity. What’s missing is something that is almost as big as tourism,” Brewbaker said. “Personally, I don’t think we are going to get it back.”

He said Hawaii’s economy has been weaker than the national economy for “reasons that are idiosyncratically Hawaii—it’s on us.”

“Our policies in Hawaii have slowly compressed our economic potential,” Brewbaker said. “We don’t invest in the future in Hawaii. We don’t build highways. We build about one-third as many homes as we need in any given year—that’s housing; that’s, like, the basic thing. Dude, we build speed bumps. Are you serious? Enjoy it, that’s Hawaii.”

He also pointed to a myriad of decisions, some of them controversial, as cause for concern, such as shutting down a refinery, deciding not to build telescopes, and using tourism destination management as an excuse to reduce tourism rather than mitigate the impacts.

He said higher volumes of people are leaving the state, and opined that the current focus by some to reduce visitor arrivals rather than to manage them could contribute to the situation.

“Anytime you hear somebody say, ‘Oh we need fewer tourists,’ they are saying, ‘Beat it. Get out of here,’ right? Because that guy is out of a job,” Brewbaker said.

When asked if people could shift from tourism to some other job in Hawaii’s economy, Brewbaker replied, “If you could, you would have already done it if it was all that important. But sure it can. It can be something else somewhere else, so beat it.”