One of the greatest hindrances to progress in Hawaii is the chronically high cost of living. While the U.S. Bureau of Labor Statistics’ most recent consumer price index report last week showed meager declines in the cost of certain Hawaii food items and transportation since June, overall, prices are higher now than they were a year ago.

We all know that Hawaii is a pricey place to live, and that the dollar doesn’t stretch very far here. But what does that really mean in terms of the big picture for us all?

The effects of rising prices impact more than just the overall cost of living or quality of life; they also disrupt the stability of our communities. Inflation is a key driver of political upheaval and social unrest because it frustrates hard-working individuals while simultaneously entrenching the accurate perception that the rich are getting richer and the poor are getting poorer.

When one considers most hot button political issues today, the presenting problem may appear partisan, cultural, religious, or in some instances even gender-based or racial, but the underlying problem is usually monetary in nature.

Scarcity creates conflict, and that conflict in turn results in greater social divisions that keep the population cynical, divided and unable to agree on anything – this is why our elections, no matter how much upheaval at the ballot occurs, always seems to result in the same outcome in the end.

Homeless Encampment at Kakaako Gateway Park with UH Medical School the background.
This homeless encampment at Kakaako Gateway Park near the UH Medical School is a problem that has sometimes reappeared. Hawai may need to consider a cash buffer to help local residents. Cory Lum/Civil Beat

The majority of Hawaii’s problems have to do with the fact that money tends to aggregate in the gravity centers of those who control the issuance of credit and those who give or receive preferential favors from the government in the form of subsidy or exemption from regulation.

Why are the political and financial classes out of touch with the rest of us? Because rarely do they ever have to experience the consequences and negative effects associated with their actions and worldview.

Those who have to live the hard way in Hawaii – earning and saving money, not somebody else’s  – are forced to tighten their belts every time prices increase, and find themselves increasingly pitted against neighbors in a competition for who gets what before the other does. The unfortunate individuals who “lose” this contest often find themselves fleeing to the mainland for relief or, in some cases, on the streets of Hawaii as homeless.

The danger that we are facing in Hawaii is that if market conditions remain as they are, impoverishment in the islands will eventually become the widespread norm rather than the exception. With the average cost of rent $2,400 a month and the median value of a house around $672,429, this burden on everyday people is monetarily unsustainable.

This is not the future we want; parts of Hawaii are already beginning to look like the Philippines and Southeast Asia with shantytowns of homeless encampments forming around the islands. With outcomes like these, it’s no wonder that some Native Hawaiians have taken to sovereignty or secession movements.

This is in part why 20th century economists like Milton Friedman and Friedrich Hayek suggested, most likely as a concession for the inevitable economic and social disruption caused by leaving the gold standard, that there be an “assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself.”

The theory behind a universal basic income – not to be mistaken with minimum wage – begins with an understanding that because banks and corporations use credit issued by the Federal Reserve (and backed by future income tax collections), their activities, both profitable and unprofitable, distort the economy before money ever reaches the bank accounts or wallets of citizens.

While this may seem like a token amount, even a few thousand extra dollars of income, combined with a number of other fiscal reforms, could make a big difference for the more vulnerable.

As a result, there is a non-stop “heads they win, tails you lose” boom/bust cycle that always disadvantages the individual, and some kind of monetary assistance or negative income tax is needed to keep society at large from falling behind.

One can indeed respond to such problems with an array of fiscal approaches like cutting spending, lowering taxes and reducing regulations, but the core problem still rests with the fact that the central bank can always print money faster than individuals can spend (or save) it, resulting in escalating prices that are harder and harder to keep up with. As former Federal Reserve chairman Alan Greenspan once wrote, “productive members of society lose value in terms of goods.”

Whatever semantics one wishes to use, calling this intervention “universal basic income,” “negative income tax,” “stimulus checks,” “citizen dividends,” or similar language, things may eventually reach the point where Hawaii legislators may need to consider some form of cash buffer for local residents. As a conservative, I do not think this is an ideologically palatable approach, but in light of the fact that we can’t control inflation, it may end up being the only viable one.

The State of Alaska, for example, gave permanent residents oil dividend payments from the Alaska Permanent Fund of more than $1,000 per year on average. Hawaii could potentially do the same, using money collected from tourism or other industries. While this may seem like a token amount, even a few thousand extra dollars of income per family, combined with a number of other fiscal reforms, could make a big difference for the more vulnerable.

Hawaii is likely going to be facing some difficult times ahead, financially. We should consider all options on the table to help as many people as possible keep their heads above water.

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About the Author

  • Danny de Gracia

    Danny de Gracia is a resident of Waipahu, a political scientist and an ordained minister.

    Danny holds a Bachelor of Arts in Political Science and minor in Public Administration from UT San Antonio, 2001; a Master of Arts in  Political Science (concentration International Organizations) and minor in Humanities from Texas State University, 2002.

    He received his Doctor of Theology from Andersonville Theological Seminary in 2013 and Doctor of Ministry in 2014.

    Danny received his Ordination from United Fellowship of Christ Ministries International, (Non-Denominational Christian), in 2002.