Editor’s note: The Civil Beat Editorial Board and reporters spoke with Carl Bonham, executive director of the University of Hawaii Economic Research Organization, and Sumner La Croix, UHERO research fellow and professor emeritus of economics, on Thursday. Here are just a few highlights from our 90-minute interview, which has been edited for length and clarity and with an eye toward using several areas of the discussion as the basis for other stories in the next few days.
Civil Beat: Where are we economically with Hawaii and the nation? We’re looking at one year coming on next month with COVID-19.
Bonham: The U.S. economy stopped adding jobs in December and January. Hawaii’s economy data comes out with a little bit longer lag, but it looks like the labor market improvements that we saw when we first opened to tourism, when we first got over the second wave of cases on Oahu, the initial pretty sharp recovery in the labor market really stalled out in November, December. We expect that to be true in January as well.
And yet we think we’re poised for a more rapid recovery because, you know, basically when we did our last forecast, we were anticipating the vaccines. We were anticipating that there would be a federal stimulus package. We at the time didn’t know who was going to win in Georgia. And so there was a lot of uncertainty. We didn’t know even all the details about the (federal aid) package that passed at the end of December. Now, all of that has sort of come to be much more clear.
We’re still waiting, obviously, on the full details of the (latest) recovery plan, but there’s a lot of money there for Hawaii. Enormous. So when you look at the the size of the two (previous federal aid) packages, the December bill, and then what’s likely to come through the House and Senate, hopefully by mid-March, it’s roughly the same size as the CARES Act.
So there’s a heck of a lot of money that makes a real difference in basically holding people up while we simultaneously see what we think will probably be an acceleration in the visitor recovery, mostly in the summer. But we’re already seeing it. The February numbers are actually really good. It’s much better than November.
President’s Day’s long weekend was bigger than Thanksgiving for Hawaii tourism. And we’ve got spring break coming. And as more and more people get vaccinated and the case counts plummet, there’s going to be a much greater willingness to travel. And there’s clearly pent up demand. So we’re anticipating a stronger recovery in tourism through and into the early part of fall.
And then right now we’re thinking that the winter, the fourth quarter, is likely going to be slowing down a fair amount because our international markets aren’t vaccinating the same way that we are.
And so that means that once you get, say, 70% to 80% of U.S. visitors back, there’s no more. There’s no place else to go until you get the international visitors back. And we think that’s going to be a little bit of a lag.
So I guess I’m cautiously optimistic. I think it’s still going to be a long slog, and it’s still going to take time to repair the supply chains to get businesses back. But the combination of the federal stimulus and the vaccine rollout with the idea that it could be well, well on the way to completion, if you will, or near normalcy by sometime this year, in the summer, early fall, whenever it is, those two together really paint a much brighter picture in my mind than anything we’ve seen since the start of the pandemic.
La Croix: I did spend a while last night looking at the Johnson & Johnson data, and it’s really good. That said, it’s not that the vaccine is not as good as the Pfizer or the Moderna vaccine. Those two are better vaccines. But that aside, the Johnson & Johnson vaccine is a really good vaccine. It’s not quite as good against the two variants, but it’s a vaccine that could quickly be put to use with its one shot with other groups that are not in the 1b/1c vaccination category.
I hope the state, as this vaccine becomes more available, just starts to rethink what it’s doing, because I think you will find some of the older people who are more vulnerable and not necessarily wanting to take the Johnson & Johnson vaccine. But I think there’s lots of people who are out there at jobs that interact with the public. That may not be frontline providers, but we gain enormous amounts from having them vaccinated.
I also think, too, the Pacific Islanders, who’ve been a big part of our cases, if we can at some point get Pacific Islanders vaccinated — again, I’m talking mostly the younger population, under 55 — that would also reduce our case counts, our hospitalizations quite a bit.
I do think the state strategy so far has been OK. I just give it an OK. It’s been basically prioritizing by age. I know talking with with some of my contacts locally, some people wish we’d had a little more of a complex strategy where we looked at more criteria. But I think the state’s always had difficulty trying to implement complex strategies on the fly and that this simple one where it’s mostly age and frontline workers — this is a good one.
There’s enormous effort that goes into each and every case of the people who are being hospitalized. I mean, it stresses doctors, nurses, staff members, administrators, because they don’t want to see people die. We know that these are incredibly dedicated workers at the hospitals, and so much effort goes into those cases.
It will help our health care system enormously just to have fewer people hospitalized and fewer people dying in the hospitals. It’s going to take a lot of stress off that system. And that’s needed because there’s a backlog of other things that needs to be dealt with. And I think also that that will help us in the state breathe a sigh of relief and start to realize that we’re turning the corner.
And public confidence is really important.
Is there something that you would recommend the state do so that it’s not “just OK” but better than OK with the vaccine rollout?
Bonham: I talked with the folks who are running the mass vaccination sites pretty regularly as part of COVID Pau. And I raised the issue of how the Department of Health is managing that rollout. And I don’t know anybody who’s in at the front lines of giving the vaccines who is complaining about DOH. They are worried, as they should be, about the future. So there’s still a chance to really mess things up.
It really just reflects them not wanting the system to get overwhelmed, because (the 65- to 74-year-old age group) that’s a big group of people. And there’s still a lot of uncertainty about the supply. Everybody is cautiously optimistic. I think that the supply is going to increase. Unfortunately, the Johnson & Johnson supply increase isn’t likely to come in a large way until much later in the spring.
But really the kind of ramp up that we need, sounds like it’s still going to come from Moderna and Pfizer in the near term.
La Croix: And I think for Hawaii, I do think that like the months of the second half, of April, May, June, will be the big months for us, because, again, if we can get much of our population vaccinated, say, by the end of the spring, we’re going to be in just a much better position to receive tourists. Tourists are going to be happier to come here. We’re going to find us moving to different levels of restrictions. I think it will make an absolutely huge difference.
One other matter just I think it’s worth bringing up is that whole issue of firms paying people to be vaccinated. That to me, this is one of the really nice things to see. I mean, to see Zippy’s paying workers to be vaccinated, that’s wonderful. That’s great. Same thing with McDonald’s. Same thing with Target.
I really think this is the type of stuff where we ought to be looking at firms where there are people who are out front here, whether it’s (encouraging them) with time off or with monetary payments. I think this is the kind of thing where we’re just going to find that the state moves forward a lot better.
But this is the type of stuff that we ought to try to go beyond. And I’m not necessarily calling for the state to be intervening when it’s the type of things to think that the private corporations should ask themselves. This is one way that we can make sure that our workforce is able to be on the job during the spring and summer.
“To see Zippy’s paying workers to be vaccinated, that’s wonderful.” — Sumner La Croix
I think this is in the interest of a lot of people. It’s been publicized. I think the media’s done an OK job of publicizing it. But I think (it would be good) if it was done to a more widespread basis.
Bonham: That’s actually one area where I think there could be some improvement. I haven’t seen much in the way of a public health message about that, that will start to deal with those that are reluctant to be vaccinated. And I think part of that is because in the age groups that they’ve been dealing with, there’s not much reluctance and there is no excess supply of vaccine right now.
And I think broad efforts that rely on athletes and pop stars and whatever it takes is an important feature. We haven’t seen that much.
If we can go back to the economy for a second, the other thing that I worry about, and a lot of the concerns around policy have to do with, is the lack of state government nimbleness right there. And we’ve seen this over and over and over.
And so, you know, right now we don’t have a vaccine passport. And actually, if you look at case counts today, I mean, I would argue there should be no interisland travel restrictions (except from Maui).
And you know, how many weeks or months is it going to be? I know the LG has talked about rolling out the vaccine passport concept for interisland travel. I don’t know anyone who has confirmed that that’s going to happen.
And my point is that — so let’s say it’s end of April and we haven’t changed interisland travel rules. Well, then we just threw away weeks and weeks and weeks of potential economic activity.
That’s my concern with the slow response. We should have very, very hard plans in place for changes to Safe Travels. I’m not the epidemiologist or the medical doctor, but I have a hard time imagining that someone who’s vaccinated is higher risk than someone who got a PCR test three days before they traveled. Why aren’t we switching to rapid tests? It would make the travel experience much, much better.
How important is this in terms of the magnitude of the benefits from a travel passport or a general vaccine passport? And there’s another question about the lack of urgency on the part of Governor Ige and the public health director, both in terms of the actual effect of that lack of urgency but also the psychological effect (on the public and the economy).
La Croix: I think one thing that we need is even if we don’t know exactly how this is going to turn out we ought to be planning for it anyways.
Bonham: We are.
La Croix: There’s not much evidence of that to the public.
From the governor’s statements and from the statements of the health director, you kind of get this feeling of, well, (the) science isn’t there. You know, hopefully we’re making plans. So this is already being integrated into Safe Travels. So we’re not going to find ourselves all of a sudden, like six weeks from now when we decide, when the scientists decide that it’s reasonably safe, we’re going to find ourselves all of a sudden gearing up again.
I’m still wondering why it is that people who are being vaccinated are leaving with these little cards. I mean, why don’t we have an electronic registration system that could be used to go directly in the Safe Travels because that’s somewhere.
Bonham: Think about where we might be as a community in June. I mean, we could be beyond 50% vaccinated by June. If we still haven’t changed Safe Travels at that point it’s a huge deal.
Why is there still this disconnect and dysfunction at the highest levels of government?
La Croix: The (new) director of the Department of Health I think is a huge improvement over our previous director in all sorts of ways. But when she makes public announcements, they’re very buttoned down, very careful announcements and don’t give much detail and (she) basically defers to the governor.
So it’s not clear to me the whole system is so terrible from a policymaking point of view, but from a public point of view, from the public getting good, consistent, clear information about what’s going on, I still don’t think it’s working. It’s an improvement over where we were last summer, which was a disaster with people just covering up essentially what was going on.
The improvements at the Department of Health have been quite dramatic on all sorts of fronts, ranging from contact tracing to a much more open attitude by the acting state epidemiologist. I mean, I see a lot of improvements there.
But there is that problem in pushing policy making. When you have that unified voice, sometimes people need to come in and say no, this isn’t working. And the lieutenant governor’s doing that because his voice isn’t being heard. And I think he feels it’s important.
I get daily emails from people asking me what’s going on. These are reasonably smart people who say ‘I read the newspapers, I watched some of the TV news, and I still don’t really feel like (I know) what’s happening on some of these fronts.’ And I think that’s really bad, that these policies aren’t more clearly articulated.
Bonham: So there’s a couple of points about the state’s communication capabilities. Things are not worse than they have been. Things have never been great right there, (but) they’re much better than they were back in April, May, June and so on.
But the state really doesn’t have a communication strategy, not an overarching communication strategy. So that is harmful. I mean no business would behave this way, right?
How does it hurt the economy? I think the biggest place where it can hurt is in terms of messaging around tourism. What I worry about is will we, can we, get the messaging right?
Can we get the tweaks to Safe Travels that we’ve seen? And what we need going forward are more substantive changes, allowing for rapid tests, a waiver for people who have vaccinations. And those are not small changes. And so not only do we need to execute on them, but we have to communicate them. And this is all going to be happening at a time when demand for travel is ramping up.
Carl, you said earlier that there’s still a chance to really mess things up. What are the ways we could mess things up and what we should be watching for as journalists?
Bonham: The first thing that you don’t want to mess up is the vaccine rollout. And right now Hawaii is doing better than most states in the country. We have more vaccines in arms than the U.S. average, many more. And we’re using up our our supply as it comes in.
The way that we would mess up vaccines is if two weeks from now we find ourselves with twice as much supply. And we weren’t ready for it, right? I think that’s fairly unlikely because the capacity at the mass vaccination sites and the number of places that we have (with) an ability to vaccinate right now could easily handle twice the supply. The other way we mess it up is if we fail to get it into certain communities and we don’t have that outreach to try and get as many people vaccinated as possible.
To me, the messing up is really about making things take longer than they should for the inevitable economic recovery to happen, because we don’t make the adjustments that we need to.
What are your perspectives on the federal relief package and the money that’s coming into the state? Are there particular parts that are going to help Hawaii more than others? And looking back at the previous relief package, where did it help the most and what are some of the areas that it just never touched on?
Bonham: I think despite Hawaii’s incredibly challenged Labor Department, the unemployment benefits in my mind have been an overwhelming success in terms of getting to the people who need them the most and allowing them to continue paying their rent. That piece is really important in terms of having people hold on while we wait for the economic activity to resume.
In the American recovery plan, the proposal is $400 extra and an extension of the time period for which emergency unemployment compensation is available. I believe that the new deadline takes it into September or the end of August. And so those are incredibly important because by the end of August, assuming that things go well, we will have many, many more visitor dollars flowing back into the economy, people going back to work, businesses starting up as we get into fall.
La Croix: I do think there’s a lot of money just coming to help aid the state budget. And that’s a huge matter because it’s going to fill a lot of those budget holes.
Again, there’s another area where public knowledge about the actual budget holes remain. Nobody really seems to want to talk much about it. The public gets very little info on this, but it’s going to fill a lot of holes. It’s not just for us. It’s not just for the state. It’s also for the counties to help fill some of their budget holes. I mean, they’ve had smaller problems, mostly because they’re mostly property tax-financed.
A lot of property taxes have actually gone up and people are still paying their property taxes mostly. I think it’s kind of a big, big item. I know that out of the previous three CARES Acts, there was a lot of money for education, but very little of it has actually been spent. It’s one of the things Republicans keep banging away at, that the schools just haven’t spent the money. I do hope that’s the other area that the schools here really think about exactly where they’re going to go with the money and have plans ready to go when that’s necessary.
“We have more vaccines in arms than the U.S. average, many more.” — Carl Bonham
One of the things we know and have learned — we’ve known for a long time — and that this crisis has laid bare is that we have an antiquated machinery of state government. I mean, it’s just kind of the whole machinery of administration and regulation is antiquated. We see it out there with the Department of Health. We see it with the AgriBusiness Development Corporation. The research we’re doing, we’re finding all these little tax credits where nobody pays much attention to them. They’re barely used. They have some strange rules. There’s requirements of debate, evaluate, evaluate them annually, which is way too often. I did like the Donovan Dela Cruz statement recently. He said it’s like we have 100 cooks and there’s no soup coming out of the kitchen.
I see a lot of state government where we have all these little programs are supposed to stimulate stuff and start stuff. We haven’t looked at them carefully enough. We need to be reviewing them and working on reforming them. I do see a little bit of that impetus in the state Legislature.
You know, this idea you can diversify the economy overnight is a laughable idea. That’s just one of the more — it’s just laughable, this idea that we’re going to start up an industry tomorrow. “We’re going to triple the size of this industry by Thursday,” I mean, “or even by next year.”
Bonham: That’s a really important point. Imagine Waikiki or Maui in August of this year when we’ve gone from just a few months ago almost no visitors to having 50% or 60% of our visitors back. Meanwhile, there’s all this conversation about, “Oh, gosh, we’ve got to diversify away from tourism.”
Attitudes about tourism have changed and are hardened and there’s all this discussion about creating new industries and so on and so forth, all of which, as Sumner points out, doesn’t stand a chance of having a measurable economic effect in the very near term. And so I think it’s not that we shouldn’t be doing it. It’s just that we can’t use those arguments about diversification as a weapon to act to slow the recovery of tourism.
I’m not talking about going back to the 2019 peak of 10-plus million visitors. I’m talking about, “Can we get back to 2016 or 2017 levels before the surge in the short-term vacation rentals,” because that’s the No. 1 thing you can do to improve the budget. The state’s budget is the No. 1 thing you can do to reduce unemployment and all of these other topics about diversification are great.
La Croix: I just want to say one more thing about the culture stuff. You know, Jim Mak (of UHERO) and I wrote that piece on the AgriBusiness Development Corporation that basically criticized it intensely. It came out the same time as the auditor’s report.
“This idea you can diversify the economy overnight is a laughable idea.” — Sumner La Croix
And then a lot of people wrote to me and said, “Well, in that piece, you said even if the governor’s goal was accomplished, GDP would rise by like two-tenths of 1% in a $100 billion economy.” After all the changes to agriculture we’re talking about, we’re talking about $200 million or, again, two tenths of 1%. That can’t be a huge contributor to diversifying the economy.
On the other hand, I’m really delighted that the state Legislature is holding hearings on the AgriBusiness Development Corporation. We need to be looking at how to revive agriculture. We need to be looking at some of the antiquated things we’re doing at the Department of Agriculture that can be changed and that we can actually work on to promote Hawaii’s agricultural products, that we can get the farming industry in a little better shape.
Part of that isn’t just from the state. That’s also from the farming industry, too. But I just want to note, we can’t have expectations that at the end of the day, once we get ag right, we’re going to be adding $3 billion into the state economy.
This is true of a lot of other areas. Even if we like double the tech and the research-oriented tech industry here, it’s a small contribution to GDP. Doesn’t mean it shouldn’t be done. We need to be focusing on this stuff, but we’re just creating programs and letting them kind of play out with not much attention paid to (the fact that) a lot of them don’t work. A lot of these tax credits aren’t even taken.
So I find there needs to be more attention paid to, again, what we call the antiquated regulatory and administrative machinery of the state.
Bonham: Can I jump right on that? There’s very little conversation reaching my ears about making significant changes to these antiquated systems. You look at the places that have really struggled during the pandemic, like Department of Labor and Industrial Relations, anything that has to do with data and a state agency.
The state is going to be dealing with budget issues for the foreseeable future. We had big holes that we needed to fill in terms of unfunded liabilities, and those have gotten worse. We’re going to be dealing with budget strain for a long time. So there needs to be a focus on remaking government as well. That can’t just be about short-term cuts.
Big picture, are you seeing any evidence and trends having given any of these (non-tourism) industries a boost? And when you look forward, how has the pandemic changed Hawaii? Will we just go back to business as usual or has there been some sort of fundamental shift?
La Croix: I drove out to the University of Hawaii West Oahu yesterday to see Chris Lee, the producer and the head of the Academy of Creative Media, and to see the new facilities. There are really amazing facilities. And I drove out in like 25 minutes and I drove back in like 27 minutes. I ran into a little stretch near the Punahou exit that was a little crowded, but I just zoomed down the highway.
That’s a huge change. A lot of our traffic has disappeared. I mean, I’ve been advocating for a while that government, in particular county governments, ought to be taking measures to try to make sure we cement in some of those improvements in traffic. There’s all sorts of ways to do it.
You really can’t underestimate how important it is that people are actually able to get around the island, whether we’re talking about tourists or whether we’re talking about those of us just trying to do our daily business. Or commuters.
“There’s very little conversation about making significant changes to antiquated systems.” — Carl Bonham
This is the time to take steps to try to cement in some of those improvements. And the steps are not that hard. I don’t think the government sees that as a priority right now, but it’s really critical.
Bonham: Are we going to go back to just business as usual? I think the answer is, “This is definitely not just going back to business as usual right now.” No one really knows exactly how things are going to change, but they are going to change. And architects are now trying to figure out, OK, what are the office buildings of the future going to look like? And they very likely will include some form of distance working from home. And the way we work from home is going to get much, much better. So we’re just at the beginning of the technology.
You think about before Zoom, what’s that app that people used to use? Skype? I always hated it, but we’re really just at the beginning of that and there’s no particular reason to think that Hawaii can’t participate in some of that R&D and technical revolution. It’s a really small piece of our economy but it has been improving. The efforts around technology and research and innovation have really sort of matured in the state to where you have an honest to goodness ecosystem where you have people who are engaged in funding startups, incubating startups, interacting (with) businesses, doing internships. There are all kinds of programs that 20 years ago just didn’t really exist.
La Croix: Again, it’s all very small, but the tech incubators and accelerators that I’ve looked at, basically these are informal organizations that don’t necessarily require a lot of space. They need more good people associated with them. A lot of them are really quite good. It was really nice to see that.
Bonham: Well, they’re more than quite good. Some of them are best in the country.
And some of it is not just tech. Mana Up is not just about technology, it’s really about entrepreneurialism. And a key thing that needs to continue, in a way, is a focus on exporting. You know, if all you do is create a business to sell slippers to your neighbors, then you’re going to be poor for a long time because there aren’t that many neighbors and they’re not going to grow there. It’s not like you’re going to keep adding more and more neighbors. You’ve got to sell slippers to the rest of the world.
And so all of those changes that are happening in the pandemic where more and more people are shopping online, we can either thrive in that environment by making and selling things that are unique, uniquely Hawaii, and compete with the rest of the world. When you’re export-focused, you’ve got to compete with everybody. And that’s really what we have to do well, in order to have this long process of diversification succeed.
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