Column: Hawaii’s success against coronavirus requires government investment, not austerity

Hawaii has recovered from economic setbacks before. As we brace ourselves for the impacts of COVID-19, we need to focus on the proven strategies that best alleviate economic recession. These include investing in programs and policies that will address near-term financial shocks, as well as those that will strengthen Hawaii’s communities in the long run.

While we recognize that COVID-19 represents an unprecedented situation, we must resist calls for budget and spending cuts. In fact, experience shows us that when the private sector falters, government must take action to stimulate the economy. Now is the time to step up investments in Hawaii’s infrastructure and our people.

Recovery can happen only when we ensure that families have enough money to spend and will keep it circulating throughout the economy. Increasing cash assistance to low-income families is one of the best forms of economic stimulus because these households are more inclined to spend any money they receive, thus bolstering economic activity.

Since we’re facing a public health issue, not just an economic one, it’s especially important to ensure that workers can afford to stay home and that our government systems support social distancing. We’d be remiss to implement social distancing without addressing its impact on workers who can’t work remotely or receive paid sick leave.

Another thing our policymakers should do now is review the actions taken by the federal government that brought an end to the Great Recession. Between 2008 and 2012, Congress authorized nearly $1.5 trillion in spending or tax cuts. The biggest was the American Recovery and Reinvestment Act of 2009 (ARRA), which invested in “shovel-ready” capital projects, unemployment assistance, SNAP and Medicaid, among other things.

Between 2010 and 2012, ARRA filled a $1.5 billion hole in the state’s budget, preserving services and jobs that otherwise might have been cut here in Hawaii.

Economists have reviewed these federal investments and determined which had the greatest “bang for the buck.” The ones that encouraged the maximum economic return were temporary increases for SNAP, federal work-share programs, unemployment benefits, defense spending, the federal child tax credit, infrastructure spending and aid to state governments.

Among the least-effective actions were cutting corporate tax rates, and making the Bush administration’s income and capital gains tax cuts permanent.

The following policy measures are the ones we should take now to ensure Hawaii weathers the pandemic and is ready to thrive when it passes:

>> Support Med-QUEST’s capacity to enroll and serve low-income people who may be affected by COVID-19. Consider expanding eligibility throughout the pandemic period to COFA (Compact of Free Association) migrants and immigrants.

>> Put people to work by investing in public infrastructure projects that complete high-priority capital projects. Prepare to expedite contracts and payments.

>> Keep money flowing to communities and relieve families hurt by work reductions. Take advantage of federally-funded SNAP, Medicaid and TANF programs, and support refundable state tax credits that help low-income families. Prioritize the earned income tax credit (EITC), the food/general excise tax credit and the low-income renters tax credit.

>> Supplement more of the wages lost to reductions in hours and keep businesses primed to rebound when the economy expands again.

>> Take advantage of federal waivers and emergency funding to increase and expand unemployment benefits and paid sick leave, expand nutrition programs, and expand COVID-19 testing and payment for treatment.

>> Slow the spread of disease by developing guidance for businesses and schools on closures and work-from-home policies, and discourage or delay non-essential public gatherings.

The COVID-19 crisis disproportionately affects some communities more than others. Our policymakers must take effective action to protect and support Hawaii’s economy and, more importantly, its people.

Beth Giesting is director of the Hawaii Budget and Policy Center.