Economists ponder Hawaii’s road to economic recovery from coronavirus

We haven’t found the bottom yet, but at some point this will end. The worst of the pandemic will pass, and then the task will be to recover from an economic hit in Hawaii that is unlike any we’ve seen before.

The state’s tourism-based economy has been clobbered more than once in recent decades — including the 9/11 attacks and the Great Recession — but last week was extraordinary, officials concede.

Even as the state unemployment filing system was overwhelmed by new claims, a platoon of leading state politicians demanded that the airports be closed, or every tourist who comes here be placed in quarantine. On Saturday, Gov. David Ige finally announced a mandatory self-quarantine for all passengers arriving after midnight on Thursday.

Hawaii economists immediately defer to the epidemiologists when asked how long this might go on, but say there are near-term steps the state and federal government can take to try to blunt the economic shock from COVID-19 and the fear that has spread with the disease.

“With this one, I’m not sure whether we know what’s going on to begin with, and whether we’ve got the right policy mix to deal with it,” said Jack Suyderhoud, professor emeritus of business economics at the University of Hawaii’s Shidler College of Business. “It’s really difficult when you’re encountering something that we really haven’t experienced before, certainly in the kind of magnitudes we’re talking about.”

Carl Bonham, executive director of the University of Hawaii Economic Research Organization (UHERO), said economic relief must come mostly from the federal government. “The states simply don’t have the firepower,” he said.

And Paul Brewbaker, principal of the economic consulting firm TZ Economics, said policy makers “need to act fast, need to act decisively, need to go big, and not worry too much about the details, because what we’re talking about is triage.”

One modest relief package has been approved by the Congress and President Donald Trump, and the U.S. Senate is working on another that may pass to the U.S. House on Monday.

But Bonham said he worries those efforts may be moving too slowly, and sees problems with the Senate plan that may trigger a political fight in the House.

The Senate plan would issue government checks for people to help offset the impact of layoffs and business closures, but the smallest checks would go to the people with the smallest incomes.

Bonham said that’s backward. “It’s the people at the bottom end that need the most help.”

One way for the federal government to provide that help would be to boost the dollar value of unemployment benefits for jobless workers in all states, he said.

The enhanced benefits “need to be a number that allows households to pay their rent,” Bonham said.

The Federal Reserve could also begin buying municipal and corporate bonds to guarantee that businesses and local government have access to credit.

“There is obviously debate whether there should be support for corporations, or whether all of it should go to households and small businesses, but the fact of the matter is those corporations still need to be around three months from now in order to employ people when the recovery takes off, so you really have to provide support everywhere,” Bonham said.

Treasury Secretary Steven Mnuchin announced Friday the federal government will delay the federal income tax filing deadline from April 15 to July 15 — a step that would allow taxpayers to hang on to their money longer — but a spokeswoman for Ige was unable to say Friday if the state will follow suit. The state filing deadline is April 20.

The federal Small Business Administration last week announced it is making the Economic Injury Disaster Loan Assistance Program available in Hawaii to provide loans of up to $2 million to small businesses to pay fixed debts, payroll and other costs during the coronavirus disaster.

Meanwhile, the state plans to loosen eligibility requirements for unemployed workers and reduce the impact of unemployment insurance claims on employers from job losses because of COVID-19, according to an announcement by Ige and state Department of Labor and Industrial Relations Director Scott Murakami.

Ige and Murakami also announced a new program to offer cash incentives to employers to hire and retain workers.

In recent downturns, Hawaii has tried to pump up the state’s construction industry when the tourism sector took a beating, but the results have been mixed.

During the Great Recession, the federal government’s American Recovery and Reinvestment Act steered hundreds of billions of dollars into what were supposed to be “shovel-ready” construction projects to quickly create jobs, including hundreds of millions of dollars in Hawaii projects.

But Suyderhoud said the term “shovel ready” is a misnomer because “it takes forever to get those projects on their way, get them approved and that sort of thing.”

Earlier this month House Speaker Scott Saiki said lawmakers will move on a plan to boost spending on state construction projects to try to shore up the economy, with a focus on public school repair and maintenance jobs that can be executed quickly.

But last week the state Capitol shut down indefinitely after state Sen. Clarence Nishihara tested positive for coronavirus. Senators and Capitol staffers are being tested to see if the virus spread in the building, and no one knows when lawmakers will return.

In any event, Suyderhoud argued that “the faster way to keep the economy moving is to put money in the hands of people who need to spend it.”

“To the extent that they can do that and move that along, that’s going to provide some cushion,” he said.

Brewbaker said this is a time for businesses and families to carefully take stock of where they stand, and what they need to carry them through the economic storm.

As for tourism, “I think right now you should just plan on it going to zero for a month, and think about how you get through that month, or two, or a few.”

“This economy, except for the coronavirus, is worth everything it was worth a month ago,” he said. “You want to get back to that. Assess your financial needs, talk to your credit card people, talk to your banker, talk to your family, make a plan to get through, a bridge to the other side.”

But Brewbaker said he worries that the response across the nation to the virus has been too slow, with the number of infections seeming to double almost daily.

“The U.S. is in the same position that Italy and Iran were at this juncture a few weeks ago, and we need to bend that curve,” he said.

He also said the state should plan carefully for restarting the economy after the primary coronavirus crisis has past.

“Under what protocols would we restart tourism? … because you certainly can’t have people from the rest of the planet get on an airplane and come here without knowing what their health status is,” he said. Brewbaker said he envisions a system to pre-clear people, identifying them as having a lower risk for disease.