Five lessons from the Great Recession to heal Hawaiʻi’s economy
To end the pandemic recession as quickly as possible, the government must increase its spending, not cut back.
HONOLULU, Hawaiʻi — The devastation of the COVID-19 pandemic goes beyond the tragedy of infection rates and death counts. In October 2020, the U.S. Census Bureau’s Household Pulse Survey reported that nearly 60 percent of Hawaiʻi respondents had at least one member of the household who lost employment income since March. Approximately one in three has found it somewhat or very difficult to pay for usual household expenses. The pandemic recession calls for state policymakers to use the lessons learned during the Great Recession to restore Hawaiʻi’s economy.
A newly-released Hawaiʻi Budget & Policy Center (HBPC) brief, “Healing Hawaiʻi’s Economy,” shares the five big lessons policymakers should take away from the 2008 Great Recession to quickly and efficiently rebuild a vibrant economy in the wake of the pandemic:
Economic Recovery Depends on State Spending
Government Services Help People and Support the Economy
Cutting Public Worker Positions and Pay Hurts the Economy
State Service Contracts Support Jobs Throughout Hawaiʻi
Infrastructure Spending Supports the Economy and Builds Hawaiʻi’s Future
“Government exists to carry out the public good—those services we all depend on that can’t be performed individually. One of these essential services is economic regulation,” said HBPC Director Beth Giesting. “During economic downturns, government needs to increase spending to counteract the drop in private sector activity. In other words, when the engine of private sector spending sputters, government has to provide the back-up power to keep the economy aloft.”
Although the federal government has the primary responsibility for stimulus, the Hawaiʻi’s state government also has a very significant impact on the health of the economy and the wellbeing of the people who live here. The COVID-19 pandemic has only added to the list of responsibilities our state government needs to address.
“Another essential government service is to increase support for basic needs—food, healthcare, housing—for people hurt by a bad economy,” added Giesting. “For these reasons, prudent governments do not cut jobs or services in hard times.”
Crucially therefore, the brief also provides multiple strategies to increase revenues that will help Hawaiʻi’s government avoid damaging cuts and help restore our economy with a strong recovery. These include temporary borrowing and using reserve funds, increasing taxes on the wealthy, and imposing a moratorium on certain business tax credits and exemptions.
“The COVID-19 pandemic and recession have taken an unprecedented toll on Hawaiʻi’s economy and workforce. Experience has made it clear that now would be the worst time to cut state spending, furlough state workers, and shrink programs that help families in need,” said Giesting. “More than ever before, state policymakers need to use all available spending and revenue levers to quickly and completely restore a strong economy and maintain the health and resilience of households across the state.”
