Grassroot Perspective: Tourist Traps, Mainland Money and Lucky You Live Hawaii

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Photo: Emily Metcalf

by Danny de Gracia, II

A weekly liberty briefing and news guide to keep you informed and prepared on what’s UP to more freedom or DOWN to bigger, more intrusive government.


Quote of the Week:

“In our Governments, the real power lies in the majority of the Community, and the invasion of private rights is chiefly to be apprehended, not from the acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the constituents.”
James Madison

Local News

Hawaii visitor arrivals up 8.6 percent in October (Honolulu Star-Advertiser, 11/29)

Allison Schaefers at the Star-Advertiser reports “October visitor arrivals grew 8.6 percent to 640,666 and spending rose 12.7 percent to $1.1 billion. The gains met or surpassed the [Hawaii Tourism Authority’s monthly] goals and have kept Hawaii’s industry on track to reach its year-end targets.”

ANALYSIS: Hawaii has long suffered from a love/hate relationship with tourism. On one hand, Hawaii’s warmhearted, cultural tendency towards hospitality and the large profits associated with tourism make it an extremely lucrative industry. On the other hand, the “dark side” of tourism comes from the economic reality that a robust visitor industry is nothing more than a consumer economy that produces very little if anything at all. Add government market intervention to the picture, and the end result is that Hawaii becomes an inflationary engine which no one can afford to live under.

An economics instructor once conducted a class exercise in which he asked his undergraduate students to write down a list of ten things they liked to purchase. At the top of the lists were things like cars, cell phones, gasoline and other common items. The instructor then asked the students to write down what they were majoring in. The exercise revealed that while nearly all of the students wanted manufactured goods and technological items, almost none of them majored in the academic fields that produced or invented those items.

While consumption is fine so long as there is a market equilibrium to balance supply and demand, overconsumption brings scarcity and price dilation. The very reason that Hawaii has often been accused of having an “unsustainable” economy is that our government has over the last few decades stimulated growth that cannot be supported by local industry and simultaneously taxed and regulated to near-extinction the few producers that do exist. This is the perfect formula for disaster.

In a free market, things like tourism, urban growth, higher education and all the other things that our Legislature likes to dabble in are regulated by consumer time preference. No one forces the creation of a new city unless market support exists for it; no one goes to college unless they can actually afford it (or are genuinely interested in it). In a free market, prices always seek equilibrium because people want to do what is best for their immediate circumstances. Government on the other hand wants to claim credit for profits, profits, profits (in part because it needs the tax revenues and its legislators like to be re-elected) so it will stop at nothing in using its full toolbox of intervention to get them – even at the expense of your future. Government may get you a five or ten year sugar high where everything seems to be booming, but economists know that a bust always occurs sooner or later when the economic support drops out.

If Hawaii wants to have a stronger, more stable economy, we can’t force changes or pressure consumption adjustments (in the form of more visitors, for example) through government manipulation of the economy. It may look good now, but we will pay for it in the long run. Freedom is the ability to prosper without government tweaking the rules. UP to more freedom means less government intervention in Hawaii. Do we really need to stimulate more tourism? Want a better Hawaii? Try cutting taxes and scaling back government. That will allow people to save more money and have extra cash in their pocket to invest in making businesses and hiring employees.

“OHA Under Attack from Out of State” is an Irresponsible Claim (Hawaii Reporter, 11/26)

Dr. Keli’i Akina in this week’s Hawaii Reporter writes “The Star-Advertiser ran a guest editorial by Derek Kauanoe on November 18, 2012 entitled “OHA Under Attack by Out of State Interests.” Nowhere in the article is any person or group specifically identified as the out of state interest referred to in the title because there is no such party. Instead, the article insinuates that OHA must be under attack because some donations from individuals residing out of state were made to my 2012 campaign to become an OHA Trustee-at-large.”

Akina goes on to say “The claim that OHA is under out of state attack is irresponsible because of the damage it does to the public square where ideas should be debated robustly and on the basis of fact, not on the basis of fears of some unseen enemy.   To falsely associate a Trustee candidate with an attack upon OHA may be a veiled attempt to incite fear and reaction amongst Hawaiians for the shallow purpose of political gain.  Unfortunately, this kind of politics and journalism, which fails to base its claims on fact, tears apart the social fabric and generates racial disunity.”

ANALYSIS: Dr. Akina’s article touches upon a topic which sadly few are discerning enough to recognize. The famous economist Ludwig von Mises wrote in Planned Chaos that “What the interventionist aims at is the substitution of police pressure for the choice of the consumers. All this talk: the state should do this or that, ultimately means the police should force consumers to behave otherwise than they would behave spontaneously. In such proposals as: let us farm prices, let us raise wage rates, let us lower profits, let us curtail the salaries of executives, the us ultimately refers to the police. Yet the authors of these projects protest that they are planning for freedom and industrial democracy.”

The idea here is that rules are never “neutral” devices, they always serve to further one interest over another. For decades people have bemoaned the influence of “mainland money” and have said (seemingly) noble things like “Get money out of politics!” but the truth is that government imposed limitations on campaign finance – such as mainland contribution caps or industry contribution restrictions – never stop corruption, they only serve to entrench it further. Individuals who are the most likely to reform a system are, in fact, denied access by campaign spending laws that supposedly are meant to buffer against takeover by alien interests. Just as Aleksandyr Solzhenitsyn warned that the West’s greatest flaw is that it has democratic law without moral principles to uphold the spirit of the law, so we have a situation where good men and women can almost never get into Hawaii office because the “law” precludes support from coming to them locally.

I would argue that campaign spending laws frustrate freedom rather than advance them. If I want to give $20,000 to someone’s campaign because I like their ideas, I cannot do so because the law caps my aggregate contributions to a single individual. Instead, that candidate must now go out of their way to find 5 people to donate $4,000 to get that same amount (or more realistically, 800 people to donate $25 each). I can already hear some people saying, “Well, that’s why it’s the candidate’s job to educate the public.” Nonsense. In a free country we should be able to give as we please with no limit or cap on who we give it to.

The end result we have is evil government incumbents who have access to a large volume of controlling interest groups can almost always outperform good candidates because the campaign laws artificially exclude challengers from having the same power of fundraising.

Let us not be so pious and holier than thou when it comes to elections and contributions. Anytime someone complains that “Mainland money is destroying Hawaii” ought to look at what local money from special interest groups is doing to Hawaii. If you want UP to more freedom, we need to abolish these campaign finance restrictions. The issue is not a lack of law, the issue is an abundance of human corruption. Only competition can destroy corruption. The only way to stop bad people from getting into office (and staying there) is to allow the free market to make elections so competitive that anyone can get elected (or thrown out) because of the ease of fundraising.

White House: Middle Class Tax Hike Could Cut Hawaii Spending By $1B (Civil Beat, 11/29)

Michael Levine and Sara Lin of Civil Beat report “Allowing tax cuts on middle class families to expire could result in almost a billion-dollar reduction in consumer spending in Hawaii in 2013. That’s according to a new analysis by President Barack Obama’s Council of Economic Advisers.” The report goes on to say “A median-income Hawaii family of four (earning $83,000) could see its income taxes rise by $2,200. 98 percent of Hawaii families make less than $250,000 a year and would not see an income tax increase under Obama’s plan.”

ANALYSIS: Where were the Council of Economic Advisers when it came time to calculate what the individual mandate of Obamacare would do to small businesses, let alone to persons who have to purchase health insurance on their own – that they may not need or want to begin with? While its heartwarming to see that President Obama is concerned about the impact of a “tax hike” on the middle class in Hawaii, the fact remains that our bloated, multi-trillion dollar government has done more than enough already to devastate and gouge the middle class’ quality of life.

If Washington D.C. really is concerned about the plight of median-income earners in Hawaii, the first thing they would do is abolish income taxes entirely, repeal the IRS – and not replace it with anything else! Taxes are a drain on society, they distort the marketplace and destroy productivity. The truth of the matter is that our government creates a panic mentality by pitting one class against another, making populations fear losing entitlements, healthcare access, spending money – when in fact, the biggest bad guy when it comes to hurting the American people’s pocketbooks is the government itself.

Don’t buy into these fiscal cliff fearmongering tactics. The fact of the matter is that you are being ravaged by two forces: debasement of the U.S. dollar through low interest rates at the Federal Reserve (and inflation is a type of “tax” all to itself) and the compliance cost of obeying all of the mandates created by Washington D.C.’s army of bureaucrats and legislators alike. If our government wanted to help save the middle class, they’d shrink government and not tax you at all. This is a serious DOWN to less liberty for all of us.


National/International News

Why America needs Grover Norquist and the Taxpayer Protection Pledge (TWTC, 11/28)

For years, ATR’s Grover Norquist has advocated the Taxpayer Protection Pledge, which candidates for office sign as a promise that they will not raise or create any new taxes if elected. Once in office, candidates are expected to honor their commitment but recently that has been difficult for some to do. Americans For Tax Reform and Norquist have taken immense blows from both members of Congress and the media. In this recent article published in TWTC, I explain just why America needs Grover Norquist and the Taxpayer Protection Pledge.

ANALYSIS: What would you say if I told you that according to the Club For Growth, the majority of candidates who were elected in 2010 as “Tea Party” limited government candidates once in office actually turned out to be – based on their voting records – anything but limited government? The truth is, most of the candidates we elect are completely different people once they leave for Washington. Grover Norquist is among many other men and organizations dedicated to holding the line on taxes and for that, he is treated with contempt by both major parties and hated by the media.

In my article though I explain that America was a nation founded on resisting taxation – after all, if the only purpose of your life is to be a source of revenue for the government, you’re not free … you’re a slave! Norquist’s work is definitely an UP to more freedom and insistence on being true to one’s promises is a must.

Immigrant Welfare: The New Colossus (National Review, 11/29)

Jilian Kay Melchior at National Review writes of the bursting cost of entitlements and warns “Government social-aid programs consume an ever-growing portion of the federal budget, surpassing a trillion dollars even before Medicare and Social Security are factored in. And entrepreneurial activity is slowing. Census Bureau statistics show that start-ups accounted for 12 percent of American businesses in 1980 but less than 8 percent today. And earlier this fall, the Hudson Institute found that under the Obama administration, we’ve averaged 7.8 start-up jobs per 1,000 people. During the Bush years, it was 10.8, and during Clinton’s years in office, it was 11.2 … immigrants are disproportionately dependent on welfare. Senator Jeff Sessions (R., Ala.), crunched numbers from the Department of Agriculture and found that the number of non-citizens on food stamps has risen to 1.634 million, roughly quadrupling since 2001. Moreover, in August, the Center for Immigration Studies found that 36 percent of immigrant-headed households received at least one major welfare benefit. Food assistance and Medicaid have become especially popular among immigrants.”

ANALYSIS: The key problem in America is not so much immigration because of the fact that in a free market more labor means more production. Unfortunately for us, immigration in the United States adds more consumption than production because of the entitlement structure created by our government. And as I have said in so many Perspectives before, inflation makes this problem even worse.

As a third generation immigrant living in Hawaii, I totally appreciate the opportunity that being an American presents. But what I do not appreciate is the fact that our government turns nearly every positive into a negative for the taxpayers with its insistence on wealth redistribution and social insurance (welfare, subsidies, mandatory education etc).

The best way to keep America a land of opportunity is to enable people to rise or fall on their own merits. If we want UP to more freedom, we cannot rely on government to be our first and last resort in the event of personal failure or success. America is about equal opportunity, not identical outcomes.

California Worst Governed State in America (Breitbart, 11/29)

Lucky you live Hawaii – according to a new report, “California’s debt per capita isn’t the highest in the nation, but that’s largely due to the fact that so many people live in California. Its per capita debt is $4,008, ranking it 18th; it has a 20.7% budget deficit, ranking it 17th; its median household income, while higher than North Dakota’s at $57,287, is outweighed by the fact that 16.6% of people in California live below the poverty line, and the cost of living is extreme in the state. California has one of the worst business tax climates in the country, and businesses are leaving in droves.”

ANALYSIS: California unfortunately has been the “beta test” laboratory of democracy in which every ridiculous social experiment imaginable – eugenics included – has been wreaked by government upon its people. The lesson to be learned here can be summed up by James Madison who wrote, “In our Governments, the real power lies in the majority of the Community, and the invasion of private rights is chiefly to be apprehended, not from the acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the constituents.

It is absolutely important that all of us gain a firm competence in what liberty is and make it a point to keep our government accountable to the Constitution and the principles of the Declaration of Independence. It is when the people start to become slack, careless, ignorant and willing participants in theft and tyranny that our society enters decline and eventually collapse. Lesson to be learned: if you want UP to more freedom and liberty, you need to STAND UP for freedom and liberty in your state and city.

Stay vigilant, stay alert, and stay free – Happy Holidays friends!

Danny de Gracia is the Economic Policy Adviser for the Grassroot Institute of Hawaii. Views expressed in this column are intended to promote creative thought, educate, and, we hope, prompt comment. Accordingly, thoughts expressed do not necessarily reflect the official position of Grassroot Institute of Hawaii or the author.

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  1. […] Grassroot Perspective: Tourist Traps, Mainland Money and Lucky You Live Hawaii Government on the other hand wants to claim credit for profits, profits, profits (in part because it needs the tax revenues and its legislators like to be re-elected) so it will stop at nothing in using its full toolbox of intervention to get them … Read more on Hawaii Reporter […]

  2. and it doesn't help freedom lovers in hawaii when the only choice against the entrenched establishment political party,the democrat party,is another statist,big gov't. proffessional plitician,Linda Lingle.and on the national level,romney.we need principled politicians and principled voters,constituents,citizens.

  3. When more and more people are getting delusional in their belief that the government will take care of them so they don't need to work hard and consider themselves entitled to get anything from it, rest assured there will also be more intrusion to our privacy because our freedom to self govern is no longer exercised.

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