Ask anyone living on the Hawai'ian islands about their work and related compensation and most will tell you that living here is extremely difficult. According to the State of Hawai'i, it takes 135 percent of the urban mainland income to maintain the same standard of living in Honolulu. Yet approximately 75 percent of the Hawai'ian economy is represented by service sector employees and service sector employees earn close to 20 percent less than employees in goods-producing industries source p. 35.

In addition Hawai'i is frequently criticized for the state's alleged over-dependence on government workers. Yet the percentage of Hawai'ian workers employed by State and local governments, however, is almost identical to the mainland average of 21 percent source p. 33.

The significant difference between Hawai'i's economy and the mainland is the concentration of industry. On the islands approximately 75 percent of workers are employed in service-producing industries compared to the mainland where 54 percent of workers are employed in the service sector. Less than 10 percent of Hawai'i's workforce is employed in goods-producing industries while just under 25 percent of the mainland workforce are in good-producing industries.

These workforce concentration differences illustrate why increased taxation on the middle class - or reduced public services in general - hurt island families so greatly.

Crushing the Middle Class
Warren Buffet, world's second richest man, said recently, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

Testifying before Congressional leaders, Buffett reported he paid a federal tax rate of 16.5 percent on his BILLIONS while his middle class employees paid 25 percent.

Not only is our federal tax code geared to favor our MOST RICH, here's how it breaks down at the state level:

America's TOP ONE percent now pay 6.4% of their income in state and local taxes on average. They actually pay less - since they can deduct their state and local taxes from their federal tax bill. State and local tax burden on America's rich, after taking this offset into account, drops to 5.2%.

Middle-income families pay 9.4% of their income in total state and local taxes after the federal offset.

Our poorest families pay even more. Tax collectors take 10.9% from our nation's bottom 20 percent, more than double the share they take from the nation's TOP ONE percent. source

FACT: The recession has hit middle class and poor families hardest, widening the economic gap between the richest and poorest Americans, as rippling job layoffs have ravaged household budgets.

FACT: Economic inequality in 2006 was the HIGHEST EVER for the past 95 YEARS. In 2007 these measures showed another increase bringing America to its highest level of economic inequality in RECORDED history.

Both Bill Richardson, NM, and Lindle Lingle, HI, friends of the RICH and FAMOUS, are cutting worker pay and forcing furloughs on struggling families. Here's the simple economic math:

"... for every dollar of [state government] budget cuts, more than half the jobs and economic activity lost will be in the private sector."

"... nearly one-third of state spending goes to public provisions such as infrastructure, which is usually awarded to private contractors ..." source


Beginning in fall 2008 I asked both Hawai'i's and New Mexico's elected leaders to not cut spending. They didn't listen: see the layoff list as proposed by Hawai'i's Republican governor, Linda Lingle. Although the layoffs have been postponed workers were hit with furloughs amounting to 8 percent cuts in pay. Think of the damage her actions will do to families and the chaos she will bring to state services.

da Grinches Who Broke Christmas 2009
Two leading Democrats, Governor Richardson and Lt. Governor Diane Denish, "da GRINCHES Who Broke Christmas," are not friends of working families and have proposed to tax state employees TEN PERCENT in each of three pay periods over the holiday season. New Mexico employees will suffer 10 percent cuts on December 31, 2009, January 15 and January 29, 2010. Employees will be hit two more times with the 10 percent tax and likely suffer additional paycuts during the NM Legislative session.

Compare the plight of Hawai'i's and New Mexico's hard working middle class employees to Louis Bacon, the secretive hedge fund billionaire atop Moore Capital. While public sector employees will struggle to put food on their table and toys under the holiday tree, Bacon's holdings now include a private island near the Hamptons, a grousehunting lodge in Scotland, and homes in Colorado and the Bahamas source. These governors punish middle class families and pamper the most rich like Bacon.

Both states, mandated by their constitutions, must balance their budgets. Unlike the federal government, these states cannot run deficits. They can cut middle class jobs and reduce public services or they can ask our MOST RICH to sacrifice. University of New Mexico economists support this call for sacrifice.

Whether our leaders put the burden on the backs of struggling middle class families or ask the MOST RICH to contribute, there is a negative affect to the overall economy. Which is better? The PONO solution would be to ask all members of society to do their "fair share." This suggests state workers could accept modest pay cuts while the MOST RICH agree to modest tax increases.

Of course, this would happen only in an enlightened and fair society. Let's see what happens. Wanna bet on the outcome?

One other option would be for the federal government to assist both states - at a price tag of about $2 billon. This would stabilize both state economies for two years. At present Uncle Barack is attempting to stimulate the economy and create jobs with the right hand, while states are cutting back and slashing jobs with the left. This doesn't make sense. Nobel prize winning economist, Paul Krugman, writing in the NY Times (8.28.09), added his expertise and legitimacy to my requests:

Consider what would have happened if the U.S. government and its counterparts around the world had tried to balance their budgets as they did in the early 1930s. It's a scary thought. If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression.

As I said, deficits saved the world.

In fact, we would be better off if governments were willing to run even larger deficits over the next year or two. The official White House forecast shows a nation stuck in purgatory for a prolonged period, with high unemployment persisting for years. If that's at all correct - and I fear that it will be - we should be doing more, not less, to support the economy. Source: Till Debt Does Its Part

If Krugman is right, and there isn't a legitimate economist who disagrees, then a system where the 50-states are slashing spending runs counter to this plan of salvation. I estimate the total state shortfalls run close to $150 billion. This is a drop in the bucket relative to combined federal and global deficit spending. We can't effectively use Keynesian economics on the global/national level while states are dragging an anchor through the waters.

If state programs suffer cutbacks and slashed spending, if state workers suffer pay cuts, forced furloughs and layoffs, then this recession and economic difficulties will simply continue. We all must pull in the same direction.

---

While our excellent and compassionate president is doing what he can; many states are making bad decisions. Citizens must step up to assist - where you can. States with families reporting the highest prevalence of food insecurity during 2005-07 were Mississippi (17.4%), New Mexico (15%), Texas (14.8%) and Arkansas (14.4%). Hawai'i has about 8.4 percent of families who are food insecure. NOBODY in America should have to wonder if there will be food on their table! source

August 22, 2009

Aloha ~
To readers, you must do what you believe is right ... but you have a choice. You can offer compassion to these struggling families or live with a cold, dead heart. These are people who want to work; who had been working, but have lost their jobs due to tough economic times. I'm not here to just talk story; I put my money where my mouth is ... see below as I donated. JOIN ME TODAY ... pick a favorite charity or food bank. Help your brothers and sisters. We are 'OHANA and this is part of your KULEANA!

Kauai Food Bank Online Donation: http://www.kauaifoodbank.org
Total: $100.00 USD

Payment Method:
eCheck : Wells Fargo Savings $100.00 USD
eChecks take 3-5 business days to process (estimated: 8/26/2009-8/28/2009)

Wishing all of you the best. Hope my humble offering helps a bit and I encourage others to reach out, lend a hand and spread a little aloha!

A*L*O*H*A!

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On Friday (10.17.08) various representatives of New Mexico, including Governor Richardson, Senate President Pro Tem, Tim Jennings (D-Roswell), and Senate Minority Leader, Stuart Ingle (R-Portales), called for immediate cuts to government expenditures. Whoa! This is 100 percent wrong. This will make the current financial crisis worse.

Current economic forecasts for the state suggest that tax revenues have decreased and will continue to decrease over the next 24-48 months. The slowing economy also means that taxes and royalties from gas and oil will decrease as well. In response, Governor Richardson proposes to immediately freeze certain spending and reduce operating expenses by 5 percent. These actions could save as much as $440 million.

The problem is that both Hawai'i's and New Mexico's state economies as well as the national economy are recessing. If Hawai'i cuts a proposed $878 million (updated) and New Mexico cuts over $440 million, the two states add to the national/global downturn. I have included my plea to New Mexico's leaders [1] and Governor Richardson's initial press release [2] below.

[1] Dear Honorable Governor Richardson, Honorable Senator Ingle, and Mr. Gallegos:

I am writing as an expert economist who loves this nation and the great state of New Mexico. I just spoke on the economy this week and here is a summary:

new mexico independent.com/4874/political-economist-america-is-bankrupt

I received Governor Richardson's press release and read Dan Boyd's article in the Journal quoting Senators Ingle and Jennings today.

I am pleading with state leaders to reconsider their current proposal. To enact government spending freezes, cancel projects, cut payroll or stop pay increases is the exact OPPOSITE of what is needed. In fact economic experts believe President Herbert Hoover's similar reaction in 1929 made the Great Depression worse. It took the U.S. over 29 years to recover after that meltdown.

When faced with this type of emergency, the government must spend -- even more. This is what is referred to as "priming the pump" in Keynesian economics. The nation is facing a crisis in financial confidence. We all know the financial structure is collapsing, or deleveraging as experts say. The private sector is falling into a recession. How deep this goes depends on government.

Most of the private sector is cutting spending, which leads to additional cuts by business and corporations. This will result in increased loss of jobs and greater financial difficulties for consumers and families. They, in turn, will cut their spending, and this continues the cycle -- it can go down and down and down until we have a complete crash. Further, keep in mind that as employers squeeze workers' wages, there will be an increase in defaults on credit cards, car loans and mortgages. This will increase the toxic assets that are currently clogging our financial system.

Although this downward spiral leads to reduced government revenue, the only solution to the crisis is for government to inject funds -- to spend. The federal government, as we all know, is working on this. Yet if state governments do not participate, if they work in opposition, the federal effort will be partially or fully neutralized.

Keep spending! This is why we have wisely built up the $600 million in cash reserves. This is the state's rainy day fund and it's a downpour out here.

While I am a respected local economist, don't trust me alone. Here's what the recently recognized Nobel economist, Paul Krugman, had to say on the matter (NY Times, 10.17.08):

"It's now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.

And to provide that help, we're going to have to put some prejudices aside. It's politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.

...there's a lot the federal government can do for the economy. It can provide extended benefits to the unemployed, which will both help distressed families cope and put money in the hands of people likely to spend it. It can provide emergency aid to state and local governments, so that they aren't forced into steep spending cuts that both degrade public services and destroy jobs."

We are correct to be concerned about deficits, and Governor Richardson and our legislative leaders have done a phenomenal job managing our state. It's critical that we do the right thing now and without delay.

---

[2] For immediate release
Contact: Gilbert Gallegos
Oct. 17, 2008
(505) 476-2217

Governor Bill Richardson Outlines Plan to Cut State Spending

Plan will Balance Budget without Increasing Taxes - no need to Tap Reserves or Reduce Services

SANTA FE -- Governor Bill Richardson today responded to the global financial crisis and its effect on state revenue by outlining a fiscally responsible plan to immediately freeze certain spending and reduce operating expenses by 5-percent, saving $114 million. Overall, the Governor's plan, if adopted by other state officials and the Legislature, could save as much as $440 million.

Governor Richardson's plan includes an aggressive effort to identify $200-$300 million in stalled capital projects. The Governor will work with the Legislature to cut those stalled projects and shore up state revenue without raising taxes, tapping cash reserves or cutting services to New Mexicans.

The Governor directed his Cabinet Secretaries to move forward on his plan to curb spending after receiving confirmation today that revenue for the ongoing 2009 budget year will be about $344 million lower than previous estimates, and $200 million less than FY 09 budgeted expenditures. State revenue has dropped as a result of the ongoing financial crisis on Wall Street and the corresponding drop in oil and gas prices.

"New Mexico is still outperforming the national economy, and is much more financially sound than many other states where people are being laid off to balance the budget," Governor Richardson said. "But the reality is that the global financial crisis is hitting us all, and we must tighten our belts and budget responsibly.

"We will balance the state's budget. And we will do it without raising taxes, without tapping into the $600 million in cash reserves, and without reducing services for New Mexicans," Richardson said. "We can accomplish this by taking simple steps like reducing expenses and eliminating capital outlay projects that are not moving forward."

The Governor today directed all executive agencies under his control to take immediate action to cut costs and to develop longer-term plans to reduce spending - saving $114 million. The Governor also called upon legislative and judicial leaders to follow his example and help reduce this year's operating costs by another $16 million. Those steps, combined with an aggressive effort to cut stalled capital outlay projects, could save the state as much as $440 million.

The Governor is making every effort to ensure that funding for education stays in the classroom; however public schools and higher education institutions are advised to develop a strategy for reducing next year's budget.

The Governor directed executive agencies under his control to take the following action:

• Immediately freeze non-essential overtime and exempt employee annual leave buy-outs
• Effective Nov. 15: Freeze all hiring and pay increases
• Plan for 5 percent cuts in agency budgets for non-essential operations and miscellaneous expenses, including:
• Contracts
• Grants
• Care and support services
• In-state travel
• Out-of-state travel
• IT equipment
• IT exempt inventory
• Office supplies

The Governor also directed Cabinet Secretaries to implement new policies for making the best possible use of every tax dollar by conserving energy and reducing waste, which would save $2 million.

Finally, the Governor directed executive agencies under his control to identify $5-$10 million in potential cuts from what is referred to as the Junior Budget bill passed last session. The Governor asked agencies to target money not directly related to core services, or that only serve a narrow sector of the population.

Governor Richardson is calling for the deauthorization of several capital outlay initiatives previously passed by the Legislature to free up additional funding. For example, there are $63 million in capital projects that are more than three years old and have not moved forward. There is another $168 million in projects -- valued at less than $100,000 each -- that are not moving forward.

The Governor directed the Department of Finance and Administration to reevaluate existing capital projects and identify delayed initiatives around the state. The Governor will work with legislators and local governments to provide closer oversight of their outstanding capital projects. Those projects that are stalled, under-funded, or not up-to-date in their financial reporting will be identified for potential cuts.