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Hawaii House Candidates Spar Over Economic Stimulus Law

First Posted: 05/10/10 11:47 AM ET Updated: 05/25/11 05:25 PM ET

Money

HONOLULU -- Last year's federal economic stimulus law so far has steered about $584 million into Hawaii's economy, paying for transportation projects, unemployment benefits and other expenses the state and its four counties could not otherwise afford.

But the largess -- which is expected to eventually total $2 billion -- also is stimulating a lively debate among the three major candidates for Hawaii's vacant congressional seat about how far and at what price the federal government should nudge the nation's economy out of the doldrums.

The two leading Democrats -- state Senate President Colleen Hanabusa and former U.S. Rep. Ed Case -- agree the government had to take action early last year to coax the economy out of serious distress.

The main Republican contender, Honolulu City Councilman Charles Djou, flat out opposes the law, contending its $787 billion price tag added too much to the nation's debt and could have been better spent by cutting taxes and giving rebates.

While Djou has strongly criticized the stimulus, he voted several times last year with his council colleagues to authorize city agencies to go after the funds. That is no contradiction, he asserted.

"If the United States Congress is going to engage in stupid, foolish behavior and give away money, I definitely think the city government should go out there and try to get some of that money," he said in a recent interview.

The split among the major candidates mirrors the continuing national debate over the law. Democrats contend it saved the country from a worse recession while Republicans decry its cost and belittle its affect on the nation's jobless rate.

But one of its most prominent Hawaii backers is Republican Gov. Linda Lingle. She and Democratic politicians here have lauded it for helping the state weather a recession-driven decline in tourism and huge shortfalls in the state budget.

"Unlike the federal government, we can't print money," the governor said at a hearing last August. "That's why (the law) has been a big help to us."

Case and Hanabusa have made similar points in candidate forums in recent months.

"The money ... gave the Legislature the option of whether or not it had to balance the budget by then raising additional taxes, and I'm talking about the infamous general excise tax," Hanabusa aid during a January candidate forum.

Case said, "I don't think anybody has any doubt that things would have deteriorated pretty rapidly had we not had the stimulus."

Economist Paul Brewbaker, chairman of the state Council on Revenues, agreed. He said the stimulus' impact will be "less than completely observable. That doesn't mean it's not there, and I think that leaves open the debate about whether it mattered and by how much."

The stimulus law eventually will expend an estimated $2 billion in Hawaii, said Mark Anderson, the state's stimulus coordinator.

About $1.3 billion of that will flow through state government. Of that, approximately $584 million already has been spent, mostly on extended unemployment benefits to 70,000 Hawaii residents, state government aid, construction projects, social programs and education.

Among the construction projects are airport upgrades, Native Hawaiian housing and a bridge replacement on Oahu, and improvements to several neighbor island roads and water systems.

Another $700 million or so eventually will arrive, targeted mainly at capitol improvement programs, Anderson said.

The law also provided $300 million in tax credits to a half-million Hawaii workers and an additional $25.5 million in credits to 3,600 first-time home buyers in the state, according to White House figures.

The president's Council of Economic Advisers claimed it created more than 11,000 jobs in Hawaii during the first quarter of this year.

But Djou contended the law has failed because unemployment has risen beyond what the law's supporters expected. Congress instead should have reduced marginal income and capital gains tax rates to encourage small businesses to hire more workers, he said.

Djou acknowledged that tax cuts also would have added to the nation's debt and annual deficit. Still, he asserted, "I think it would have worked, turning around our economy, expanding jobs -- we'd be able to close that deficit."

Brewbaker agrees that households and businesses generally use money more efficiently than government. But he said the economy was too debilitated 18 months ago for tax cuts to have worked, and in those circumstances, stimulus spending offered a bigger bang for the buck.

Djou last year voted several times to authorize the city transportation, community services and police departments to apply for stimulus funds.

Approximately $17 million in stimulus funds has flowed into or near his council district, which comprise Waikiki and southeastern portions of the island of Oahu, according to federal data that is broken down by zip code.

About $24 million in stimulus money has been spent in or near Hanabusa's state Senate district, along Oahu's western coast, federal data showed. Case is not currently an elected representative.

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Filed by Jeremy Binckes  |