Monday, January 25, 2010


We were fans of the promises made by Obama to spend Federal dollars to rebuild our Nation’s roads, bridges, power grids, and fund an alternative fuel and energy program to end our dependence on imported oil. Sadly, those projects have yet to be funded by Congress while a lot of other very expensive and bizarre programs have been funded. Instead of rebuilding our country’s infrastructure and getting people back to work, Congress funded a $787 billion economic stimulus plan to entice Americans to increase their consumer debt, punish them for saving, and provide gigantic bonuses for the executives that nearly bankrupted our financial and insurance institutions.

The $4 billion Car Allowance Rebate System (CARS) program gave $4,500 in cash to anyone willing to demolish their older working car or truck and buy a new one for up to $45,000. To qualify, clunkers had to be owned at least a year, built since 1984, and be completely demolished so that even their valuable reusable parts like pistons, engines, and drive trains could not be reused. Americans traded their paid off cars in exchange for debt on new cars with only a 10 mile per gallon difference in fuel usage required. SUVs and even Hummers qualified, while used cars with substantially better gas mileage did not.

Americans were encouraged with up to $8000 in tax credits to buy a house this past year even as job losses and overspending by Americans led to an ever increasing number of foreclosures. The Treasury spent over $400 billion on underwater mortgage-backed securities to keep banks, Fannie Mae, Freddie Mac, and Ginnie Mae afloat from their bad home loans. Subsidizing the failed housing market has kept mortgage rates at a record low and builders afloat in a market awash with houses. Meanwhile, Obama’s $75 billion Home Loan Mortgage Modification Foreclosure Prevention (HAMP) and Homeowner Affordability and Stability Plan (HASP) programs are not keeping up with the accelerating number of Americans unable to afford their payments while their housing values and salaries continue to decline.

The Treasury paid over $700 billion in cash bailouts to 770 recipients including banks, mortgage servicers, insurance providers, auto companies, and government backed institutions under the Troubled Asset Relief program (TARP). TARP allowed US Banks to not have to trouble themselves with the usual bank business of luring depositors, thus creating record low interest rates in government protected FDIC savings accounts and discouraging Americans from saving their money. These same banks are getting 29% interest and higher on credit card balances. We guess this bizarre business model is one of the reasons bank executives feel justified in giving themselves gigantic bonuses. The Treasury’s actions resulted in a US stock market bump in 2009 of 28% (S&P 500) and a global securities bubble where some international stock markets gained over 160%, further feeding Wall Street’s unrepentant attitude for the damage they caused with their creative mortgage-backed securities

The loss of income to the State of Hawaii due to sinking property values, rising unemployment, fewer tourists, increased bankruptcies and foreclosures had a big impact on life in Hilo in 2009. Hawaii’s cost reduction programs and cutbacks combined with Congress’s stimulus plan programs created some bizarre situations.

1 The concept of “Furlough Friday” has entered into the collective consciousness and almost come to seem “normal”. Hawaii State, Education, and soon County workers are on various forms of “Furlough Friday”. Traffic and shopping on the Big Island now revolve around Furlough Fridays and new businesses and services have emerged to take advantage of the new habits and needs of the growing number of furloughed workers and children.

2 The acceptance of the lowest number of instructional days in the US (down 17 days to only 161 days) at Hawaii’s public schools has become the new reality after lawsuits and a national scolding had no effect. Hawaii’s children had already lost their State’s Universal Child Health care program at the beginning of 2009. Yet, Representative Abercrombie garnered $59 million in 2009 earmarks for education, health care and activities only for Native Hawaiians excluding Hawaii’s children furloughed from the State’s public school system (ironically founded by King Kamehameha in 1840) due to a $38 million shortfall.

3 Hawaii’s Food Stamp program (SNAP) has the highest income limits in the US allowing 94,000 residents to collect the awesome benefit. On Food Stamp day (the day the State loads up the EBT plastic card holders) the Hilo grocery stores’ parking lots are packed. The strange thing is that the autos are mostly brand new, large SUVs, we presume bought through the clunkers program. The rest of the month, the lots have fewer, older, and smaller sized cars.

4 The rapid rise of unemployment, particularly among young Americans, has made enlisting in the US Military look attractive. If the fitness requirements and background investigation can be passed, being a solider is one of the few full-time, full-benefit jobs available without job experience and the only Federally supported employment for those without college degrees. While Obama was wringing his hands over sending more soldiers to Afghanistan, we met many young people in Hilo waiting impatiently for their acceptance into the US military knowing they would immediately be sent into a violent war zone if they were able to get through boot camp. This is a bizarre departure from the 1990’s when parents and public officials scolded gamers and game developers about the harmful effects of violent video games.

We are disappointed that during the first year of our new administration, Congress and Obama have not chosen to invest in America’s infrastructure, jobs, or college tuition support. We heard from our grandparents how strange things were in the Great Depression and as the bizarre become normal in these times we wonder what the next year of Obamanomics will look like in Hawaii.


Victoria Hokulani said...

Excellent overview of the Obama paradigm. I am beginning to think you have been frequenting some of the blogs I am a regular with. My favorite is Karl Denninger's Market-Ticker. They would love this post over there. I know you are a fan of Charles Hughes Smith so good enough. Same thing, same viewpoint.
The reason why you see all of those shiny, new SUV's on EBT fill-up day is all those people have the money to make car payments. I thought long and hard about getting an EBT card if they do away with the asset limits and raise the poverty level limit, and came to the conclusion that we would just get fat and unhealthy with over $200 more in food than we get now. I feed a family of 4 (2 adolescents, 1 husband) on about $600/month. If I did not spend that money on food, then possibly I would on a new car. But new cars are not what you go into debt for with their massive depreciation factor.

larry said...

a note on furlough fridays, i wonder why they could not (or would not) simply make existing holidays into the furlough days and thereby keep all the existing school days. maybe that solution is too simple and does not cause enough havoc to make it so the politicians and unions can make a ruckus and finger point.

and all i will say is if people think 2009 was bad for government you ain't seen nothing yet. state revenues continue to fall and there is no end in sight.

as for the "stimulus" policy it has been as well though out as the get rich quick schemes that messed everything up to begin with :(

Anonymous said...

Hawaii has the highest state income tax in the U.S., and is hurting. Texas has NO income tax, and is the fastest growing state in the union.Multiple liberal give away programs have not saved the state.
Hawaii is an expensive place to get to, and very expensive place to vacation. Unless you can repleal the laws of geography, that is not going to change. Do not expect a turn around in tourism.

rj said...

So where are the earmarks from Abercrombie? Why not just use them to solve the bigger picture?

Something's not right here.

Anonymous said...

Obamaeconomixs is a bust naturally. But the island of Hawaii is crowded with people out of work and no chance for a future job. For years Hawaii has depended upon tourist trade. Florida once did this but as air travel got better and people went else where for vacation (even to Hawaii) Florida had to find another way of supporting it's people.
The same thing has happened in Hawaii. The clique of people profiting from tourism is greedy and have kept the Big Island from developing other means of income. Most of these are Far eastners who owned muck of Hawaii and businesses here.
Now the crunch has hit and these people are still cring "mei Culpa" only in Hawaiian. The state of Hawaii is part of the United States and Hawaii should recognize that. The cowboy economy is long over and people should be aware that nothing comes into planet Earth from outer space. What's here is hers and no more spending and acting like children at a party. THE PARTYS OVER. The sooner people recognize that fact and tighten the belt a few notches, the better we will be.

The sooner we get rid of the evil greedy people, who profit from us the sooner we can find a new way. These evil greedy people ar the ones profiting from the bad economy. The oil companies and yes even the utilities. It should cost no more to live in Hawaii than any other state in AMERICA. But the evil greedies still want to enrich themselves. In Hawaii they do it through what they call "O HANNA".

I will probably move back to California. Even with their budget crisis.(at least California realizes that they have one)Hawaii refuses to admit it. The average Hawaiian is still like a child. Years of tourism have made it so.They want to be lazy, live on their fish and poi.

There are so many things wrong with Hawaii it's pitiful. GOD gave it the climate which id second to none but Hawaiians act like it's all their doing. The sun is free. The warm weather is free. Because of these things the Hawaiians think they can charge outrageous prices for goods. Wal Mart leads the parade of evil greedy people. Wake up Hawai9i. Hawaii is no paradise. The volcano makes sure of that with respiratory problems.

Another problem is the Islands morality. Rather than recognize that Greed and avarice is against morality they look upon someone wearing speedoes as wrong. Hey this is the land of the's free. Young men wear knee length swim wear. Why???are they ashamed of GODS body.. No it's because some greedy wants to control morality for profit. Hawaii will not learn.

Anonymous said...

"Things should cost no more in Hawaii than any other state in AMERICA??"
Hello! As someone who ran a sucessfull business for 10 years,I can tell you that price has to reflect the cost of goods, PLUS transportation and distribution cost. Hawaii is the most isolated chain of islands on Earth. It has no oil, no coal, and does not grow it's own food. If you ship goods to Oahu, you then have to distribute them again to the outer islands. Hawaiian unions are paid very high wages, which increases costs.
Yes, Hawaii IS very expensive to live. But geography and lack of resources are the reason.

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