Guest blog: Trouble in paradise

I’m in Maui for the holidays. Hey, somebody has to do it and anyhow I have a good excuse. My daughter and two grandchildren live out here and I have to visit them once in a while. So why not now? Besides, I’m not the only inside the Washington beltway type coming out here this Christmastide. Michelle, the two girls, and the dog arrived over the weekend and President Obama himself will be out just as soon as he signs into law all of the last-minute bills he has been able to milk out of the lame duck Democratic congress.

After the ordeal of the mid-term elections and the last months of this congress, the President for sure deserves some R&R and if Honolulu just happens to be his old hometown, so much the better. But while he’s here he might do well to ponder aspects of the Hawaiian political scene that have similarities to and significance for the Washington scene to which he will only too soon have to return.

Start with Mufi Hannemann, the former mayor of Honolulu who lost to Neil Abercrombie in the Democratic primary for the nomination for governor. Just yesterday it turned out that losing was probably the best thing that ever happened to Hannemann. Sunday’s Maui News reported that Hannemann has been hired to head up the Hawaii Hotel and Lodging Association, the lobby group that represents most of the islands’ hotels. While in office, Mufi was a big promoter of the hotel industry and now the time has come for the private hand to wash the public one.

This kind of swinging door for lobbyists and government officials will no doubt make the president feel right at home, but it might also remind him of the promise he made to stop this kind of corruption in Washington. He hasn’t even come close. Virtually all of his top economic advisers have been from Wall Street or closely associated with Wall Street. Rumors have it that the top candidates to replace Larry Summers as the head of the National Economic Council are also Wall Street types. Maybe while he’s reading the local papers about Mufi, the president can reconsider and get someone from closer to Main Street instead. Former Michigan governor Jennifer Granholm or current GE CEO Jeff Immelt would be good candidates.

Another issue Obama ought to consider while in Hawaii is that of alternative energy and energy independence. It’s not clear that the United States as a whole can become energy independent. But if there’s one place in the world that should be energy independent it’s Hawaii. I mean with all the sunshine, tidal forces, potentially energy-producing algae, sugar and macadamia nut waste out here, Hawaii should be the world’s leading laboratory and showcase of alternative energy. It’s not… not even close.

Take just solar cells. My cottage out here needs a new roof. So I called the local solar cell rep to get an estimate of the cost of installing the cells along with the new roof. The quoted cost was $40,000, but after federal and state tax credits the actual number I would have to pay came down to about $15,000. That’s a nice discount to be sure, but $15,000 is still a significant number and that’s why most houses in one of the world’s great sunshine capitals don’t have solar cells on their roofs. The cost is high because solar cells are not yet being produced in large enough quantities to achieve maximum economies of scale. Moreover, those that are being produced in large quantities are being produced in China not in the United States.

This is really a critical moment for the industry and for the United States. Already, major U.S. producers like Applied Materials have moved not only production but also even their R&D centers to China. While soaking up the rays out here where the major industry is tourism that pays low wages in a high cost area, the President ought to consider matching the Chinese effort and launching a serious Apollo Moon Shot like project to make America and Hawaii number one in a solar cell industry that would pay high wages and be at the leading edge of technology.

Finally, the president ought to visit some local stores and take a look at the prices. Gillette aftershave lotion costs double what it does in Washington D.C. as do most other goods. People call it the price of paradise, but actually it’s the price of monopoly. The Jones Act requires that interstate shipping in U.S. coastal waters be carried in U.S. ships, and the shipping from the mainland of the United States over 2300 miles of Pacific ocean to the islands of Hawaii is considered inter-state coastal shipping for Jones Act purposes. So the result is that the Matson Line holds a monopoly on all shipments from the mainland of the United States to Hawaii and they, of course, charge monopoly prices. Both to relieve the citizens of Hawaii and to make American shipping competitive once again in international markets, the president ought to call for abolition of the Jones Act. It is just an excuse for monopolies protected by lobbyists to rip off ordinary citizens.

Whether Barack Obama will go down in history as a great or even good president will not be decided on the battle fields of Afghanistan. It will be decided by whether the American economy can compete effectively in the 21st century market place. How that must be done can actually be seen very clearly here in warm, sunny Hawaii. Wish you could all come.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.