Donna: Foreclosures are growing, yet you say that Hawai'i's market is not as bad. I question that. What do you see as the impact of these foreclosures? All you have to do is look at the state of our parks and beaches to see the numbers of homeless are growing.

Paul Brewbaker: The differences are in magnitudes. I haven't looked at the fourth quarter data, but in the third quarter foreclosure starts nationwide were a little over 3 percent, of which a little more than half finish. Hawai'i's foreclosure starts were 1.67 percent (of mortgages with Hawai'i collateral) and the number I saw briefly was 0.9 percent — roughly half go through to completion — in the most recent data set.

Hawai'i's exposure is half the national average, which is, in turn, roughly half that of the toxic states (California, Nevada, Florida).

This is a pattern seen across the board: Hawai'i's downturn is among the mildest nationwide by all measures. That doesn't minimize the fallout from recession in terms of joblessness and homelessness. It says that if there is a homelessness problem, we should focus on it. But Hawai'i is not experiencing what the states with the greatest mortgage-related risk and toxicity are going through, and it's important to recognize that a different experience calls for different remedies.

Nanakuli Bill: President Obama said we should be investing in green energy as a way to create jobs and boost the economy. Is he right, and if so, will it work for Hawai'i?

Brewbaker: Distributed power production might be where O'ahu ends up, and different solutions might be appropriate on the Neighbor Islands. We won't know until we check it out. Obamanomics is partly a bet on increasing scarcity of petroleum because of supply constraints (in the long run), emerging markets economies' demand, and actually having to pay for the carbon-loading (possibly/probably) caused (in part) by fossil fuel consumption. The point about carbon-loading is important. We pay at the pump to run our little Hummer, including taxes for road repairs (supposedly). What we didn't pay for when we bought the vehicle or the fuel was our personal contribution to environmental degradation.

Part of Green Obamanomics is making sure we are paying, at least for the carbon emissions our vehicular and fuels choices created. In principle, that should make us think twice since the "true" cost of our behavior will be explicit and we won't have to rely on our elementary school children shaming us into being better environmental citizens.

Keane: Will rail and other infrastructure projects put a dent in the local recession? What bright spots do you see in our economy for the next two years?

Brewbaker: If all we build is TheTrain, in 2012 or something, then no, it can't possibly help out on the recession, which should end (technically) later in 2009 and have a long tail on it; a "jobless recovery" stretching out to 2011.

I've told people I've worked with at the city that the development around train stations should be occurring simultaneously with the construction of TheTrain itself. No sense build a train station in Waipahu if da ting no get park-and-ride, 7-11, daycare, local competition for Starbucks, a senior center, a health clinic, and some medium-density/medium-rise apartment buildings all built around.

The point is: build TheTrain and DaStation and DaRetail and DaCondo all at the same time, between now and 2011.

Craig: The Legislature is thinking about increasing our state taxes. What kind of effect will this have in Hawai'i's economy and Hawai'i's small businesses?

Brewbaker: OK, this is a hard one because the answer is politically incorrect. The recession was intensified by a dramatic loss of wealth (houses, stocks) and a nearly unprecedented decline in consumption. If you give people money, they don't spend as much of it as they used to. Conversely, if you take money away from people, it doesn't reduce consumption expenditure as much as it used to. Follow me? The marginal propensity to consume has decreased, and marginal savings propensities have increased. Adding or subtracting income has a smaller impact on consumption than used to be true.

Instead, suppose that government spending — on police and fire protection, public education, the courts, take your pick — is decreased by one dollar. How much does it decrease expenditure? One dollar.

Reduce income by one dollar, consumption expenditure falls by less than one dollar (and even less than before). Reduce government expenditure by one dollar, and expenditure falls by one dollar.

The point is that it's less scary than a lot of people would argue to blend tax or fee increases with government spending decreases in order to balance the budget, given the circumstances that now are true, but then most people aren't making an economic argument (pro or con).

Comma'aina: What impact does the lack of mobility through Honolulu's urban corridor have on productivity and the economy at large?

Brewbaker: From personal experience traveling and working in other cities that have fixed-rail mass-transit systems, it's pretty clear that such infrastructure provides some households and businesses with the opportunity to locate their activities (e.g. living and working) to mitigate many of the congestion externalities that burden people's lives and add cost to production. While working at Bank of Hawaii Downtown for two decades I rode TheBus. When I actually had to drive from Downtown to another bank office (like, to Kapolei) I burned an hour of my life in addition to what I burned driving to work instead of busing.

Lisa: How critical is Act 221 for Hawai'i's business climate?

Brewbaker: Act 221 is neither necessary nor sufficient for Hawai'i to signal a credible commitment to an accommodative business climate. On the contrary, Act 221 (and its predecessor, Act 215) is a clear signal that political pressures with little economic foundation are the dominant determinant of the character of Hawai'i's business climate. It seems like that is the opposite of the signal Hawai'i would want to send.

Hoomalimali: What does Hawai'i need to do differently now than it did during other recent economic downturns, such as 9/11? Am I correct in thinking both the public and private sector have fewer options than during previous downturns?

Brewbaker: In some ways the current downturn is a garden variety recession, just deeper. For Hawai'i, the current downturn is not as deep as prior downturns, so right off the top, the "options" as you put would seemingly not be as constrained.

Still, despite ultra-low interest rates that are the consequence of extraordinary monetary policy response to the financial crisis, the credit crunch in Hawai'i is as binding as it is in places that really have a bad housing problem (O'ahu not being one of them). You'd have to ask banks what gives on that.

The reality is that Hawai'i's balanced-budget constitutional requirements eliminate countercyclical fiscal policy responses by state and county governments, which limit their reactions to infrastructure investments (whose debt service costs must still fall within the operating budget constraints). So on the one hand the recession in Hawai'i is not as severe as elsewhere or as here in the past, but our options are limited by the constraints we imposed (by constitutional limitation) and by the constraints imposed by the credit crunch. I believe it is the latter that comprises the principle impediment to household and business "options," as you put it.

James: It looks like Kapolei city and new home construction in the 'Ewa plain has stalled due to the downturn in the economy, but do you still see new growth in this area? How long will it take to get the construction of new homes and businesses started again?

Brewbaker: Two things are going on. First, the housing recession. This is a classic housing investment-led recession, exacerbated by financial turbulence and (most recently) a consumer capitulation. But, at the core is a housing recession. Private homebuilding on O'ahu peaked in 2005; house prices peaked in 2006. It's 2009, we're three or four years into a downturn that should gradually find a bottom somewhere from 2010-2012, maybe toward the end of that interval. So, there you go.

However, with respect to West O'ahu housing investment, there is another factor at work. For 50 years the spatial pattern of urban development on O'ahu was a mimicry of patterns in Mainland cities with lots of flat land radiating outward from city centers. It was enabled by freeways and highways; it coincided with affordability of the automobile.

The rail system provides a completely different framework for urban redevelopment during the next 50 years. This a spatial pattern that does not radiate outward from the city center but instead enables more intensive residential and commercial mixed-use development around train stations.

My sense of it is that most people on O'ahu (since they voted for steel wheels on steel rail) are inclined to think that the 21st century should be marked by a diminution of urban sprawl. That's just a guess, but I'm pretty sure I'm right.

Reach Paul Brewbaker at (Unknown address).