Dr. Claret Ruane, an economics and finance professor and resident economist for the University of Guam’s Pacific Center for Economic Initiatives, explains in a recent technical report that the macroeconomic multipliers, and spending multipliers in particular, used in the draft report should be recalculated using a Guam-based model to develop more accurate projections regarding the economic benefit of the proposed military buildup.
Ruane posits that the draft study estimates overstate the build up’s direct and indirect economic impacts by 41 to 118 percent during the construction phase and by 17 to 93 percent during the operational phase, thus paint a rosier picture than presented.
In her report, Ruane presents a framework on how to adjust the draft impact study spending multiplier to better reflect Guam’s specific economic conditions.
Because of the lack of current economic data on Guam, she is unable to calculate the actual numerical value of Guam’s spending multiplier but presents arguments for why she believe it is probably quite lower than Hawaii’s spending multiplier. This is in contrast to the draft report that admits Guam’s multiplier to be only slightly lower than Hawaii’s.
Ruane also notes that a cost analysis should be done carefully by Guam-based experts in order to weigh the build up’s benefits and costs to the island.
The report notes one positive aspect of the above analysis: “Should the proposed military buildup remain attractive according to the evaluation suggested above, our estimates suggest that the impact on the island’s economy and the pressure on the island’s limited resources during the peak year would be less than estimated in the draft impact study.”
Roanes’ analysis points out that “our lower estimates relative to those by the Department of the Navy translate to recent requests by the island’s leaders to lengthen the impact period by another four years (from 2010 to 2018 as opposed to 2010 to 2014) so as to spread out the impact of the proposed military buildup and to allow the economy and community some breathing room to adapt and respond more effectively. Although the impact period in our analysis remains the same, the magnitude of the impact has been shown to be less and presumably more manageable.”
