There is a stark difference in approach and philosophy to national debt between the PLP Government and the One Bermuda Alliance. The Government wants Bermudians to think “We’re all right, Jack”. We disagree.In their so-called Pre-Budget Paper released in December, the Government went to great lengths to justify ballooning Bermuda’s debt by focusing on debt/GDP ratios. But these ratios are nonsense when applied to Bermuda serving only as a dodge for the Government to rationalise its mishandling of the Island’s economy.Here’s why:A country’s national debt relative to its Gross Domestic Product (debt/GDP) is used by the government as a measure of Bermuda’s potential to borrow. But this is a misleading and unrealistic line of thinking. A person’s or a country’s potential to borrow is limited by their ability to repay. Any banker will tell you this.So, who repays public debt? Is it GDP? No, it is taxpayers who repay public debt. GDP, in the debt/GDP ratio, is used as a proxy or shorthand for taxpayers, because GDP represents the whole economy. It is on this point that the Government in its pre-budget paper is misleading people and, perhaps even, misleading itself.Let’s look briefly and broadly at taxes. Taxes consist of five main types:l Taxes on labourl Taxes on corporate profits,l Taxes on investment/savings returnsl Taxes on consumption andl Taxes on real estate holdings.Taxpayers in all major countries are included in all five categories: labour payroll taxes, corporate profits corporate income tax, investment/savings taxes taxes on dividends, interest and capital gains, consumption taxes VAT, sales taxes, and customs duties, real estate taxes land tax in its various forms.In most major countries, these tax categories capture virtually all of the private sector. In other words, the tax base covers the entire economy, with the exception of government itself. GDP, in this context, can be said to represent taxpayers.But in Bermuda, GDP does not represent taxpayers in any meaningful way. We don’t tax corporate/business profits or investment returns or interest on savings or dividends. These represent a large part of our economy. We tax labour (payroll taxes), consumption (duties) and real estate. Our tax base is much smaller than our private sector. Neither does our tax base necessarily move in sync with our GDP.Because of this, Bermuda’s GDP in no way is representative of taxpayers. A huge part of the economy is, by design, tax free.Debt/GDP is a debt indicator invented in major countries for major countries. To have the Bermuda Government use it to compare Bermuda to G7 countries, or any country with income tax, is to compare apples to oranges. It’s simply an invalid comparison, and it is being used to mislead people to think “We’re all right, Jack.”There are two other factors to consider in this deception. As a country, the source of our revenues is so narrow and undiversified that the risk of disruption to that revenue stream is far greater than that of a major diversified economy. We borrow in foreign currency and cannot borrow money that we have printed, as is done in major countries. Moreover, we must earn that foreign exchange in order to repay foreign lenders. Therefore good sense would demand a very much more conservative approach than some other countries.In their Pre-Budget Paper, the Government went to great lengths to justify their record of skyrocketing debt. One paragraph was striking:“According to the Maastricht convergence criteria relating to the soundness of budgetary positions ... the public debt-to-GDP ratio should not exceed 60 percent. Judged by these standards, Bermuda is well positioned and maintains a much lower debt-to-GDP ratio than international debt standards require.”Require?Does the Bermuda Government think the international financial community “requires” a certain level of public debt? I consider this to be a blatant abuse of language to lull Bermudians into false sense of security, particularly since the implication is that the Finance Minister thinks it would be OK to increase debt to 60% of GDP, which equates to about $3.3 billion, or triple what we already owe!That would also equate to a debt of $50,769 per man, woman and child in Bermuda with an annual debt service of more than $300 million. And since the Government likes to compare us with G7 countries, consider this: The debt per capita for the USA is just $35,239 even though they owe over $10.8 trillion, which is a debt/GDP of about 100%.And what is the “Maastricht convergence criteria” anyhow?Well, Maastricht is the city in Europe where the treaty forming the European Union was signed. The PLP Government, in its wisdom, has chosen, as its standard, the debt criteria of the EU, the same EU that is today in danger of melting down because of too much debt. So let’s get real.For a tiny country, with an even tinier tax base, this Government has racked up a mountain of debt with little to show for it. In a stagnant economy with the Government continuing to spend more than it earns, there is no way to pay it down much less pay it back. In their gut, all Bermudians know this Government has put them and their children in a big hole.Bermudians must ask themselves if they want a Government that plays so fast and loose with their money.We at the OBA know the facts about national debt. We know that this Government has increased debt by about 700 percent since 2003, and still thinks it can triple the debt before it becomes too much. We know we are a fragile, undiversified economy that is thousands of times more vulnerable to the debt trap than other countries.We would never allow Bermuda to slide into the debt trap that has engulfed other countries. We would control spending, grow the economy and put Bermuda’s fiscal house in proper order. That is our promise.ET (Bob) Richards is Shadow Finance Minister