Debt's consequences

February 17, 2010

Dear Sir,

The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth. (Psalms 37:21)

There has been a lot of press coverage recently on Bermuda Government debt, and rightly so because the position is alarming. Examples are Larry Burchall in several erudite Bermuda Sun columns, Bob Richards, Opposition spokesman on Finance, and the Auditor General affirming that government spending is out of control.

Why do I say it is alarming? Here are a few figures to chew on.

$million

Budget deficit (estimated) 700

Social Security Fund Deficit 1,774

Public Service Pension Fund Deficit 534

MPs Pension Fund Deficit 5

Grand total of Government debt: $3.013 billion

I have not dreamed the numbers up. They can be found on the latest Budget statement, the June 2007 Actuary's Report on the Social Security Fund dated June 2007, on Page 8 of the Report on Bermuda Public Service Superannuation Fund as at March 31, 2004, and on Page 4 of MPs Pension Fund as at 31 March, 2004. Some reports are out of date, but the Bermuda Government operates like the Kremlin and it is very difficult to obtain current reports. So much for freedom of information.

The $3 billion debt does not take into account the fall in the value of the various funds' investments over the past few years. Nor does it take into account the costs of FutureCare and HIP which are huge – because there has been no public costing of these expensive ventures. The sum of $1 billion would not be far out. Indeed, Government has promised far more than I think it can deliver – so if you are more than 65 please do not get sick.

The pension fund deficits do not find their way into the Budget statement because the Minister uses the technique of off-balance sheet accounting, a stunt reminiscent of Enron or Bernie Madoff.

With a Bermudian population of around 45,000 (30 percent of the population is non-Bermudian), the per head debt is almost $67,000 or $268,000 per household. Not chicken-feed – but then travelling around the world with his circus in tow, on the pretext of drumming up business for Bermuda, is not cheap.

The PLP Government is spending its way into our financial oblivion, and no one in Government seems to care, least of all the Minister of Finance who, sheep-like, bleats that she is only a cog in a machine. How will Bermuda's debts be paid back? I doubt if anyone in Government has even thought of that – for the simple reason that it does not bear thinking about, especially as Bermuda has an ageing population and those born post 1945 are retiring soon with the expectation of a reasonable pension. I wish them luck.

There are some important lessons to be learnt from Greece whose government, at this very moment, is paying the price of civil unrest for going heavily into debt; and also the government of Argentina which has nationalised private pensions in order to escape from its borrowing predicament. Some years ago when I was in Argentina – whose government followed, and still follows, policies very similar to that of the PLP – I asked the question of what happens to ordinary people when debts fall due for payment and lenders cut off your credit. I got the look that people give you when you ask a really dumb question. The answer was that when routine government services collapse because of financial mismanagement, people die; they die from lack of medical care, the absence of medicines, ordinary diseases like measles, or malnutrition. Such are the consequences of spiralling debt. I suppose if the same question was asked of the Premier, he would simply answer "feel the love". As the Bible says, "The wicked borroweth, and payeth not again."

ROBERT STEWART

Smith's

Baffled by MPs

February 19, 2010

Dear Sir,

It is truly a sad statement when we read about already overpaid and underworked MPs in discussions about a 30 percent pay rise while another article tells of underpaid and overworked hotel workers going yet another year without a pay rise. Is this current government ever going to look past (not down) their privileged noses to see how the people they govern are surviving?

BAFFLED TAXPAYER

Pembroke