To spend or not to spend? That is the question exercising the minds of economists and pundits as Finance Minister Paula Cox gears up to deliver the Budget early next month.

Countries around the world have unveiled big spending plans to keep their economies flowing during the recession but some argue that simply saddles future generations with debt.

Last year Bermuda's budget topped $1 billion – a lot of money for just 60,000 people.

But some believe when the economy is spiralling into trouble, that is the time to splash the cash even though Finance Minister Paula Cox has previously called for 10.5 percent spending cuts across ministries.

Bermuda College economist Craig Simmons said: "Government spending should not decrease during the recession; if anything, it may have to increase in order to provide a predictable level of spending in an increasingly unpredictable world.

"Having said that, it is likely that for the first time in living memory, current Government spending may have to exceed the tax dollars collected."

Finance Minister Paula Cox would not be drawn on that or on whether the 10.5 percent cut was still achievable.

She said: "Budget Day is February 20 that is when the Government of Bermuda in its National Budget will articulate its plans for the next fiscal year 2009/2010.

"Until then there will be much speculation but I do not intend to pre-empt Budget Day."

Mr. Simmons said Bermuda's tax system responds automatically to the economy's health.

"In good times, when incomes and spending are rising, payroll tax provides a gentle drag on additional income by taking a larger chunk out of our pay. Customs duties perform the same function with respect to spending.

"During the downturn, the fiscal drag of payroll and duties will diminish as will the number of tax dollars collected."

Mr. Simmons said a deficit will likely result. "But this should not concern us now. We have bigger fish to fry."

This recession could derail the social stability that the people of Bermuda have worked so hard to build since democracy was introduced in 1968, fears Mr. Simmons.

"Looked at from a long-term perspective, a deficit is a cost of maintaining both economic and social stability."

Mr. Simmons said Bermuda has a fundamentally sound economy and was facing a temporary downturn so there was a need to support spending, particularly among the poor and those made jobless from the recession.

Homeowners may need support in making mortgage payments said Mr. Simmons, adding that the housing market had avoided some of the pitfalls seen in the States.

"We have wisely maintained the link between those who sell mortgages and those who bear the risk of default. But there may be a need for a contingency fund for the distressed."

However free market economist Robert Stewart believes Government must resist the temptation to launch a reflationary budget and instead should do nothing as there was little that could usefully be done.

He argued that Bermuda's economy was as much a part of the American economy as anywhere in the States.

"We are just the speck on the flea on the back of the elephant. People have grandiose ideas about what a Finance Minister or a Premier can do. The reality is they are completely helpless in this situation."

The big deficit spending being seen in the US and the UK was effectively mortgaging the future of the working population who would be paying for it into their old age, said Mr. Stewart.

Some economists have argued that governments should spend more in a recession to get money flowing in the economy.

But Mr. Stewart said: "That's complete nonsense."

He maintained any money spent came from the taxpayers and that it was like taking water from one end of a swimming pool and putting it into the other, and then saying you had added water.

Foreign money kept Bermuda's economy afloat, said Mr. Stewart – either through international business or tourism and the best thing the Government could do was not offend foreign capital.

But he said the six-year term limit was enormously damaging. "If you want to kill the goose that lays the golden egg that was the one to follow.

"It's complete madness – but those who the gods would destroy they first make mad."

Chamber of Commerce president Philip Barnett said he would welcome a spending budget, particularly with potholed roads in dire need of attention.

"I would say spend, but there needs to be more accountability on what's being spent. That is the frustrating part – actually getting what we the people of Bermuda are paying for."

While Bermuda does not have income tax Mr. Barnett said Government took a hefty slice of money from import, payroll and property taxes and there needed to be productivity to match it.

"It is our money."