2/3/2010 10:03:00 AM Our national debt time bomb is ticking Government is handling public debt like an irresponsible credit card holder — and we’ll pay the price
National debt by year
1999: $163.5m; Minister: E. Cox; Premier: J. Smith
2000: $162.3m; Minister: E. Cox; Premier: J. Smith
2001: $161.1m; Minister: E. Cox; Premier: J. Smith
2002: $160.0m; Minister: E. Cox; Premier: J. Smith
2003: $160.0m; Minister: E. Cox; Premier: J. Smith/A. Scott
2004: $160.0m; Minister: E. and P. Cox; Premier: A. Scott
2005: $175.0m; Minister: P. Cox; Premier: A. Scott
2006: $225.0m; Minister: P. Cox; Premier: A. Scott/E. Brown
2007: $255.0m; Minister: P. Cox; Premier: E. Brown
2008: $345.0m; Minister: P. Cox; Premier: E. Brown
2009: $535.0m; Minister: P. Cox; Premier: E. Brown
2010: $679.0m; Minister: P. Cox; Premier: E. Brown
Larry Burchall
Why delay the debate on Bermuda's national Budget? Because the Minister for Finance has belatedly discovered a 'debt time bomb' in that a cash-strapped Bermuda Government is due to repay a loan facility of $200,000,000 that becomes due in June 2010.
In 1998, the late Eugene Cox took over the UBP's gross (national) debt of $163,500,000. He died in office in January 2004 with Bermuda's gross debt at $160,000,000. This was $3.5m less than what he had taken over from the UBP.
Mr. Cox was a strong Minister for Finance. In February 2004, with Debt at $160,000,000 Paula Cox became Minister for Finance. Six years later, on January 27 in this newspaper, minister Paula Cox admitted to a net public debt of $679,000,000 - more than four times as much debt as Minister Eugene Cox had passed to her.
Under her management, Bermuda has borrowed an additional $519,000,000. National debt charges - like credit card charges - have shot up from minister Eugene Cox's 2003 low of $162,400 per week to 2009's reported $419,230 per week. For the financial year 2010/2011, these charges will easily go over $500,000 per week. Triple what they once were.
There has been an absolute shift from Mr. Cox's careful management to a habit of adding debt as if there were no tomorrow. This Cox 'chip' is not up to the standard of the Cox 'block'.
In Uyghur month 2009, Minister Paula Cox described herself as "feeling politically neutered". Seven months later she wrote: "The Minister of Finance operates as a cog in the wheel. My role is to add value and to provide input on fiscal positions... I can indicate support or objection. However the sponsoring Minister(s) knows that I cannot overrule their request unless I have others who join with me to support and uphold my position. Individual Ministers are 'finance directors' in their own right...".
Unlike all of her predecessors, and by her own admission, she is not in charge. She is financially neutered. Comparing her management result of mushrooming debt and uncontrolled overspending, to those of the previous PLP Minister for Finance proves her abysmally poor performance.
Pushed around by an overspending Brown Cabinet, and in order to fund every day expenditure in 2010/11, the minister must now add another $120m to $150m to her just acknowledged $679m debt.
Tax increases
This will rocket debt levels to $799m (possibly $829m). The minister must now also increase general tax levels. She is forced to take this wrong time wrong way tax action because of her six years of weak management.
Under the Brown/Cox regime, this country began running on debt. The minister and Cabinet adds debt - uses credit - the way developing countries add debt and unwise credit card holders flash their credit cards.
Like a credit card balance, national debt must be dealt with. In June 2010, Bermuda is supposed to repay that $200,000,000 loan facility. However, repayment money is not secured in any Sinking Fund, stuffed in any mattresses, or buried in back yards.
We don't have that $200m because the overspending uncontrolled Cabinet spent it a long time ago. So the minister has to borrow more money.
Put the two together: $200m due in June plus $120m ($150m?) for current expenses equals a $320m ($370m?) total required in the form of a new loan. That's like paying off one credit card with another.
With some national and corporate borrowing, it often makes sense to roll over debt. But not when adding more debt in order to cover national - or corporate - operations that are running at a national deficit - or corporate loss. Big, widely resourced economies like the U.S. and the U.K. can do that. But small delicately balanced economies like Bermuda's cannot.
Admitting to owing $679m, Minister Paula Cox is now puzzling over how she will explain and justify her need to negotiate a new loan and borrow a fresh $320,000,000 ($370m?) - just to 'tide her over' to March 31, 2011. Whether its personal, household, corporate, or national - this is classically bad money management.
And remember, just seven years ago, with minister Eugene Cox handling finance, Bermuda owed a measly $160,000,000 - and had been paying down debt.
The minister's Budget debate delay tactic is simply a useless bid for time to marshal more words and call up more rhetoric so as to create more excuses about the impact of global economic forces.
The minister's real problem? How will she package six years of "brown stuff" and make it smell like Chanel No 5?
Given the Premier's penchant for tilting at ancient windmills, even in this financial matter he is likely to inject some invective about race - as befits an ancient race-rebel from the long-gone 1960s.
But wasn't it a black man - the late Eugene Cox, JP MP, B.Eng (McGill) - who, for years, ran surpluses and reduced national debt?
Words cannot alter an arithmetic result. This Brown/Cox duo has screwed up! It is in Bermuda's best national interest to change, and change now!
Posted: Friday, February 19, 2010
Comment by:
dread
it should b ticking cause there all crocks!
Posted: Monday, February 15, 2010
Comment by:
Bruce McClarron / Arizona
Regarding the "US Economy"....I'm an *Onion*, but I live in the States in the "Thick-Of-It", so to speak...I agree that Bush left some unresolved fiscal problems, but Obama has been riding a fresh horse now for the last year - And the horse is now limping badly...He is trying to spend his way out of this BIG MESS, that is slowly crippling America!! That, and his 'Socialist Ideology' are taking the USA into the abyss!! There will be a 'Changing of the Guard' in the November Mid-Term elections, because middle-class Americans are deeply worried about the future of THEIR country! Bermudian's should be deeply worried about their future as well!!
Posted: Sunday, February 07, 2010
Comment by:
Robert Bryce
What is most alarming is that nowhere has the Minister of Finance said how the debt will be repaid, or at least reduced. Larger economies such as the UK and USA can increase interest rates, print more money or reduce Government expenditure. Bermuda cannot do the first two and is apparently unable to do the third. Oh well, let the supporters pay, because no one else will as they will be long gone.
Posted: Sunday, February 07, 2010
Comment by:
Pat Ferguson
Sorry Minister Cox you (like your leader) are a total failure as a Finance Minister therefore, you would not be fitting as a leader of this country. You had the power to stop all of this excessive spending and you did nothing. Shame to say - but when it comes to the PLP as the Government of this country, all of you should pack your bags and go home - and by the way, take your little parasites with you and let us get on with restoring the damage your money guzzling. ill prepared, incompetent, (missing cedar beams) PLP Government has done to this island.
Posted: Thursday, February 04, 2010
Comment by:
Martin Morris
Government leaders should first start by selling every single GP vehicle. Then encourage the next Premier to ride into work on the bus/ferry each morning. If he/she makes a bad political decision on Tuesday morning then they will have to suffer the wrath of the pubic transportation riders Tuesday evening.
Make a conscientious effort to scale back the vast amount of overseas consultants littered throughout the governmental departments. Finally, have each elected official sign a legally binding document that states if they are found stealing from the public purse then they will be stripped of their duties and imprisoned.
Posted: Thursday, February 04, 2010
Comment by:
Sara
The conservatives are on a mission! They want us to forget about the fact that Obama inherited the HUGE deficit from TWO FAILED WARS on Georgy boy's watch!
He is spending the money to create jobs and stimulate the economy.
I am not saying that isn't a huge sum of money to delve out cause it is, but funny I don't see ANY Republicans posing solutions to the failed everything that Obama inherited!!
Posted: Thursday, February 04, 2010
Comment by:
rich
To TO WIARUZ,
Get a reality check. Obama inherited a $1.3 trillion deficit from George W Bush, who in turn inherited a $230 billion SURPLUS from Bill Clinton.
That represents a $1.5 trillion turn around in 8 years.
In 2000, US public debt rose from $3.4 trillion to $8.5 trillion when Obama took over. That's right - George W Bush, the alleged conservative, saw public debt more than double in his 8 years in office.
Frankly, his record and the PLP's are not all the dissimilar.
Public debt as a % of GDP is about 60% for the last fiscal year in America. The highest it's ever been was in 1950 when it hovered at 80%. America isn't going bankrupt any time soon.
It's funny that you didn't point out countries like the UK, Canada and Germany, which also are hovering at 60% public debt. Or France at 75%. Or Japan at 170%. But then again, those countries aren't being run by a black man so I wouldn't expect you to.
Posted: Thursday, February 04, 2010
Comment by:
Paul Clinton
Hey party Green, if you can keep your head while all about you
lose theirs, and blame it on you,
then perhaps you've
"overlooked" something.
Posted: Thursday, February 04, 2010
Comment by:
TO WIARUZ:
If you think that money is being wasted by the government here on the Rock, take a look at the States. obama, the mand man, is wasting TRILLIONS of dollars which will destroy the U.S. in a few short years. The U.S., solely because of obama's insane dictatorial policies won't be able to even pay the INTEREST on the national debt, let alone the principal of the debt, AND for NO REASON! He is bankrupting the country and so far...he's getting away with it.
Posted: Thursday, February 04, 2010
Comment by:
Bruce McClarron / Arizona
Belated, Happy New Year Larry!
Well...Who is going to be bankrupt first - The USA or Bermuda? America is now beholden to China - who is BDA beholden to?...But seriously folks, like Larry says...Something stinks to high heaven here!! It's NOT rocket science - where has the money gone?? And don't forget, this is the public's purse! An old fashioned "Audit" should clear the air...But I remember what they (PLP) did to Larry Dennis, when he raised a few 'Red Flags' not too long ago!! He must have really scared them, to get arrested...No real explanation about that fiasco, as well!
Are we now following the path of the Turks & Caicos Islands...Should London initiate a thorough 'General Audit' of all Government accounts?... I'm sure "Inquiring Minds" want to know what happened to THEIR money!! Mr. Governor - are you on board with this one?
But, let's be optimistic here...Perhaps Paula Cox has a large secret 'Rainy Day' account down in the Cayman's, that she is going to surprise us with...Then on the other hand - (You fill in the blanks)
