A slash-and-burn approach to spending cuts won’t work

It is easy to continuously point fingers at one another and state “it’s all their fault”.

The challenging part is actually using that same energy to attempt to work together and say “the challenge and solution belongs to all of us”.

In a slight departure from the norm of social and or political commentary I have worked with one of my knowledgeable cousins to put together a summary view of where we should all look in regards to one of our challenges.

Fiscal stress can basically be described as the growing imbalance that occurs between a country’s revenues and expenditures.  Bermuda has been experiencing long run fiscal stress, fuelled by the worst recession the Island has ever faced.  We must take a look at how to remedy imbalances that occur between the island’s revenue and expenditures.

The simplest way to reducing the imbalance is to reduce expenditure and increase revenue. The challenge arises in finding ways to best accomplish that task.

The two main mechanisms used by Governments to reduce expenditure are personnel restraints and across-the-board cuts.

Personnel restraints include reducing public service post, freezing recruitment, and offering early retirement. Across-the board cuts are administered through expenditure reductions by a specified percentage in all budget areas.

There is evidence to support that these two commonly used measures of expenditure restraints only have a short term effect and only scratch the surface of overall expenditure control.

The factors that contribute to the rise in Government employment levels are the increase in government services and the amount of labour needed to provide those services. 

If the Government services that these officers provide are not examined, then reducing staffing levels will create an even greater problem.

In addition, across-the- board cuts, which are fairly easy to implement, represent a lack of strategic thinking.

Government departments are not all equal and the degree of slack is bound to be uneven among them. As a result, the cuts will affect some departments significantly more than others. The effects of these cuts paralyze programmes and hinder service delivery.

Anyone who states they wish to see staffing levels cut in a slash and burn method, is really not thinking of their fellow Bermudians and their respective families.

The Government needs to comprehensively review the services it provides along with the expenditure allocated to those services.

The review should aim to identify and address areas of possible duplication within Government. The results of the review should then be used as a basis for symmetrically addressing government expenditure.

Finding ways to increase revenue is a much more complicated task than reducing expenditure, as expenditure is managed internally while revenue is externally driven. One area that the Government needs to consider is whether or not our tax system and fiscal policies are adequate and equitable given the current economic climate.

Tax breaks

Government must consider whether tax breaks to businesses serve their intended purpose or create disparities.

They must look at whether or not it is fair to tax someone that makes $80,000 a year on all of their income while taxing someone that makes $1 million a year on only a portion of their income. Government must consider whether to incorporate taxes on wealth, such as; capital gain taxes and dividend taxes. Government must ask themselves two questions. Is there a need to reform our current tax structure?  And, how are the current fiscal policies adding to Bermuda’s fiscal stress?

The OBA spoke glowingly about “Social and Economic Equality.” Let us now see it in practice.

We all have a huge task ahead in trying to remedy Bermuda’s fiscal stress. I strongly believe that they must take a critical look at their operations and policies.

A failure to do so will result in Band-Aid solutions focused on addressing symptoms rather than the underlying problem.

Any continuation of “blame it all on the PLP” is childish at best, divisive at worst. We all have access to the Internet and global news. The entire world is in turmoil financially. Ask anyone in Europe if term limits created problems. Ask those in America, if it was the poor who created the 2008 financial meltdown.

We have an opportunity to sit down as collective everyday Joe and Jane Bermuda and work together or we can continue down the path of partisan destruction.

“We can live in peace or perish in pieces”. E-mail: [email protected]