If debt is like whisky then our Government is an alcoholic

Over the past couple of years, most Bermudians have shown little interest in austerity measures imposed on a group of countries known by the acronym PIIGS — Portugal, Italy, Ireland, Greece and Spain — all financially troubled nations in Europe.

As recession riots erupted in nations such as Greece and Spain, most Bermudians remain convinced that nothing like that could happen here.

Austerity means taxes will have to go up in order to pay for Government’s extravagance in the past, which created a huge debt of $4,589 million.

Extravagances include ministerial visits to India to drum up tourists. Government spending may also have to fall. Services will be slashed dramatically, many employees may be laid off and politicians belatedly will talk about ways to make budget cuts.

Unfortunately, even with severe cuts we will still face a sea of red ink as far as the eye can see. We are up to our eyes in debt, a debt bomb waiting to explode.

Hold on to your wallets because the politicians will be coming after them.

We are entering, for the first time in living memory, a period of financial stress. Government is broke.

The debt-fuelled prosperity of the last 12 years came at a cost — we mortgaged the future and sold our children into financial slavery. Can things ever be the same again? 

Those of us with long memories find it difficult to remember the prosperous place Bermuda was even five years ago.

The Finance Minister has hinted on a few occasions that we can borrow to meet the extravagant Government promises on pensions and other social problems.

But how is more debt supposed to get us out of a problem that was caused by taking on too much debt in the first place? The idea of borrowing more to pay off our creditors of the past 12 years is simply a debt-based Ponzi Scheme — or to put it into modern parlance, Bernie Madoff economics. 

The PLP Government has borrowed more money in the last 10 years than all of the Bermuda Governments that have existed since 1619.

To tell a politician to stop spending is a futile quest. It is like telling him that his wife is ugly — he has undoubtedly noticed but does not appreciate your observation, no matter how truthful.

People should look upon debt as a bottle of whisky. A drink now and again will do you no harm. But watch out — too much booze will sink you and your bank balance. Government is an alcoholic and has failed to tell us. 

Anyone who follows the news outside Bermuda will realise the extent to which governments’ debt has changed the economic game — all for the worse.  But there is no other choice. When you go into debt, you enter, as the Bible tells us, a form of slavery.

Let me also mention, the medical reforms, really medical burdens, which have been mentioned by Government. These are HIP and Future Care. 

The details of how these programmes will work and how they will be paid for have not been spelled out but with an ageing population (20 per cent are above 60, and life expectancy is more than 80) and long-term care becoming hugely expensive, free medicine promises to be the biggest budget buster in the history of reckless Government spending.

Freebies

This will make Government debt and the pension issue a minor detail. In short, this will be another millstone around our necks.

Government has led many Bermudians to believe that there is something for nothing — that generous pensions, medical care and other freebies will somehow be paid for out of some fifth dimension. 

Earning money, saving it and behaving prudently during good times are considered old-fashioned virtues not in keeping with the ‘new Bermuda’.   

Alas, not even Dr. Ewart Brown or Paula Cox can repeal the iron laws of economics, especially the one that says that before you spend money and get into debt, make sure you are capable to earning enough to pay it back. 

In the past, failing to repay debt was regarded as not merely a breach of contract but a crime.

People who failed to repay debts in a timely fashion were thought to have stolen from their lenders and put in prison.

In the Middle Ages even a dead debtor’s children could be sent to prison. 

I suspect that before too long many Bermudians will regard the reckless accumulation of debt by Government as something akin to a crime. 

The big question is, will Bermuda default on its debts, especially to pensioners, or will all of us be financially penalised for Government’s mismanagement?  

Friday’s Budget should give us some clues.