Opinion: Looking For Financial Assistance?

[Opinion column written by Larry Burchall]

Looking for Financial Assistance?

Many people believe that if things get really tough, they will be able to rely on Government’s Financial Assistance program for help.

That’s true, but only up to the point where Government can still put dollars into Financial Assistance funding.

Government’s audited accounts show that in FY 2009/10 Government paid out $33.08m in Financial Assistance and $29.98m as Interest on Debt. Together, that’s $63.06m.

Five years later, in the November 7th Throne Speech, the Finance Minister said that in 2014/15, Government is committed to paying out $46.9m in Financial Assistance and $113.5m on Interest on Debt. Together, that’s $160.4m. This is two and a half times higher than just five years before.

In five years, Financial Assistance went up 42%. But Interest on Debt rocketed up 278%. So funding for Interest costs grew more than six times faster than funding and the apparent need for Financial Assistance.

In FY 2009/10, on Revenue of $917.3m, Financial Assistance and Interest took up 6.6%.

In FY 2014/15, on anticipated lower Revenue of $901.7m, Financial Assistance and Interest will require 17.8% – almost three times as much.

Now, and in the future, Government’s ability to provide funding for Financial Assistance is and will be limited by Government’s Revenue and by Government’s need to priority pay Debt Service Costs on Government’s current gross Debt of $2.185 billion.

The People In The Corners

Democracy’s hallmark is the more or less equal acceptance of alternate as well as diametrically opposed points of view. Some think that murderers should be executed, others don’t. Some think that education from primary to tertiary should be free, others don’t. Some think that two plus two equals four, others don’t – but these others could be wrong.

Democracy and reality do clash. If the people who think that two plus two equals five are democratically running a national economy, then, sooner rather than later, driven by the unbreakable laws of arithmetic and the unchanging principles of economics, their national economy will collapse.

Changeable democracy and unchangeable arithmetic don’t really mesh. They clash. And one always rolls over the other.

Like that “lucky old sun”, in every such clash, the laws of arithmetic just keep “rollin’ around heaven all day”. With every roll, the laws of arithmetic crush the democratic ideas of those planners and national policy-makers who hang on to their democratic right to believe and spend as though two plus two equals five.

That’s one of the fundamental problems that Bermuda and Bermudians face today where Nanci[*] needs to be fed an average $170 million a year – all in foreign exchange that must first be earned.

Some people democratically deal with that fact by denying the importance and impact of Nanci. I imagine that, in their world, two plus two equals two. For them, Nanci doesn’t really exist. They intellectually fly swat the problem away, by saying to the problem: “Oh! Go away!”

Others democratically deal with Nanci by saying that the annual $55 million contribution to the Sinking Fund should not be factored into the average $170 million. They reckon that only the average $115 million in annual interest should be considered; and the $55 million should be ignored. I reckon that in their democratic world, two plus two equals three. They say: “Well, let’s look at it this way ….”

Still others democratically believe that Nanci is perfectly affordable now; that Bermuda’s average annual Debt Service Cost of $170 million is entirely manageable; and that it is causing Bermuda no problem. These believe that people who say otherwise are scare-mongering. These also believe that Bermuda is so blessed and so special that, absolutely, a beautiful graceful longtail carrying bags of billions of US dollars will fly in and pay all our bills tomorrow. I reckon that in their democratic world, two plus two equals five. They say: “We needed to spend the money.”

That leaves a few who democratically believe that Nanci is a problem; that Bermuda and Bermudians must rapidly acquire an understanding of how Bermuda’s unique economy really works; of how deep in doo-doo Bermuda really is; of how radically many of us must change our attitudes; and of how little time we have left. In their democratic world, two plus two equals four. These say: “We can only have what we can afford to have, and we must understand, collaborate, and fix our problem – ourselves.”

In November 2014, in the standard four cornered room of our Bermuda democracy, which democratic corner are you in? Are you in the corner of a Two-er, a Three-er, a Five-er, or a Four-er?

[*] Nanci = NNC = Non Negotiable Costs = Debt Service Costs = Interest & Sinking Fund payments

- Larry Burchall

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