A Lousy Gift
The Government has allowed the country’s debt to grow to dangerous levels. By June 2009, the total public sector debt in the
Ordinary citizens pay for this debt in three direct ways: By increases in various government fees so that the government can raise sufficient revenues to help in repaying the debt; By a reduction in certain public and social services so that the government can use some of those funds to repay the debt; And finally people feel the burden of this debt when the government has to cut important capital expenditures in areas like education or on key infrastructure.
Talking about debt definitely falls into the area of “doom and gloom” or being “negative”. But the truth is there is no positive way to talk about debt that will have increased by over 400 million or 160% in a single four year period. This must be seriously questioned.
Going back for decades, while no administration was perfect, the country’s policymakers avoided increases in the national debt as much as possible, while maintaining investment in infrastructure. During that time, the Cayman Islands had achieved a sort of low debt miracle in the
But in less than four years, that prudent aspect of our approach to debt has totally disappeared. For the first time in our modern history we have more than doubled the total public sector debt in one fell swoop. Not as a result of Hurricane Ivan and not as a result of the global financial turmoil, which has not yet taken its full impact locally.
To be clear, some level of debt has proven to be necessary in most countries and there is no reason why the Cayman Islands should be any different. But it is a question of how much debt, for what purposes, and when. The answer to those questions should all lead to a sustainable level of borrowing.
The investment into new schools, for example, is a worthy investment into social infrastructure. But is it necessary for us to do this to this extent at this stage? Is the lack of physical capacity the primary cause of the issues facing our education system or does it relate to curriculum, quality of teachers, disciplinary procedures, attitudes of both teachers and students, involvement of parents in the process among other issues? Education experts may well have the answers to these questions, but even if physical capacity does lie at the heart of the solution, there is no doubt that the financial implications of how this important investment proceeds needs to be reconsidered.
The experience of many other countries shows that a country’s national debt ca
A large national debt can lead to reliance on other governments and multilateral bodies such as the IMF, World Bank or IDB to provide funding on a long term basis. And that type of reliance brings a number of other challenges too lengthy to discuss here.
As a result of the current debt, the total public sector debt in Cayman is the equivalent of 12,000 per person, or 20,000 per Caymanian or worse yet about 36,000 per family if we assume about 3 persons per household.
Unlike some larger countries, the Cayman Islands does not have either the influence in the global markets or the resources to be able to sustain a high level of debt. As a small open economy with people being our primary resource, we simply cannot afford to do that.
Debt is not something that any of us as individuals take lightly. None of us wishes for our children for example to have the burden of our poor financial management fall on their shoulders.
So why should we sit back and watch a country go down the path of so many others, where high indebtedness marks the beginning of bad economic policies and eventually leading to a crisis?
Category: Viewpoint
I am an expat so just my 2 cents on this. …even though this guys is a politician, it seems that the points he is making deserve credit. I have not seen that many local politicians saying much about key issues like this one..
I read an article somewhere else which said that Cayman is not in the same position as some other countries to borrow a lot like it is doing now so I beleive this level of debt is a concern.
To: Anonymous (not verified) on Mon, 02/23/2009 – 13:01
It appears you haven’t been listening. This politician has simply picked up the chorus started by the UDP and carried on by people like Gilbert McLean and Ezzard Miller. They feel that it resonates with the electorate since it is an easy idea for people to understand as they make comparisons with their domestic budget.
As to the poster who said that my initial post missed the point, I am afraid you missed my point: we have little choice. Note that the debt is within the borrowing ratios permitted by the UK (which are deemed to be prudent).
Twyla,
See, I told you to think about what you are writing and not just write whatever comes into your head. You thought I was being nasty. You are a ‘shoot from the hip’ kind of person which will eventually get you into real trouble.
the debt is almost double. come on guys this is dangerous. i for one don’t want to end up paying it. and i agree that we might see more taxes on us to pay it!
Guys, this article was wriiten well and Wally seems to have thought the issues through. we may agree or disagree with his view, but this is the type of intelligent thinking and leadership that the country needs in these tough times. we don’t need to always take these issues in the gutter. how about simply respecting opinions and putting forward ours?
I can see that there is a balance required here regarding debt versus spending on important projects. But i think on balance I would agree with the article in terms of the need for us to better manage the situation i guess. i think the large increase in debt is too much for such a short period though
First response to the article misses the point somewhat. we know that capital spending is good in the long term whether this is on roads or education. But the point is that we have to balance those needs with our short term cash flows and finances. The basic point that the government is ‘over spending’ is the issue. and debt that goes unmanaged will most certainly ruin the country.
I just hope that this does get to a situation where the government has to increase taxes to pay the debt..
The concern on debt is real and I believe the author is right on track with this point. We cannot continue to go blindly down the road of mounting debt which we will all end up having to pay anyway. The previous post by ‘twyla’ seems to be very innapropriate and does not speak to the issue of the article.
LOOK WHO’S TALKING NOW
Wally Whittaker. I believe you have a short memory. Try and remember 2005 after the hurricazne IVAN when everyone was suffering and I was working with the department of labour, you were then Kissing the —- of the now government,. Remember how you cursed me and other people in your office and treat them like dog. You are not a good person wally, and you know what I am saying is true.. People do not know you. I do!!!!!!!!!!!!!!!! Dare to tell me I am not telling the truth. I have all my letters and recordings of our conversation. Tell me I am not elling the truth. would you like to hear it played on the talk show. AND YOU WANT TO REPRESENT CAYMAN. TAKE A BREAK HIPPO—–.
Twyla, I’m just a lawyer offering you some free advice, but I hope these recordings were made with Mr. Whittaker’s consent otherwise you could be looking at some potential legal problems….particularily now that you have publicy confessed to committing the act.
Just remember, my online legal advice is free, but if you need to visit my office or need me to represent you in court…..it will cost you LOL!!!
LISTEN UP MR LAWYER
AND ALL OF THE OTHERS WHO DO NOT KNOW WHAT YOU ARE TALKING ABOUT.
You do not know S— what went down with me and WALLY before this happened. If you want to hear all of it AIRED OUT IN COURT lets go for it. Draw your gun, Because Wally knows exactly what I am talking about. I believe this is going to get SEXY and SEXIER as we continue. there may be some embarassments revealed, but who cares a S—.’
THERE IS MORE TO THIS THAN YOU KNOW, So Mr BIG TIME ANONYMOUS LAWYER, I say go for your gun and when I start talking head will roll, . I DO NOT HAVE A D—thing to loose. So flip your coin and see how I jolt the mind of Mr Wally Whittaker, and make headsroll. Let me tell you one D—thing, I never asked wally for nothing in my life. I never once was paid for services rendered an moneys due and owing. Are all of you so fool to think that I asked Wally to put me up in an apartment. Listen up anything that I asked wally for was due to me. And further listen up, dont you beso fool to think that I know wally at the Labour department. I was very well acquainted with WALLY WHITTAKER when he operated the liquor store in Bodden Town. So Mr Bad man LAWEYER, and MRs Bad Women, stir this S—, and you will see how stink I can make it get. SERVICES RENDERED MONEY DUE AND OWING. PULL MY PLUG TODAY>
I dunno wha the problem is between you and Whalling but what exactly are you planning to do with SECRET RECORDINGS????? Play them on the talk show? GAL U DUNNO DAT ILLEGAL?
Yuh head nah good or wha?
Twyla, wha happenin you went beggin an got thrown out of someboddys office again? I would love to see a tape like that!!! LOL
Twyla,
ITS CALLED SERVICES RENDERED
MONEY DUE AND OWING. TALK ABOUT WHAT YOU KNOW. AND I KNOW YOU OLD CAYMANIAN WANT TO HEAR THE BEST PART. SUE ME.
Mr. Whittaker is right that debt is not something that we can take lightly. However, there are two fundamental flaws in Mr. Whittaker’s argument:
1. He indicates that the debt is ultimately paid for by "ordinary citizens", and that one of the ways they pay is "when the government has to cut important capital expenditures in areas like education or on key infrastructure". The implication of this statement is that this debt is has not been on account of important capital expenditures in areas like education or on key infrastructure. In fact the debt has been largely due to important capital expenditure and education, so this appears to be a circular argument. Mr. Whittaker has also not produced any evidence that the spending has been wasteful.
2. He states "going back for decades, while no administration was perfect, the country’s policymakers avoided increases in the national debt as much as possible, while maintaining investment in infrastructure".
First, previous administrations were hardly models of financial prudence. There was a great deal of wasteful government spending, for example on the Pedro Castle project as well as on the Boatswain’s Beach project. By contrast, these were not important capital projects. However, it suits Mr. Whittaker’s political purpose to look at previous administrations through rose-tinted glasses and so he describes an entirely unrealistic picture. Second, in fact adequate investment in infrastructure was not maintained which is why there was a need to undertake so many capital projects all at once. For example, the various road corridors were planned since the Master Ground Transportation Plan in 1988, yet no longterm strategy to implement this plan was put in place by previous governments. The result was that the traffic was virtually grinding to a halt. Some have suggested that the East West Arterial Road was unnecessary at this time. I would say first that it is unlikely that those persons live east of Prospect to make such a statement in view of the heavy morning traffic. But further I would suggest two reasons why it is vital: (1) to foster development in this area at a time when the economy is in need of such injections; (2) as an alternate route into George Town in the event of another disaster comparable to Hurricane Ivan which totally blocked Spotts Road with debris.
The Government has done and is doing what previous governments failed to do through neglect and lack of a long term plan or failure to implement such plans as they had. We can hardly look to them as inspiration for proper financial management because they kept the national debt low.