Editorial for July 26: Debunking the myth of government 'austerity'

Let’s not hear anything further from government officials about “bare bones budgets” or “tough times” in the public service.

A few facts from the government’s own human resources report for the 2011/12 financial year tell the true tale:

The entire public sector staff grew from 5,810 in 2011 to 5,901 in 2012 during these times of so-called “austerity”. Most of the job growth took place in the statutory authorities and government-owned businesses.

In 2001, the public service sector numbered approximately 4,000. The 5,900 employees last year represents a massive 46 per cent growth in employment over just 11 years. The 2010 “Miller-Shaw Report,” the most authoritative study ever undertaken to examine the fiscal sustainability of the Cayman Islands, shockingly documents that these islands, relative to their population, have one of the largest public sectors in the world. Likewise, government’s public pensions, healthcare provisions and other benefits are among the world’s most generous.
However, the growth of the Cayman Islands government payroll is only one of many financial concerns facing our country.

The unfunded liabilities of the government pension system and healthcare system are actuarially both unsustainable and irresponsible. Together they approach nearly $1 billion. As Detroit, Michigan has learned, those bills do come due. (Detroit has just filed for bankruptcy protection after decades of the equivalent of fiscal felony. See related story on this page.)
Soberingly, Cayman’s entire public sector debt now stands at more than $700 million. By 2019, government must refinance part of that debt or pay its lenders more than $250 million in immediate “bullet payments” – money it does not, and probably will not, have.

One telling example: Government, meaning taxpayers, will continue to prop up the Cayman Turtle Farm with subsidies approaching $10 million each and every year with no credible plan in place to eliminate these losses. Talk-show fantasies about privatisation assume someone in the private sector would be moronic enough to buy such a “business”.

All of these payments, debts and the steadily increasing costs to operate the government service (approaching $700 million per annum) beg the question: What are we getting for our money?

All too often government departments, their regulatory boards and concomitant bureaucracies impede, rather than enhance, private sector development and growth, thus having a sclerotic, rather than an invigorating, effect on the local economy.

We’ll repeat our recurring refrain one more time: Governments cannot be – and should not be – a major driver of economic expansion in the Cayman Islands or anywhere else. Growth in government correlates inversely with growth in the economy, and, frankly, it is time for the Cayman Islands government to stop growing. We are a tiny country with a disproportionately massive government.

Consider the following: 26 per cent of all Caymanians now working are employed by the government. In Cayman Brac, the number is approximately 70 per cent.

Unless we are trying to camouflage a public welfare system under the guise of public service employment, those percentages must be significantly reduced. The path forward includes a serious commitment to privatisation (where the jobs move along with the enterprises) and the government sells off or shuts down many of the companies it runs.

Put another way, business is the business of business; it is not the business of government.

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1 COMMENT

  1. Why is it that every time government is questioned about their employment and spending, the final solutions demands it’s privatizing of public facilities. Why the rest of us should pay the pension and medical insurance for government employee is beyond me, but government employment of its citizens is not. National projects was the driver which brought the US out of the great depression. Countries regularly subsidize their countries production exports
    in order to keep their citizens in work. It seem that many would be satisfied to see government working out of rented facilities, and outsourcing every element of their function to profit making private sector, who by the reports import labor in the interest of profit, and not in the welfare of the citizens. A country,s structure is meant to function for the welfare of all its people, not to reinforce the profits of the few.

    As a community, our combined economic effort and need, constructed utilities where private sector was unable or unwilling to provide. If the proceeds from these utilities now serve as employment of our country-men instead of jet-setting profit, citizens eat..

    Every effort should be made for the employment of Caymanians. We have subsidized private sector with the most lenient tax structure in the world. We ask that our concessions bear fruit by our employment.

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