Young people and the SAGE Commission
Member, Privatisation & Outsourcing Committee, SAGE Commission
The young people I teach at Bermuda College are largely unaware of the existence of a Spending and Government Efficiency (SAGE) Commission.
They are, however, aware of the debt problem: they know that government spending has gotten ahead of tax revenues since around 2003 and that the recession has made the situation worse. As a consequence, debt is rising at an unsustainable rate.
Further, young people accept that it is fair for the cost of capital projects -such as the building of Bermuda College, schools and hospitals, as well as the purchase of buses and ferries- to be shared between present and future generations.
I've shared the SAGE Commission's interim findings and recommendations with my students; they are alarmed, to put it politely.
They knew there was a problem, but its scale was not known. From their perspective, an injustice has been committed by the older generation. The older generation took it upon themselves to spend and consume resources beyond their means without considering the financial impact it would have on the younger generation.
To my students, it is becoming evident that the older generation suffers from an edifice complex: the desire to leave a legacy of buildings, bridges, roads, etc as evidence of their existence. This begs the question: how could the caretakers of the Island's natural, physical and financial assets, all of whom are considered old by College student standards, be so irresponsible? How could the caretakers have not considered the risks associated with borrowing against young people's inheritance?
Perhaps it would be prudent to define what I mean by young and, by implication, what I mean by old.
The SAGE interim report suggests that anyone under 37 years of age will not receive a public pension when they retire. I would, therefore, propose for purposes of better understanding how a rational young person might think, that we label as young those not likely to receive a pension. By implication, anyone over, say, the age of 40 is old.
Further, from the point of view of the younger members of our community, SAGE Commissioners are all old; the Chairs of its committees are all old as are most members of those committees.
Old people, with their political, racial or other baggage, should take heed.
From the perspective of the young, when it rains, it won't fall on one man's house: most of the debt burden will fall on young people. SAGE's work reveals a fundamental dichotomy: the interests of the young are at odds with the old.
For example, old people have bequeathed a pension liability in excess of $3 billion, which more than doubles the stated size of government's debt. This is an obligation placed on future taxpayers.
If the rules of engagement with respect to the public pension remain unchanged, then the young will help pay for old people's retirement with no quid pro quo.
The same applies to other government schemes like the Superannuation Fund, a supplemental pension fund exclusive to government workers. Older people are, in fact, forcibly requiring young people to participate in the equivalent of a pyramid/Ponzi scheme.
Young people could reasonably expect, at the very least, a renegotiation of public pension schemes. They could demand an immediate cessation of all pension payments until actuaries prepare a comprehensive plan to significantly reduce the liabilities of all government pension funds.
The recommendation in the SAGE Commission's interim report that most annoyed students was number six: the current lack of liquidity in Bermuda. In other words, why are banks reducing the amount they are lending? Everyone knows that businesses need capital for start-up purposes and growth. Entrepreneurs, that perennially optimistic class of individuals, are necessary to turn the economy around. So why are banks not providing the liquidity to make it happen?
My students believe the answer is simple: it's political! Politicians lack the testicular fortitude to nudge bankers. At the end of the last recession in 1993, the Bermuda Monetary Authority (BMA) asked the government for legislative powers that would allow it to influence lending. The government of the day and every government since has failed to act. It is as if bankers, who for the most part are old people, can feed the economy with steroids (liquidity) when it chooses to, even if it's not in the social interest, and deny the economy liquidity when it is in the social interest.
Given that the views of the young and old are potentially at odds with one another, young people would like older people to meet them where they gather, whether on Twitter or Instagram. Young people don't go to public meetings or rant on radio shows.
Secondly, young people would like old people to realise that the young are better at adapting to change. They bring a fresh perspective and a new dynamic to thinking about problems and how to solve them. In short, they are better equipped than we older people are. More importantly, they have more skin in the game.