Last week in this column I wrote what I hoped was a provocative article, hoping to stimulate some discussion on the issue of what should be the economic policy for our country at this point in time and, in that context, on what Minister Winston Dookeran should be looking to include in his soon-to-be-presented budget.

In the days subsequent to the publication of my article there were several important interventions by key stakeholders which added significant new pieces of information to the discussion. Two of these interventions are of particular interest. The first was the publication by the Central Bank of its July report on the state of the economy. The second was a series of statements made by the Minister of Finance himself on how he proposed to take the economy forward.

It is interesting to note that these two interventions, in their different perspectives, posed squarely the central issue in the debate which should be exercising the attention of the country. For its part the Central Bank was very clear. In its statement it noted that "faster medium-term growth would require fiscal consolidation in order to contain public debt and provide fiscal space for sustained infrastructural investment". As a consequence, the 2012 budget "should mark the start of fiscal consolidation moving towards a balanced budget or a much smaller deficit".

For his part Mr Dookeran was signalling just the opposite. He made it obvious that it was his intention to introduce into Parliament a deficit budget. He stated: "I will have to ensure that we could put in motion the processes to eliminate the deficit budget over time, but sometimes you need a budget deficit to stimulate the economy." He further stated, "We went into deficit to create incomes, but what is bad is if you persist with it for many years."

It should be noted that should Mr Dookeran be true to his word, then the 2011-2012 budget would be the fourth consecutive deficit financing budget presented to the country. The Central Bank estimates that with the projected deficit in the budget, the country's debt-to-GDP ratio will stand at about 50 per cent at year's end.

Now to be fair to Mr Dookeran, there is nothing particularly worrying, in itself, about a debt-GDP ratio of 50 per cent, just as there is nothing particularly bad about a country having debt or growing its debt. It all depends on what the government has done and is doing with the money it borrows. Where a government is borrowing in order to try and boost its GDP and future growth, then a short-term increase in debt and the debt ratio is not a difficulty since it is expected that the future increase in GDP would serve to lower the ratio.

But where a government borrows for four straight years, not to fund productive investment and ensure future growth, but to maintain existing levels of recurrent, non-productive expenditure such as salaries and wages, interest payments and transfers and subsidies, and it does so moreover in the context of an economy which is in its third year of negative growth, then it is time for serious concern.

The key question always in relation to debt is that of fiscal sustainability; that is whether a government will be able to pay off its debt in the future. And this is the central issue of the discussion. Mr Dookeran does not hide the fact that his deficit financing is not for investment purposes but "to create incomes". So, since the sums borrowed are not going to generate the revenues in future years to pay back for themselves, then Mr Dookeran is morally obligated to tell the country where he expects the revenues to come from to repay the accumulating debt.

Again, to be absolutely fair to Mr Dookeran, he did attempt to give justification for the strategy he has chosen to adopt. His justifications are two. In the first place, as he says, "sometimes you need a budget deficit to stimulate the economy". So that in his mind "creating incomes" is a means of stimulating the economy.

This is a completely fallacious proposition. If deficit financing to support recurrent expenditure were a path to economic stimulation then the economy should have shown positive signs of stimulation by now since that is the policy which has applied since 2008.

More fundamentally, the idea that, in this economy, maintaining consumption spending is going to stimulate economic activity to the extent where you get several cycles of investment and spending fails to understand the reality of the economy. No such stimulus is going to take place until and unless the business sectors and consumers see sufficient buoyancy in the off-shore sector to make medium-term investments an acceptable risk.

The other justification given by Mr Dookeran is certainly more understandable though not any more acceptable. Mr Dookeran argued that it was necessary to maintain expenditure levels so as to maintain social stability and that social instability had an economic cost. Here Mr Dookeran is absolutely right. The sudden withdrawal of the current levels of social/welfare subsidies could well lead to social chaos, the cost of which would be enormous.

This is precisely why Mr Dookeran's strategy is so fundamentally flawed. Because the fact is that the current levels of social/welfare subsidies simply cannot be sustained indefinitely by deficit financing. And when the debt trap shuts over our heads, all those subsidies are going to disappear overnight, leading to the very consequences Mr Dookeran thinks he is avoiding. That is why the time is right to start the process of, as the Central Bank puts it, "fiscal consolidation moving towards a balanced budget or a much smaller deficit".

Whether Mr Dookeran wants to acknowledge it or not adjustments are going to come. We can try to manage those adjustments ourselves in a way that protects our weakest citizens and protects those sectors of the economy which can help us generate self-sustaining growth in the future. Or we can wait for the visitors to do it for us and damn us all to hell. The difference between the former and the latter option is called political will.

• Michael Harris has been for many years a writer and commentator on

politics and society in Trinidad and the wider Caribbean. He is a long-standing member of the Tapia House Group and works as a human resource executive.