Puerto Rico

Bankruptcy and the Case for Puerto Rico's Independence

The island commonwealth and the U.S. would benefit from giving each other more space and more freedom.

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Puerto Rico has defaulted on its public debt, which is about equal to its GDP. There are many reasons for why the U.S. commonwealth can't pay its bills these days and first and foremost is that the island's public sector is swollen beyond health with public-sector jobs and benefits.

But part of the reason is that the cost of living is artificially made more expensive due to it being part of the United States. Not only does that mean Puerto Rico has to follow a whole host of labor regulations, including a minimum wage set for wealther areas, but it has to put up with abominations such as the federal Jones Act, which "which requires shippers to use costly U.S. flagged ships that result in Puerto Rican consumers paying artificially higher prices for goods."

As Reason columnist Veronique de Rugy and her Mercatus Center colleague Tad DeHaven write in USA Today, Puerto Rico is screwed:

Puerto Rico's debt obligations have reached $72 billion (roughly equal to the size of its entire economy), and thanks to lavish benefits given to government employees over the decades, it faces more than $40 billion in unfunded liabilities. The island defaulted on $400 million in debt service payments at the beginning of May, and the prospects of it making good on another $1.9 billion in early July look bleak unless it works out agreements with creditors or the federal government gets directly involved.

They note that whatever debt relief package gets passed, it will likely tighten controls over the island's economy and strengthen Washington's hand. De Rugy and DeHaven argue that it's time to rethink Puerto Rico status as a U.S. commonwealth, for its health and that of the United States:

Over 100 years [after the Spanish-American War, which brought Puerto Rico under American control] the United States' federal government finds itself with a virtual military empire that, when all related costs like veterans' benefits are factored in, soaks taxpayers close to $800 billion a year. That's a lot of money to effectively subsidize the defense needs of wealthy allies and exert control over foreign populations for the ostensible purpose of "spreading democracy." And not coincidentally, the tentacles of the federal government can be found in virtually every aspect of our lives. After all, federal involvement in everything from education to the federal highway system has been justified on dubious "national security" grounds.

So, while raising the question of Puerto Rican independence might seem quaint, its prominent place in the news is at least an occasion to recognize that big government abroad and big government at home are two sides of the same coin. Relinquishing control of Puerto Rico would be a significant step toward a badly needed downsizing of the federal government.

Read the whole thing here.

Back in 2012, Matt Welch interviewed then-Gov. Luis Fortuno, whose spending cuts had helped to prevent Puerto Rico from becoming "America's Greece." After taking a hatchet to the state workforce, Fortuno was voted out of office and, well, here we are.

Take a look below or read this conversation between Welch and Fortuno.

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  1. On the one hand, do we really want another class of Hispanics that President Trump gets to wall off? On the other, I don’t really care as long as I don’t have to buy new flags with 51 stars. (What would that even look like?)

    If Puerto Rico doesn’t like labor regs that are choking its economy, they should use their vote in Congress to change things.

    1. Just merge the two Dakotas, put West Virginia back into Virginia, and then we’ll have room for both PR and Canada. Fuck DC statehood and DC generally.

      1. I’m not sure I can get on board with annexing Canada.

        On one hand, Justin fucking Beiber. On the other hand these.

    2. Here’s a whole google worth of ideas.

      1. Every one of those ideas is an idiot. Except maybe the bikini.

  2. So austerity is why Puerto Rico is in so much trouble. I knew it.

  3. There are no policies Puerto Rico could implement outside of independence that would fix their problem. The main problem is federal policy. There are laws protecting US shipping companies that basically destroyed Puerto Rico’s shipping industry and forcing Puerto Rico onto the federal minimum wage caused gigantic unemployment problems because no one is willing to hire Puerto Ricans at $8.00 an hour when it’s effectively a third world country with artificially inflated wages.

    You can try to cut the government workforce all you want and it won’t fix the underlying problem of federal policy

    1. You can say that, again!

      Oh, and obligatorily: Raaaaacist!

    2. Bernie Sanders is going to force a $15.00 minimum wage on PR. Hillary $12.00. Trump $11.50.

  4. There are no policies Puerto Rico could implement outside of independence that would fix their problem. The main problem is federal policy. There are laws protecting US shipping companies that basically destroyed Puerto Rico’s shipping industry and forcing Puerto Rico onto the federal minimum wage caused gigantic unemployment problems because no one is willing to hire Puerto Ricans at $8.00 an hour when it’s effectively a third world country with artificially inflated wages.

    You can try to cut the government workforce all you want and it won’t fix the underlying problem of federal policy

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  6. Even though Spanish is an official language of Puerto Rico it is considered to be a disability if you speak only Spanish

    “”””Puerto Ricans who can’t speak English qualify as disabled for Social Security”””

    http://tinyurl.com/glep599

    1. Rulings like this end up with Puerto Rico having huge disability costs

      “”””Nine of the 10 top U.S. zip codes for workers collecting Social Security disability benefits are in Puerto Rico, according to government data.”””

      http://www.wsj.com/articles/SB…..3481258206

    2. No habla Ingles!

  7. The thread a couple down from here has been completely Tulpafied. On the look out for possible Hinfections.

      1. Gotta be the Freddie Gray innocent cop one.

  8. The last time this question was formally put to the people of Puerto Rico, something like a whopping five or six percent of them voted in favor of full independence, and a solid majority voted for statehood.

    The people there don’t want to be free of Uncle Gringo’s ginormous white teat. Quite the opposite.

    1. Good info, I wasn’t aware of that. So looks like another bailout. Well, at least that gets us all lubed up for the big one, California.

  9. I’m 100% in favor of them going independent. Just cut them loose. They get more freedom, if they choose, or a nice dictator if they choose, and we don’t have to bail them out. WIN/WIN.

  10. If the PR wants independence, give it to them. But deRugy is on crack if she thinks giving the island full sovereignty is necessarily going to lead to better economic policies. Venezuela has sovereignty and elections. How is that working out?

    The key to fixing PR is to not bail them out and make sure the bond holders get rightfully punished loaning money to a government that obviously cannot pay the money back. Do that and PR won’t be able to borrow any money. Since there is a limit to how much tax money can be raised, the PR government will be forced to live within its means.

    Sadly, the idiots in Congress are going to choose the worst available option and bail out the bond holders. This will just make people more willing to lend the Island money. And since no government official ever refused to spend money if he could borrow or steal it, a bailout will just set the stage for more problems down the road.

    1. If they do that, look forward to the same thing happening with California.

      1. And Illinois and New York after that. And the fucking Republicans will be the ones doing it. But we are all supposed to shit our pants over Trump not being a real conservative.

        1. Maybe I’m a naive fool, but I don’t think the republicans are caving in this time, no matter how much bitch ass Paul Ryan whines.

          Election season isn’t that far away, and you don’t need a weatherman to know which way the political wind blows.

          1. I hope you are right. And if this doesn’t cause his supporters in Wisconsin to primary his sorry ass, nothing will.

  11. There’s no hope for the island. Washington has turned Puerto Rico in to one big-ass housing project.

    If it becomes independent, it will just turn in to Venezuela or Cuba. If it stays as is or becomes a state it will at least serve to make Mississippi feel superior to someone.

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