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Puerto Rico's Political Limbo and the Economic Crisis

The economic crisis in the island is suffocating the people. Water and electricity bills have skyrocketed. Public services are far, way far, from good.
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Puerto Rican flag in Old San Juan
Puerto Rican flag in Old San Juan

A few weeks ago I had a conversation with a good friend from high school via Facebook. My friend, who lives in Puerto Rico, is a bilingual professional with almost two full decades of distinguished service as an administrator at the University of Puerto Rico. She loves her job. Her commute is no more than fifteen minutes. Most of her relatives live nearby. Her life seems perfect. So you may understand why it surprised me when she told me she is trying to relocate to Florida to start over.

Her career is not in jeopardy though her benefits may be slashed and her pension will be reduced as the Puerto Rican government tightens its belt. Make no mistake this is a hard working woman who runs small businesses on the side to carve a better life for her family. She is not afraid of doing what needs to be done to get ahead. In fact she has been doing that all along. The problem is that the economic crisis in the island is suffocating people like her. She feels, and I understand her, that the more she works the less she has. Water and electricity bills have skyrocketed. Public services are far, way far, from good.

The García Padilla administration, desperate for revenue, signed into law a bill to increase sales taxes from 7 percent to 11.5 percent- the highest in any state or territory of the United States. And state income taxes are ever-increasing. The debt crisis is kicking people like her out of the island at such a rate that in the last decade Puerto Rico lost about a million people. And these are exactly the people that Puerto Rico needs, (educated, young, strong, entrepreneurial) to move forward. But if a solution is not quickly found and implemented Puerto Rico may suffer an acute shortage of the talent it will need to rebuild the post-crisis economy.

Puerto Rico is burdened by roughly $72 billion of public debt. Simply put, public debt is the total financial obligations incurred by all the governmental agencies of a country. And therein lays the problem. The Puerto Rican government can't declare bankruptcy to restructure its debt because is neither an independent country nor a state of the union. Puerto Rico's economy operates within a political limbo. Though there are bills on the house and senate to extend to Puerto Rico the protection of Chapter 9 of the U.S. Bankruptcy Code so far those bills are stalled.

The federal government could solve the Puerto Rican dilemma. And it should do so as quickly as possible. After all, the previous administration and the current one have worked to reduce the public debt by implementing many of the austerity measures recommended by the creditors. Both administrations have tightened the government's belt and earned the enmity of the public for it. But that has not been enough and it won't be enough for the gargantuan debt is sinking the island.

A federal bailout has been touted as unacceptable to U.S. tax payers. Arguing that U.S. or American tax payers won't support a bailout is based on two very wrong premises. To make this argument one must believe that Puerto Ricans are not U.S. citizens and that they pay no taxes. First, the 5 million Puerto Ricans spread throughout the fifty states of the Union are "U.S. taxpayers" and I suspect that a majority of them are perfectly ok with a bailout.

This line of thought also assumes that the 3.5 million people living in Puerto Rico are not U.S. citizens but foreigners. This is getting old. Let's explain it one more time. The Jones-Shafroth Act of 1917 extended U.S. citizenship to the people of Puerto Rico who until that point had been classified as "citizens of Porto Rico" and "American Nationals" under the provisions of the Foraker Act of 1900.

NEWS FLASH: Puerto Ricans- even those born in the island- are U.S. citizens and should enjoy all the protections guaranteed by it.

But, do residents of Puerto Rico pay federal taxes? Yes they do. The taxes paid by residents of the territory are import/export taxes, federal commodity taxes, and social security and Medicare taxes much of which is not returned fully to Puerto Rico. But, with the exception of federal employees, residents of Puerto Rico do not pay federal income taxes. They also don't get real representation in Congress.

The American public, in general, also operates under the assumption that Puerto Ricans burden the country and that they do not carry their own weight. This is far from the truth. Residents of the island contribute in meaningful ways to the country beyond the taxes payed to the federal treasury. The island exports highly educated and skilled bilingual professionals (doctors, paramedics, nurses, teachers, firemen, policemen- and everything in between) to states with rapidly growing bilingual and Latino populations.

Further, since World War I, when the U.S. mobilized Puerto Ricans en masse for the first time, they have been overrepresented in the military. This is most striking as Latinos in general are underrepresented in the armed forces. There are over 300,000 Puerto Rican veterans and roughly 30,000 serving in the active duty military. And that is without counting those in the National Guard and Reserve components of the U.S. military. If this is not a major contribution I don't know what it is.

Puerto Rico's crisis may seem like a political problem instead of an economic one. It is both. The political arrangement between the U.S. and the Estado Libre Asociado de Puerto Rico forces the island to operate under certain economic parameters. Can the government of Puerto Rico be completely responsible for the crisis if it can't even design its own monetary policies? Don't get me wrong, I'm not defending the elected officials that got Puerto Rico into this mess but Washington is also responsible for it.

The economic crisis can become a humanitarian one. It is essential that the Puerto Rican government, Congress and the Obama administration find a quick economic solution. After solving the crisis- through a bailout or by allowing Puerto Rico to restructure its debt- it is imperative to move Puerto Rico out of this political limbo- which after all is the root of the problem.

The author's views and opinions are his own and do not represent the opinion of the Center for Puerto Rican Studies, Hunter College or CUNY

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