Puerto Rico has enjoyed an Open Borders relationship with the United States for most of the last century, along with a plethora of tax breaks for over half a century to keep everybody from leaving. And yet, Puerto Rico has still managed to mess up.
A Washington Post editorial:
Puerto Rico’s sinking economy
ALAS FOR Puerto Rico, the Caribbean commonwealth attracts little attention on the U.S. mainland except when it’s in trouble. So it is with the looming crisis over Puerto Rican public debt, estimated at $70 billion. Detroit’s bankruptcy was bad for the municipal bond market; a default by Puerto Rico, though unlikely, could be worse: Some 70 percent of U.S. municipal-bond mutual funds hold the island’s paper, which bears tax-free interest. Large U.S. bond insurers are heavily exposed as well.
How Puerto Rico got into this mess is a long story, with plenty of villains: The island’s government frittered away funds on unproductive investments and bloated payrolls; Wall Street bankers enabled more borrowing, collecting $880 million in fees since 2000; the U.S. government's policy of tax-free status for Puerto Rico bonds, meant to boost its economic development, subsidized the island’s habit of living beyond its means.
And last but not least is the near-collapse of economic growth . Puerto Rico’s output has declined 16 percent since 2004. Its recession, triggered by the 2006 phaseout of a federal manufacturing tax break, began before that of the mainland and lasted longer. Only about a million of Puerto Rico’s 3.6 million people are employed. Not coincidentally, Puerto Rico’s population shrank 4 percent in the past decade, as many of the best and brightest sought opportunity on the U.S. mainland.
... Commonwealth officials say default is not only undesirable but, literally, unconstitutional since Puerto Rico’s constitution gives general-obligation bondholders first dibs on the island’s cash. But that guarantee has never been tested in a predicament such as this, which is economically analogous to Detroit’s — and that of Greece, another heavily indebted political entity linked in a currency union with far larger and more competitive neighbors.
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27 comments:
If you knew most of the Puerto Ricans I have met, failure despite a massive tailwind wouldn't seem so incredible....
Yeah I must say PR is pretty loose with their funds, planning big projects but unable to implement...not sure what the problem is but I suspect some basic incompetency on the ground. Maybe they could import a lot of Anglos to get everything working for them.
From a Republican perspective, a Puerto Rican default would probably be a good thing, since it would severely undermine the argument for statehood. But given the way we seem to respond to crises these days by doubling down on stupid, it might actually increase their odds of achieving statehood.
I wonder what would happen if the USA ever decided to cut Puerto Rico loose and give them their independence. My guess is that no less than 2/3rds of the population would rapidly head for the exits, since they are all considered American citizens. Just one more blessing from our late 19th Century turn towards imperialism.
"Not coincidentally, Puerto Rico’s population shrank 4 percent in the past decade, as many of the best and brightest sought opportunity on the U.S. mainland."
This is why the open borders lobby gets it backwards and the old colonizing powers had it right: the answer to solving the Third World's problems isn't to import all their unskilled people here - it's to give them enough human capital to build a productive economy there. People who believe we need open borders to help the foreign poor should move to the Third World and help them build up their countries. The impact would be far greater.
ALAS FOR Puerto Rico, the Caribbean commonwealth attracts little attention on the U.S. mainland except when it’s in trouble.
Or when the statehood debate flares up again, as it's wont to do.
On the topic of exodus from nations such as Puerto Rico, you might find my inaugural blog post interesting...
Redefining Confluence // The Confluence Artist
...since I show that, of the 21 Latino nations, all but four of them have negative migration rates - and of the four nations with positive rates, two of them have a net migration rate of zero.
Puerto Rico holds the world record for lowest per-capita annual consumption of coffee
Living through this era from the height of U.S. power in the 1950s to today has been a stunning experience.
The massive capital amassed by previous hard working generations of Americans has been squandered in such a short time. I would not have thought that such a thing was possible.
Wealth and leisure corrupt. I have no doubt that this cycle has been replayed innumerable times throughout human history.
Anonymous 7:34 makes some excellent points. But I wouldn't be too hard on the Puerto Ricans.
The article notes that only a million of the 3.6 million people on the island are employed, which sounds bad and is bad. This is an employment population ratio of roughly 28%. However, the employment to population ratio in the United States as a whole is about 45% (yes, only a minority of Americans has a job, keep in mind the population includes very old people and children) and has been falling.
Likewise, on the defaults and the falling for financial chicanery, Puerto Rico joins Detroit, Orange County, Jefferson County, one of the East Bay small cities (I forget which) and will no doubt be joined by other places as the national economy unravels and corruption continues unchecked.
The place is poorer than the poorest state and doubtless not particularly well governed, but its not that far out of step with what is happening on the mainland.
"Puerto Rico holds the world record for lowest per-capita annual consumption of coffee."
Then how come they talk so fast?
Some of you have probably seen this, but the open borders groups are now using this statistic from the Pew Hispanic Center to dismiss our concerns for border security and amnesty as being unnecessary. You see according to the Pew Center net migration from Mexico is approaching zero.
Of course the article goes on to confirm what we already know, that Mexico has sent as many immigrants in forty years as Germany and Italy have in 400. Included is this interesting stat:
The U.S. today has more immigrants from Mexico alone—12.0 million—than any other country in the world has from all countries of the world.
That's pretty damning isn't it?
However, we are not to worry because over the past five years the migration rate has fallen, and now they believe net migration is near zero. Of course this dovetails with the recession. And they don't address the chain migration effect that will take place once the illegals are amnestied. And they don't discuss the increased levels of legal immigration being bandied about, nor the fact that Mexico is used as a conduit for Central Americans.
Like the FBI crime stat indicating a 20-year low in violent crime is used as a retort to those who complain about black-on-white crime, be prepared for this net migration from Mexico being zero argument being used to counter any arguments for stricter border enforcement.
So, the strong implication is that open borders - contrary to the claims of immigrationists - does absolutely nothing to 'dvelop' the sending country, whilst having pernicious effects on the reciving nation.
In other words, the only people it actually benefits are the immigrants themselves - plus employers of sweated labor.
On a purely utilitarian view, the damge wrought to the many fare exceeds the benefit accruing to a few.
I think Puerto Rico should be independent! Vive el Puerto Rico Libre!
As I recall, whatever else it is or is not PR is also a hotbed of disability fraud. As they say ... google it.
poland, too.
@Anonymous 23:02:
Mexico's net migration rate is -2.99 per 1000 - hardly "near zero" and certainly more negative than several other Latin American nations; see my post for the relevant data.
Meanwhile, Puerto Rico's net migration rate comes in at -7.73 per 1000, perhaps underscoring this conflict...
Time for the brave and freedom-loving people of Puerto Rico to have their own independent nation.
I wonder how West Virginia would have done if all the bright folks couldn't leave for the big city?
Robert Hume
Actually, the real culprit in PR's decline is massive local tax increases since 2006. See the graph here: http://www.hjsims.com/assets/Puerto-Rico-Tax-Increase-Are-Making-Up-for-Declining-Collections-and-External-Borrowing.jpg
Back when I was a nascent conservative and worked for the PPSSOCC (otherwise known as the "Grace Commission"), I recall that Grace labeled food stamps an almost entirely Puerto Rican program. Kudos to the Halfrican for increasing the diversity of the food stamp population. Now it's a Puerto Rican, Haitian, and Honey Boo boo program. Yeay for progress.
I wonder what would happen if the USA ever decided to cut Puerto Rico loose and give them their independence
I've been advocating for decades that we SELL Puerto Rico, in a process similar to converting an apartment into condos. Puerto Ricans who are willing to renounce their American citizenship and relocate to PR get first dibs at below market costs, then sell the rest of the island to multinational corporations.
Rename it Puerto Pobre.
puerto rico is an unsual case, with only 3 million people. generally the sending nation has a near bottomless barrel of useless peasants to send and this doesn't hurt it much, sending it's dumbest and dimmest in a slow but steady stream. the remittances actually help.
it does point out what a boat anchor puerto rico would be as a US state, however.
"Kudos to the Halfrican for increasing the diversity of the food stamp population."
The vigorous increase in food stamp use began under Bush (of course), but it's accelerated under Obama. In AD 2000 we had 17.2 million people on SNAP; by 2008 average participation was up to 28.2 million (most of that increase was before the recession); by 2012it was up to 46.6 million. This year we'll probably hit 50 million, with a total cost of over $80 billion/year.
The 80s saw participation averaging around 20 million/year, and the prior maximum was in 1994, at 27.5 million.
"Wall Street bankers enabled more borrowing, collecting $880 million in fees since 2000"
Wall St is organised crime.
"Actually, the real culprit in PR's decline is massive local tax increases since 2006"
No, the real culprit is the Wall St. banks acting as loan sharks. They buy up local politicians to take on too much debt so the banks can soak up every spare penny in loan repayments creating crippling deflation as a result.
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"Wealth and leisure corrupt. I have no doubt that this cycle has been replayed innumerable times throughout human history."
It's not wealth and leisure it's the banks and usury. The banks constant hunger for debt saturation and the maximum profit it brings but debt saturation creates deflation and round and round in a circle it goes.
So yes this has played out innumerable times but it's not wealth and leisure it's usury.
In 1898, Puerto Rico was an autonomous province of Spain, a status that took many years for Puerto Rico to gain. It was self-sufficient and had a thriving export economy. Unlike many other Caribbean islands, it mostly escaped the plantation/slavery paradigm of islands like Cuba and Jamaica. The middle-class was growing, and family farms were thriving. Then the U.S. invaded, confiscated family farms which were then consolidated into huge plantations under the control of large American corporations. The Puerto Rican farmer was then forced to work the land he once owned for a pittance. By the 1930s, Puerto Rico had to import food in the form of government aid to survive. This lead to the mass migrations starting in the 1940s-50s. This is an American created problem. Anglo arrogance and greed destroyed a tiny nation of people who never asked for their 'enlightened' dominion...
Been to Puerto Rico a couple times. As a young man working a geophysical cruise out of UT Galveston in the summer of ’80, and with my family as winter getaway vacation in ’06.
It’s not the prettiest of the Caribbean countries but quite pleasant. But what’s obvious is that if it could be taken over by some business friendly white conservatives—say a bunch of Texans—it would be *booming*. But instead it’s dragged down by mediocre human capital and welfare-statism. We were enjoying ourselves there and the wife and I were vaguely interested in it as a retirement home because of the no federal taxes deal. But we talked with some locals, and basically the Puerto Ricans have simply mirrored the US tax code as their own, so you pay the same, just to Puerto Rico. Nix that idea! (We already live in a no-income-tax US state.) So instead of using this huge US tax subsidy to go the Hong Kong route and becoming a great place for business, and for well to do folks to set up shop, with super-charging tourist industry … they chose to just cash the welfare check. Essentially become the sleepy island-life version of Detroit.
Welfarism just appeals to a lot of people. Unfortunately more and more Americans. PR—with a thin crust of Chews bossing us around—probably looks like our future.
~~~
If you visit, worth taking the ferry out of Farjardo and spending a couple (or more) days on Vieques. Kayaking out and swimming in the biobays at night—your movement disturbs the bioluminescent bacteria causing them to discharge—is cool. My kids got a kick out of it—making snow angels and watching light drips from your hand. Also worth a visit is the old Navy bombing range. Since it was closed, it was undeveloped and is now—or was in ’06—a park, preserve. Preserved Caribbean coast. I remember snorkeling around, dipping down into old bomb craters. Not crowded and very relaxed. Nice “getaway” spot.
What has the USA ever gained from having this poor Spanish-speaking island? I'm baffled why you just don't give it its independence.
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