Puerto Rico - Greece in the Caribbean

[FarCenter]

IT WILL not be long till Congress and the White House start squabbling again about the budget in Washington, DC. But before they create another artificial debt crisis, Barack Obama and his Republican opponents ought to pay some attention to a real one 1,500 miles to their south-east.

Puerto Rico, an American territory, risks a Greek-style bust. With $70 billion of debt outstanding, the equivalent of 70% of its GDP, it is more indebted than any of America’s 50 states. (Puerto Rico is not technically a state, but its bonds are treated as if it were.) Yields on its bonds have soared as high as 10%, as investors fret it may be heading for a default.

Like Greece, Puerto Rico is a chronically uncompetitive place locked in a currency union with a richer, more productive neighbour. The island’s economy is also dominated by a vast, inefficient near-Athenian public sector. And, as with Greece, there are fears that a chaotic default could precipitate a far bigger crisis by driving away investors, and pushing up borrowing costs in America’s near-$4-trillion market for state and local bonds. Yet the Hellenic comparison is also helpful: it should show the Americans what not to do.

For decades Puerto Rico has been sustained by federal subsidies. Its people, far poorer than the American average, get lots of transfers, from pensions to food stamps. Until 2006 the economy was buoyed by tax incentives for American firms that manufactured there. As drug companies took advantage, the territory became a vast medicinal maquiladora.

This tax break disappeared in 2006, and Puerto Rico’s economy has shrunk virtually every year since. It has been able to keep on borrowing, thanks to another subsidy: interest on Puerto Rican debt is exempt from state, local and federal taxes in America, making it artificially attractive to investors.

http://www.economist.com/news/leaders/21588374-stuck-real-debt-crisis-its-back-yard-america-can-learn-europes-aegean

[abelenkpe]

1. They took away tax incentives that brought in drug companies

They have too many pensioners and government employees, their workers too expensive because of minimum wage. Hmmmm

[DonViejo]

2. The GOP is largely responsible for the financial mess Puerto Rico

finds itself in. Bill Clinton ordered the military to stop using the island of Vieques (7 miles off the southeast coast of the main island of PR), as a live bombing range (it had been one since 1940). This is what the residents of Vieques wanted but, not necessarily what the residents of the main island wanted. Residents of Vieques were torn between halting any and all bombing, thereby throwing the military off the island or allowing bombing with not live ammo to continue. The "military out at all costs" side of the debate won.

Dubya, playing Mr Magnanimous, ordered the closure of the military base and the range on Vieques. However, Republican Senators from the western part of the U.S. were enraged, told Bush/Cheney to "screw the Puerto Ricans, they don't want us there? Close the other base on the main island. They're Democrats any way." That other base on the main island was the largest U.S. naval station in the Caribbean/Southern hemisphere. Thousands of Puerto Ricans were employed at the base, thousands of businesses depended on their income to come from local Puerto Ricans and military personnel. Bush caved in to the demands of Western state Senators and ordered the naval base closed; thousands were thrown out of work, businesses, shops, banks and entire towns collapsed into financial ruin.

Then, in 2008, the Bush/Cheney economic collapse hit the U.S. and its territories. Unbelievably, the Puerto Rican people elected a GOP allied candidate to be their Governor. Fortunio promised he could make everything right. He laid off 30,000 (yes, thirty thousand) employees. The GOP was so happy with Fortunio that Grover Norquist was promoting him to be a VP candidate in 2012. He was defeated for re-election in 2012.

Regarding the minimum wage, it has all ways been linked to the U.S. BUT it has all ways been one dollar less than the minimum wage in the U.S, e.g., if the US wage was $7.50 per hour, it was $6.50 per hour in PR. The last raise in the minimum wage, here in the U.S., did away with the "dollar less and hour" rule and the job markets are now in parity.

[FarCenter]

3. Military spending is not a sound basis for an economy

The United States must cut back on the Military Industrial Complex. Locally, a major Army base was closed with serious economic repercussions. However, we must learn to live with less consumption of military services.

[DonViejo]

4. And the people of Vieques are learning...

75% of them are on Welfare while 65% of them live below the poverty level.

[FarCenter]

6. It looks like tourism and agriculture are the only possibilities for civilian employment

Although wiki says that the continuing Navy cleanup of the target range is the largest employer.

[DonViejo]

7. "High" season for tourism is Thanksgiving week...

and then December 26th until Easter. Agriculture is limited to what people grow in their yards and whatever trees are on their property, e.g., avocados, lemons, mangoes. That's about it; terrible soil and growing conditions. The island is 21 miles long X 5 miles wide.

[FarCenter]

9. Apparently the best agricultural lands were Navy and are now wildlife reserves

Guess the only option is to emigrate.

[geek tragedy]

5. This is some seriously rightwing shit.

Like Greece, Puerto Rico is a chronically uncompetitive place locked in a currency union with a richer, more productive neighbour. The island’s economy is also dominated by a vast, inefficient near-Athenian public sector.

more:

For decades Puerto Rico has been sustained by federal subsidies. Its people, far poorer than the American average, get lots of transfers, from pensions to food stamps. Until 2006 the economy was buoyed by tax incentives for American firms that manufactured there. As drug companies took advantage, the territory became a vast medicinal maquiladora.

This tax break disappeared in 2006, and Puerto Rico’s economy has shrunk virtually every year since. It has been able to keep on borrowing, thanks to another subsidy: interest on Puerto Rican debt is exempt from state, local and federal taxes in America, making it artificially attractive to investors.

So, in short, the author views P.R. as a 47% moocher population, and that the solution to their problems is tax cuts for big corporations.

[KamaAina]

8. With the mainland U.S. in the role of Germany

If we were to impose austerity measures, would we see people in the streets of San Juan? And if we did, would the M$M deign to cover it?

edit: That could get VERY interesting if such protests were to spread to the substantial Puerto Rican communities in many mainland cities, especially "Nueva York".