Sinking Feeling in Puerto Rico
The island, so popular with tourists, is $123 billion in debt.
Puerto Rico, my heart’s devotion. Let it sink back in the ocean. — West Side Story
The Commonwealth of Puerto Rico is drowning. The island, so popular with tourists, is $123 billion in debt. That’s more debt than the $18 billion bankruptcy filed by the city of Detroit in 2013. In May, San Juan declared a form of bankruptcy after creditors filed lawsuits demanding their money. A federal district judge appointed by Chief Justice John Roberts will handle the case.
How did this happen? Luis Fortuno, former governor of the Commonwealth of Puerto Rico, who served as president of the New Progressive Party of Puerto Rico (PNP), which advocates for the island to become a U.S. state, believes he knows.
Fortuno was elected in 2009. In a telephone interview from his Washington law office, he tells me that during his one term he cut government expenses by $2 billion and the island’s bond rating went up. “We refinanced the debt on better terms” and by the time he left office in 2013, “we had brought down the budget every year and lowered corporate taxes. People believed they could take risks again.”
In the 2012 election, Fortuno lost to Democrat Alejandro Garcia Padilla by a narrow (0.6 percent) margin. Fortuno blames the Service Employees International Union (SEIU) for contributing to his opponent’s campaign. “They invested heavily against me,” he says. Padilla renewed the spending policies of the past and, though he left office earlier this year, the damage was done.
According to the American Bankruptcy Institute Journal, most of Fortuno’s cuts in public expenditures were never implemented by his successor. The island’s Office of Management and Budget reported that one year following legislation that called for spending reductions, 31 government agencies had, instead, increased spending.
As the Journal noted, under Fortuno “Puerto Rico implemented tax reform and permit reform, legislated a world-leading public-private partnership (P3) act, reduced government expenses and paid its suppliers…”
In light of such success, why would voters return control of the island to a party that was responsible for its fiscal downturn? Sometimes ideology beats success and common sense. Fortuno says it didn’t help that “61 percent of eligible voters failed to vote.”
A referendum on the status of Puerto Rico was held in Puerto Rico on June 11. Three options were open to voters: remain with the commonwealth, independence or statehood. Statehood won.
Would a Republican Congress and a Republican president ever back statehood for a territory that seems overwhelmingly Democratic and possibly add two senators and one voting House member to that party’s total in Washington?
Fortuno doesn’t believe it is a given that Democrats would win those seats. He draws a distinction between the mostly liberal Puerto Ricans who have left the island for places like New York City and those who remain. He says current residents “are social and economic conservatives,” suggesting Republicans could pick up seats.
Perhaps, but the U.S. taxpayer would also have to pick up Puerto Rico’s huge debt and with our debt at $20 trillion, it is doubtful Congress, at least under a Republican majority, would be willing to add more red ink.
Perhaps those economic and social conservatives Fortuno says remain on the island might come to their senses and elect someone who represents his views, which were beginning to bear fruit, before a bare majority panicked and returned to the failed policies of the past.
Readers may email Cal Thomas at [email protected].
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