The basic model for Puerto Rico isn’t working any more

by on September 26, 2017 at 1:30 pm in Current Affairs, Economics, History, Political Science, Uncategorized | Permalink

That is the topic of my latest Bloomberg column, here is one bit:

Worse yet, the island has about $123 billion in debt and pension obligations, compared with a gross domestic product of slightly more than $100 billion, a number that is sure to fall. In the last decade, the island has lost about 9 percent of its population, including many ambitious and talented individuals. In the past 20 years, Puerto Rico’s labor force shrank by about 20 percent, with the health-care sector being especially hard hit. The population of children under 5 has fallen 37 percent since 2000, and Puerto Rico has more of its population over 60 than any U.S. state.

And then came Hurricane Maria.  According to a recent NYT piece, almost half of American’s don’t know that Puerto Ricans are American citizens.

In my considered opinion, using government money to help Puerto Rico has a much higher humanitarian return than devoting it to the further subsidization of health care.

1 JonFraz September 26, 2017 at 1:32 pm

Re: In my considered opinion, using government money to help Puerto Rico has a much higher humanitarian return than devoting it to the further subsidization of health care.

This is not an either-or choice. And if do need an “or’ to take money from might I suggest our imperial projects around the globe?

2 ttt September 26, 2017 at 2:02 pm

never let a disaster go to waste.

so blatant

3 Jeff Fisher September 26, 2017 at 2:15 pm

Has it even been two weeks since the last massive increase in military spending?

4 Art Deco September 26, 2017 at 2:49 pm

The ratio of military spending to domestic product is near the post 1939 nadir.

5 Anon7 September 26, 2017 at 5:26 pm

+1

6 PBT September 26, 2017 at 6:08 pm

It’s true, though little appreciated:

https://fred.stlouisfed.org/graph/fredgraph.png?g=fcZZ

7 Jan September 26, 2017 at 7:18 pm

Yet we have no challengers for world superpower and military spending. Far, far from any challengers in terms of spending.

8 Anon7 September 26, 2017 at 9:06 pm

Yes, let’s be complacent like our NATO allies who couldn’t even manage to mount a simple air campaign against a third world country like Libya without the U.S. military setting the table for them: “Sarkozy wanted to trumpet the flights he was taking in the air campaign, despite the fact that we [the U.S.] had wiped out all the air defences and essentially set up the entire infrastructure [for the intervention].”

9 Benjamin Cole September 26, 2017 at 10:03 pm

Re military outlays: Add in VA spending, black budget, and pro-rated interest on the national debt, before you decide that military spending is too high or too low.

But more than that, what would be the minimum we could spend and dissuade foreign invasion of the US?

If we hired a McKinsey or a Bain, and said, “We want you to devise the cheapest plan, from scratch, for military security of the US,” what would they devise?

I am sick of global obligations. Explain how we benefit from the $6 trillion in outlays and incurred obligations in Iraqistan. How did Vietnam work out?

The trillion dollars of annual dinosaurs we have today?

10 Anon7 September 26, 2017 at 11:16 pm

The cheapest plan would be nuclear weapons and an ironclad commitment to use them in response to any hostilities direct against the U.S., conventional or nuclear (kinda like Kim Jong-un).

11 Roy LC September 26, 2017 at 5:03 pm

Puerto Rico currently has a life expectancy of 79.8 years, in the US it is 79.1 years. There are 35 US states with lower life expectancy, WV is 4 years less than PR. Sure PR has high unemployment at 10% over all but its worst MSA Guayana has a 17.5% but El Centro is 24.2%, Yuma is 23.8%.

So humanitarian wise we need to sacrifice healthcare, which after all includes Puerto Ricans, in favor of Puerto Rico’s humanitarian crisis?

12 Jan September 26, 2017 at 7:17 pm

Yup.

13 Viking September 26, 2017 at 1:34 pm

“In my considered opinion, using government money to help Puerto Rico has a much higher humanitarian return than devoting it to the further subsidization of health care.”

My conclusion from the figures mentioned above, is that government debt is unsustainable, and one should live by the old adage of not throwing good money after bad money, like in Greece and Detroit.

14 Alistair September 27, 2017 at 4:50 am

+1. Hasn’t Puerto Rico enjoyed relatively generous fiscal transfers, as a proportion of it’s GDP, over the years?

15 mulp September 27, 2017 at 4:40 pm

Not since the 80s. One of the biggest transfers was military spending, that plus huge tax dodges for global corporations building assets in PR, heavily in high value, low mass products like circuit boards and drugs.

Super integrated circuits and electronic devices killed a lot of the circuit board production, and these storms are likely to wipe out a lot of the drug production and logistics. If they are not back in operation within weeks, alternative production will be needed, and if it’s easier to simply import from Europe, then the logistics will shift, and reversing the changes in supply chain back to PR plus restarting PR operations will be more costly than continuing to pay the higher import costs over the pre-storm baseline.

And the $300 million per year US military spending ended in 2004.

16 Art Deco September 26, 2017 at 1:38 pm

Puerto Rico’s employment-to-population ratio is 0.35. The rest of the country’s is 0.60. Rates like Puerto Rico’s are seldom seen bar in countries which have had natural resource bonanzas the proceeds of which have been spread around. Suggest the problem there might be minimum wage laws and social transfers set with reference to mainland income levels (and thus totally inappropriate for Puerto Rico).

The place also has some severe quality-of-life deficits. The homicide rate is 5x what it is on the mainland. You also hear stories to the effect that they’re not ace at institution building: that the public fiscal system’s a mess, the primary and secondary schools are hopelessly ineffectual, and higher education is ruined by impenetrable institutional politics.

17 FYI September 26, 2017 at 1:49 pm

I wonder if people from Puerto Rico feel like Americans… It seems to me that they are just a foreign country who is benefiting from a sugar daddy. That never works.

18 Careless September 26, 2017 at 2:23 pm

They feel so American they field their own teams in the Olympics. Cast them off already.

19 napoleon sansomite September 26, 2017 at 2:37 pm

standard VGA display adapter is said to provide a palette of 256 simultaneous colors from a total of 262,144 different colors.

The pallet, the mallet. The duke would walk around the gothic sculptures behind the public library and there were days when he gave me a florin or Kreutzer or a piazza, and I would go to the market and chew on sweetmeats. But on one occasion and stayed behind and spied on the Duke and saw what he did and I was most surprised. Because the Duke knelt in a manner that was unfitting for a man of his stature on the asphalt road between the pigeons stalking and undergoing their roundabouts, and the duke stretched his hands over the pebbles on the on the asphalt and placed his index finger over a multitude of muti variable rocks and gems and specks of mica and I saw the shade of his eyes and they were sealed and airtight and the irises were covered by pupils and inside the apiture there was a sunspot from sun light hidden by the Suffolk air at its most prim and rose. And his right eye opened and caught my sight but we never spoke of this.

20 Sigivald September 26, 2017 at 4:16 pm

The USVI, Guam, and American Samoa also have Olympic Committees, and all have also had their own teams.

Several British unincorporated territories have, as well.

This is not some Weird Thing about Puerto Rico; it’s true of all the territories.

21 Careless September 26, 2017 at 5:55 pm

And?

22 Careless September 26, 2017 at 5:59 pm

Cast. Them. Off.

23 Cooper September 26, 2017 at 6:43 pm

Cast them off?

Guam couldn’t survive as an independent country. Plus it has useful geo-strategic advantages for the US military.

The same is true for the USVI and the Northern Marianas Islands.

Puerto Rico, on the other hand, has about as many people as Uruguay and nobody argued that Uruguay is incapable of surviving as a nation state.

As for DC, it should be merged with Maryland just as the Virginia-side of DC was merged back into Virginia.

24 Careless September 26, 2017 at 8:44 pm

Guam couldn’t survive as an independent country.

Ludicrous (there are smaller countries all over that side of the Pacific) and irrelevant. If they want to play at being their own country, let them be their own country.

25 Stubbs September 26, 2017 at 7:50 pm

We should condition any aid on allowing us once again to bomb the hell out of Vieques.

26 Greg September 26, 2017 at 8:26 pm

The folks who own the W hotel there may object.

27 citations! September 26, 2017 at 2:52 pm

motherfucker, list your sources.

28 napoleon sansomite September 26, 2017 at 3:29 pm

With the scythe on the porch lifted, it bore down upon them, the wild single blue glare in a wild instant that wasn’t so wild as it was dewfilled without any fear and without any shame. –Jack Kerouac

29 Brian September 26, 2017 at 1:40 pm

https://www.nytimes.com/2017/09/25/opinion/hurricane-puerto-rico-jones-act.html

“Under the law, any foreign registry vessel that enters Puerto Rico must pay punitive tariffs, fees and taxes, which are passed on to the Puerto Rican consumer. The foreign vessel has one other option: It can reroute to Jacksonville, Fla., where all the goods will be transferred to an American vessel, then shipped to Puerto Rico where — again — all the rerouting costs are passed through to the consumer.”

30 Matt2 September 26, 2017 at 2:04 pm

I’d need to see a specific reference to the punitive tariffs, fees, and taxes. Hawaii has direct service from Asia on foreign flag ships and US flag service from the west coast. No reason foreign flag ships can’t call PR direct from Asia. Also no reason that goods can’t be transhipped from hubs in Panama, Jamaica or Bahamas using all foreign flag vessels. If you think about how little of the consumer product mix is made in the US, the only thing that triggers a US flag shipping requirement is if it is imported to US mainland first then sent to PR.

31 Sigivald September 26, 2017 at 4:28 pm

No reason foreign flag ships can’t call PR direct from Asia

Well, if they want to go through a busy, expensive canal or around the horn or the cape, sure.

But realistically, no, nobody’s ever going to do that; why would you, to ship to a tiny market like PR?

(More importantly, though, the Times says that foreign goods can’t be shipped directly to PR, but none of the links it provides actually substantiate that*, that I can see.

[* It links, on that sentence, to an evidently historical – pre-GATT – report from NACLA, which doesn’t seem to make the claim the Times does; the NACLA report suggests, as far as I can understand it – it’s badly written – that tariffs are good for PR, and removing them is bad, because PR can’t compete. Even if we grant protectionist theory as acceptable, it’s not a claim about impossiblity of import, especially not one valid today under GATT and WTO rules, where PR has the same tariff regime as the US … “not much”.]

The Jones Act is bad policy, but I can’t see any part of it that prohibits direct import to PR from anywhere else in the world, or applies any tariffs that are not applied to the entire US; the Jones Act only prohibits foreign-owned transport between two American ports, after all.

The Jones Act is bad for the PR economy because it makes it harder to use cheap non-US transport to sell PR goods to the US, yes, but it’s not like that should be that important to the PR economy, specifically.)

32 mulp September 26, 2017 at 5:51 pm

China has made Haiti part of its silk road and has tentatively committed $30 billion in investment to make Haiti one of its Latin America and Caribbean shipping hubs. Are you saying I’m confused and Haiti is not in the Atlantic but in the Pacific or India ocean instead???

Now if the Jones Act is bad policy, isn’t it bad policy to prohibit Chinese trucking companies and Chinese truck drivers operate in the the US moving cargo from Chinese ships to destinations in the US. Or courses, China would likely use Chinese workers to fix railroads in thee US, after using cash from selling Chinese made goods to Americans to buy all the US railroads. By using prefab track made in China and Chinese construction workers, Chinese workers would deliver Chinese goods throughout the US faster, on high speed intermodal freight, and cheaper than US workers.

Free lunch economists consistently argue paying US workers costs too much and Americans will be richer if they only pay non-US workers.

33 John September 26, 2017 at 8:43 pm

Chinese have a lot of experience building our railroads.

34 matt September 27, 2017 at 11:32 am

The argument is that because Puerto Rico is a relatively small market, ships from foreign ports would need to stop there and then in another nearby port (most of which are American). It’s these journeys that are hit by the Jones Act; a ship from China to Miami can’t make a stop at Puerto Rico.

35 Roy LC September 26, 2017 at 2:41 pm

The Jones act only applies to cargoes carried between the a US port and another US port. It has nothing in it forbidding foreign imports as long as they are not already imported to the US. In other words goods that have already paid tariffs, if applicable, on entering the US.

The Jones act is awful but it is not like the navigation acts or the old Spanish monopoly given to Seville for all trade with Americas.

36 Anon7 September 26, 2017 at 5:40 pm

All the more reason to set Puerto Rico free of the contradictory mix of U.S. federal government taxes, regulations, AND subsidies:

https://www.reuters.com/article/usa-puertorico-tax/backdoor-bailout-boosts-puerto-ricos-revenues-idUSL2N0LF1BE20140210

37 buddyglass September 26, 2017 at 8:34 pm

“Puerto Rico Jones” sounds like Michael Vick’s newest fake hotel name.

38 msgkings September 26, 2017 at 11:23 pm

Holy smokes did I LOL

39 Art Deco September 26, 2017 at 1:41 pm

The place might benefit from a conservatorship – if you could find someone capable of running it. I don’t think their local politicians would like that, of course. It would help on an abiding basis if it influenced the terms of debate in PR. (DC seems much better governed now than was the case a generation ago).

40 DevOps Dad September 26, 2017 at 4:42 pm

Since Puerto Rico presently shows no signs of neglect or abuse, we could enact a Puerto Rico `Safe Haven` law to put it up for adoption to Columbia, Venezuela or possibly another Hispanic island nation. Puerto Rico could then receive the care it needs by a similar people and culture and the US would be allowed to withdraw.

41 Anon7 September 26, 2017 at 5:45 pm

An outright sale would be much better. As I’ve said before, China with its imperial ambitions and hoard of cash make it a good mark for a bargain sale.

42 mulp September 26, 2017 at 5:57 pm

China is already working on buying Haiti. Do you think Trump can offer China a better deal so it abandons Haiti?

Maybe Trump will win China over by keeping the US citizenship if born in PR, and no visa travel to the US.

43 Anon7 September 26, 2017 at 6:19 pm

¡Si se puede! Selling worthless junk is right up Trump’s alley.

44 Ray Lopez September 26, 2017 at 1:42 pm

Shorter summary: life in the tropics is hard, economically. I’m surprised Hawaii is not a basketcase.

45 Hwite September 26, 2017 at 1:46 pm

” I’m surprised Hawaii is not a basketcase.”

It’s a real mystery….

46 Art Deco September 26, 2017 at 2:55 pm

Puerto Rico has a manufacturing oriented economy. Hawaii’s largest industry is the hotel-and-restaurant business.

Hawaii isn’t suffering horrendous street crime and their governments have a functional budgeting and payments system.

47 mulp September 26, 2017 at 7:33 pm

You bought the “Join the Navy See the World” line as tourism? Military spending in Hawaii has been cut drastically since Reagan as a share of the economy, and after the sequester has been cut below 10%. But that is much higher than most States with only Virginia getting more military spending as share of gdp.

PR saw it’s military spending cut starting right after the end of WWII.

Hawaii is a State thanks to the 2 to 4 year or more Navy “vacations” real Americans had in Hawaii. Very few real Americans had extended vacations paid for by Congress after WWII, so no demand for Statehood.

48 Art Deco September 27, 2017 at 1:43 pm

Military compensation accounts for 9.4% of all earnings on the island and 6.8% of personal income in general. The analogous figures for 1985 were 14.8% and 10.4%. Between 1985 and 2016, military compensation as a share of earnings nationally declined from 3.9% to 1.6%. It was rather less drastic in Hawaii than elsewhere.

I’m sure the sailors on The Arizona were just loving their ‘vacation’.

Hawaii and Alaska had in 1920 a combined population of 310,000, little enough to explain why Congress did not admit them

49 ʕ•ᴥ•ʔ September 26, 2017 at 1:46 pm

I expect PR to depopulate (as the governor implied), and that won’t be a bad thing. More opportunity on the mainland, and a smaller population reliant on tourism and agriculture.

I can see the strategic need for US ships, and the Jones Act, but exempt both Hawaii and PR. Neither are necessary to make it work.

50 Art Deco September 26, 2017 at 2:50 pm

Why reliant on tourism and agriculture? They’ve a manufacturing oriented economy right now.

51 ʕ•ᴥ•ʔ September 26, 2017 at 3:04 pm

I assumed that with 2-way Jones Act impact that would be difficult, but more power to them!

52 msgkings September 26, 2017 at 2:59 pm

Speaking of tourism, I’ve never understood why PR isn’t more of a tourist destination. They should have a bunch of 4-5 star resorts that the guests never leave, like Mexico and Jamaica and the Bahamas do, but they don’t. And no passport or different money needed for Americans. What’s the catch?

53 ʕ•ᴥ•ʔ September 26, 2017 at 3:06 pm

I have never been, but my father, a well travelled gentleman, thought he had seen the most beautiful women in the world.

No offense, Thiago.

54 msgkings September 26, 2017 at 3:24 pm

Well, JLo is pretty hot. Actually better looking since turning 40.

55 Li Zhi September 26, 2017 at 3:39 pm

If you’re into pear shapes…

56 msgkings September 26, 2017 at 3:45 pm

Yeah her celebrated rear end is the least appealing thing about her. The rest is pretty nice.

57 Careless September 26, 2017 at 10:46 pm

Well, JLo is pretty hot.

This is the wrongest thing you’ve posted in all these years

58 msgkings September 26, 2017 at 11:24 pm

Seriously? She’s a total MILF. Anyway I couldn’t think of any other Puerto Rican ladies who were attractive.

59 TMC September 27, 2017 at 9:35 am

msgkings +1

60 The Other Jim September 26, 2017 at 3:38 pm

>What’s the catch?

I’ll take “Staggering Levels of Graft and Corruption” for $500.

61 msgkings September 26, 2017 at 3:44 pm

They don’t have that in Mexico or Jamaica?

62 Urso September 26, 2017 at 4:09 pm

Relative to Mexico, Jamaica, etc?

63 Axa September 26, 2017 at 3:39 pm

@msgkings: resort owners say it’s because development costs are higher compared to other Caribbean island as a higher minimum wage. http://uk.businessinsider.com/r-puerto-rico-tourism-industry-lags-rivals-offers-little-relief-from-debt-crisis-2015-7?r=US&IR=T

However, Florida has the same labor laws and tourist number has been growing in the last 20 years, so?

64 Laura S September 26, 2017 at 4:50 pm

They don’t speak English in Puerto Rico. The official langsuage is Spanish, and it is very challenging to find anyone, even among the young, who speaks English. English language instruction is not a major curricular goal in the schools.

For this reason, tourism is a fraction of what it otherwise might be. Job opportunities are limited–no offshore call centers in PR. No real opportunity to leave PR and move to the mainland easily. No real opportunity to move from the mainland to PR easily.

This is why Hawaii is successful and PR is not.

65 Potato September 26, 2017 at 5:06 pm

No opportunity to leave for the mainland ?

Um. What.

66 msgkings September 26, 2017 at 5:27 pm

Then why is Mexican resort tourism successful (Spanish speaking) and PR’s isn’t? Cooper below says they have a low ratio of coastline to area but I don’t see why that’s a factor, still plenty of beaches to put a 5 star resort that Americans don’t need a passport or money changer to visit, and one closer to the Acela corridor than Mexico.

67 Potato September 26, 2017 at 6:06 pm

Having lived in Mexico, I believe I can shed some light:

Mexico in tourist areas vs non tourist areas is night and day. Tourist areas in less secure parts of the country have:

Mexican Marines literally patrolling the streets randomly with antique M-16s, federal police with submachine guns standing at random checkpoints, and police that remove anyone who isn’t connected and looks like they might be gang affiliated.

They’re all bought and paid for of course. They belong to the cartels. However, they still have to respond to violence or tourist incidents. Hence, the gangs and cartels know that they have to keep the violence out of the area.

In PR there’s no such deal with the authorities. Violence in tourist areas is just as unlikely to be dealt with as in non tourist areas.

Hilarious and sad, but as every Econ dude knows, the optimal corruption rate in 3rd world states is not zero.

68 Laura S September 26, 2017 at 6:17 pm

In Mexico is common that the hotel staff speaks English and most people in tourist areas speak enough to get by. In PR it’s Spanish.

69 Cooper September 26, 2017 at 6:21 pm

Hawaii gets a lot of international tourists, especially of the high spending Japanese variety.

They also have much better tourist infrastructure than PR.

In my experience, Puerto Rico felt pretty run down/third worldy compared to Cancun, Mexico.

Given that Mexico seemed to be much lower cost, it makes sense that people would choose to vacation in Mexico over Puerto Rico.

70 Axa September 27, 2017 at 3:59 am

Legal drinking age is 21. Puerto Rico has nothing to offer to the 18-21 population.

71 Bart September 27, 2017 at 1:47 am

I took my whole family on a vacation to PR and we had a great time. None of us speak Spanish and none of us had any trouble. Plenty of people spoke English. All the tourist companies were somehow run by white English-speaking people, which I found a bit odd, but there it is.

72 JonFraz September 27, 2017 at 2:09 pm

Lots of Puerto Riqueños have emigrated to the mainland over the years. There are large diasporas in New York and Florida. But it is true there isn’t much migration the other way. The island has nothing to offer you can’t find in Florida.
When we visited in 2008 we didn’t have a lot of trouble with the language. I speak Spanish, although mine is very Castilian and the local dialect is a bit different. Hotel staff was English-speaking. We only had to deal with one restaurant where it was Spanish only.

73 thfmr September 26, 2017 at 5:21 pm

I went there as a 21-year-old to see what Hunter Thompson had found interesting about the place. Spent about a month wandering around and taking publicos from town to town. My assessment was that PR could be the bastard child of Tijuana and Hawaii. Beautiful island beset with gangs and and corruption. Bring the kids!

74 msgkings September 26, 2017 at 5:28 pm

So is large swathes of Mexico and Jamaica, but that doesn’t stop tourists from visiting the resorts. The authorities keep the gangs far away from the tourist $.

75 JonFraz September 27, 2017 at 2:04 pm

We went in 2008 and were not much impressed. Old San Juan and the forts were kind of neat, but my impression was that the island was one big tourist trap. Also, kind of schizoid: metric and English measurements both in use. English and Spanish in some kind of strange farrago.

76 mulp September 26, 2017 at 7:38 pm

Amexican workers are better off when they are paying non-US workers to produce everything they buy? It’s just too costly to pay American workers to work?

Or do you believe American workers show spend much less money after being paid much less money to work. The less workers spend, the faster the economy grows?

TANSTAAFL– economies are zero sum. Cut pay, cut spending and gdp.

77 Hwite September 26, 2017 at 1:58 pm

Puerto Rico’s experience ought to interest the fans of open borders, along with the fans of “institutional” theories of economic development. But the results would be too depressing, so they don’t.

“In my considered opinion, using government money to help Puerto Rico has a much higher humanitarian return than devoting it to the further subsidization of health care.”

As if we haven’t been trying that for the last 40 years? Tyler’s right that there has been a failure of policy there, but then proceeds to recommend the same thing. He’s just signalling his leapfrogging loyalties.

78 Potato September 26, 2017 at 5:07 pm

They’re literally Americans. Whose loyalty is he leapfrogging ?

79 Dan Hill September 26, 2017 at 7:24 pm

@Potato – don’t you understand that there are Americans and then there are “real” Americans. Putting the real Americans back on top is the entire basis of the Trump presidency.

80 Anonymous September 26, 2017 at 7:48 pm

How many, if asked, would identify as such? I don’t think of them that way: they are American like Nigerians in 1955 were “British.”

81 Bob from Ohio September 26, 2017 at 2:04 pm

We should get them recovered from this, assume their debt and give them independence.

Fresh start. A win for us and them.

82 Li Zhi September 26, 2017 at 3:44 pm

You’re assuming our government can walk and chew gum at the same time. They can’t. What they can do is pour money down the drain (to contractors who don’t deliver anything but campaign contributions), institute vast bureaucracies to “measure the impact” of their wasteful and ineffective spending, and then pour more money in to “combat” the crime, unemployment, and illiteracy which is the core of PR’s identity. The idea that they’ll decide to cede control of PR is delusional.

83 Anonymous September 26, 2017 at 4:28 pm

When 97% of them want statehood, is it really “giving” them independence?

https://en.m.wikipedia.org/wiki/Puerto_Rican_status_referendum,_2017

84 Potato September 26, 2017 at 5:13 pm

Not against statehood for PR, but dude come on.

23% turnout. Either put a huge footnote that 22% of “them” voted for statehood or retract the statement.

2012 referendum over 25% of voters refused to answer the question regarding statehood. 78% of eligible voters chose to vote, and of them 54% rejected the current status quo.

I realize you’re Canadian but Jesus Christ. This question isn’t simple, even to our fellow citizens in PR. They’re decidedly undecided.

85 Bob from Ohio September 26, 2017 at 5:14 pm

The referendum was boycotted by one side.

There are never going to be a state. Being a colony is no good for them. Independence will let them chart their own course.

“The idea that they’ll decide to cede control of PR is delusional.”

Who is “they”? Is PR so much of a prize?

86 Anon7 September 26, 2017 at 6:09 pm

+1. The current trajectory is for Puerto Rico to become a retirement home for the people who decide not to emigrate. Making it a state would be like accepting Greece into EU, and we all know how that turned out.

87 Roy LC September 26, 2017 at 5:15 pm

So we get an independent basket case in the Caribbean with 95% of its population being US citizens. Sounds awful.

88 anon September 27, 2017 at 6:27 am

I thought they were “citizens by act of congress” or something, not citizens by birth… for exactly this reason. But I could be remembering wrong.

One more vote for independence. Just have Trump insultingly refer to them as a colony a few times & you’ll have an anti-colonial movement going in no time…

89 Publius September 26, 2017 at 2:09 pm

hard to look on the bright side, but look on the bright side:

Puerto Rico can do a re-over

how many countries are in a position like post-WW2 Japan? Puerto Rico can leapfrog every other island in that area

make it the polar opposite of Venezuela, and eat popcorn

90 Roy LC September 26, 2017 at 2:42 pm

Puerto Rico is not that sort of devastated.

91 Wonks Anonymous September 26, 2017 at 2:57 pm

Pre-war Germany & Japan were industrialized countries with the capacity to challenge the most powerful militaries on earth. Afterward they were able to rebuild bombed buildings, because they retained most of that capacity. Puerto Rico is in a radically different situation.

92 JonFraz September 27, 2017 at 2:12 pm

A giga-ton of American money went into that rebuilding.

93 thfmr September 26, 2017 at 5:25 pm

If you can repopulate the island with Germans or Japanese, you might be onto something.

94 Alan Goldhammer September 26, 2017 at 2:16 pm

The removal of the section 936 tax preference devastated Puerto Rico. Certainly in the pharma industry (where I spent my career), everyone jumped out of Puerto Rico and moved operations to lower tax havens in Europe (those savvy Irishmen knew a thing or two about attracting new business). I had a lot of friends in QA/QC who used to make regular trips to Puerto Rico for manufacturing plant inspections until the tax break was gone.

95 Roy LC September 26, 2017 at 2:43 pm

This +1

It was actually a good deal for the US, it subsidized PR and yet kept US pharmaceutical manufacturing in the US under direct FDA supervision.

96 Publius September 26, 2017 at 2:45 pm

Ah, the old Clinton magic touch.

97 Bill Walker September 26, 2017 at 2:35 pm

Enough with the “tropical people are inferior” BS, that was wrong when Queen Victoria’s subjects were repeating it to each other.

Singapore. QED.

98 Art Deco September 26, 2017 at 4:26 pm

Well you’ve never been fucked in the ass Mr. Walker!

99 Thor September 26, 2017 at 5:12 pm

They have more advantages than Singapore did. Such as proximity to the markets of the US. All they need is for their hard-working people to … oh oh, wait a minute.

100 Roy LC September 26, 2017 at 5:17 pm

With Singapore as your comparison there are so many awful places to go with that…

101 asdf September 26, 2017 at 2:50 pm

The unconventional libertarianism of giving away tax dollars to failed foreign states.

The unconventional patriotism of wanting flags, anthems, and any other pro-americas symbolism banned from public.

Etc.

102 foobarista September 26, 2017 at 2:56 pm

If the “help” starts with big pension haircuts, abolition of government unions, making civil service jobs into at-will employment, and tearing up civil-service labor “agreements”, we may have something to talk about.

If the help is to make existing arrangements “work” while physical infrastructure is left to rot – as it almost always is in “bailouts” – screw it.

103 The Other Jim September 26, 2017 at 3:35 pm

>”the island has lost about 9 percent of its population, including many ambitious and talented individuals.”

Dear God, I pray that an editor forced those last six words on you.

Even I don’t want to believe you are THAT much of a pandering fool.

104 ttt September 26, 2017 at 3:41 pm

When Puerto Rico sends its people, they’re not sending their best. … They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people

105 Art Deco September 26, 2017 at 3:57 pm

I’ve been cuckolded more than once by a Puerto Rican.

106 Thor September 26, 2017 at 5:08 pm

I knew it! The Cuck-Meister is a Puerto Rican, and he resents the suspicion the majority of the commenters have of statist solutions to PR’s problems.

107 Potato September 26, 2017 at 5:18 pm

There are a lot of talented and ambitious PRicans. Is your implication that there are not any?

So much for Sailer’s “citizens first.” True colors and such.

Gross.

108 So Much For Subtlety September 26, 2017 at 8:14 pm

Really? Where are these talented and ambitious Puerto Ricans? If I have a heart attack, what are my chances of being operated on by a Puerto Rican doctor?

Most people will only ever see a Puerto Rican on Sesame Street, if they need a policeman in downtown New York, or if they do jury duty. Plus some rappers. And Jennifer Lopez. That is about it.

109 buddyglass September 26, 2017 at 8:53 pm

Entertainers: Benicio del Toro, Rita Moreno, Raul Julia, José Ferrer, Ricky Martin,
Sports: a bunch of baseball players
This guy: https://en.wikipedia.org/wiki/Horacio_Rivero_Jr.
And the subset of these guys living and working in the U.S.: https://en.wikipedia.org/wiki/List_of_Puerto_Rican_scientists_and_inventors

110 chris September 28, 2017 at 1:47 pm

Yes, all great people, I’m sure; but didn’t most of them leave Puerto Rico as soon as they could? You see? Brain drain.

111 Cooper September 26, 2017 at 6:28 pm

Brain Drain.

Puerto Rico is losing its ambitious youngsters. The people left behind are disproportionately uncompetitive in the global economy. The same happened to Greece and rural Kentucky.

112 Li Zhi September 26, 2017 at 4:00 pm

Gosh, I don’t know much about the so-called citizens living in PR. Are they covered by Medicare? Medicaid? Social Security? What is the withholding rate? (I’d assume the same as in the real USA.) PR has been, continues to be a disaster, and shows absolutely zero indications of improving its fundamental problems. The flight of the population indicates what profound dysfunction exists there. The solution is not “more government money”. But I’d favor requiring people who use the phrase “government money” to live there, THAT would fix things! (Especially since they’d lose the right to vote in Federal elections). That’s MY money, bud. Keep your filthy hands off it.

113 Art Deco September 26, 2017 at 4:07 pm

Take heed my celestial friend, a Puerto Rican will cuckold you at the first opportunity.

114 Roy LC September 26, 2017 at 5:34 pm

They get Social Security pensions and Medicare but no SSI, so they pay FICA, but Medicare has lower reimbursements in PR as well, so it could be seen as sort of a raw deal but cost of living is a lot less. The Food Stamp program is different than in States and actually pays cash, back in the day food stamps often traded at par in Puerto Rico and had no limits on what could be purchased, so this is just more of the same.

However there is no Federal Income Tax on Puerto Rican income. PR has its own income tax but if you have ever been there you can see that their is a lot of fraud of the sort that the Federal IRS would shut down very quickly.

All this stuff is case by case and the US has only two of these commonwealths. It is really different in North Mariana Islands.

115 Bob September 26, 2017 at 4:04 pm

The real secret here is putting together Tyler’s closing arguments and the latest Econtalk: It’s not just that Puerto Rico and Greece aren’t catching up: It’s that metros under 1M people aren’t catching up either. It’s just that we have little trouble offering transfers when we can to others in the US. Awful things happen when the states with the most economic activity don’t want to be part of transfers: see Catalonia. Average is over alright.

116 Cooper September 26, 2017 at 4:18 pm

Puerto Rico, if it were a state, would be the 3rd or 4th most densely populated state in the country.

If we assume that more density means more prosperity, Puerto Rico stands out as a counterexample.

As for tourism, Puerto Rico has comparatively little coastline. It’s shaped almost like a perfect rectangle. It’s ratio of beachfront property to total land area pales in comparison to a state like Hawaii or an archipelago nation like the Bahamas.

117 Oahu September 26, 2017 at 4:49 pm

Oahu has almost twice the population density of PR and seems to attract a few tourists.

118 Cooper September 26, 2017 at 6:18 pm

In the Bahamas, tourism accounts for nearly 45% of that country’s GDP.

Hawaii’s tourism industry represents 21% of the state’s economy.

Puerto Rico? Only 7%.

Hawaii is 3X more dependent on tourism than Puerto Rico despite being much further away from major population centers.

Visiting PR just isn’t that cheap and there’s very little in PR that isn’t better somewhere else.

Sources:
https://www.washingtonpost.com/blogs/govbeat/wp/2013/09/27/hawaiis-14-billion-tourism-industry-back-to-pre-recession-levels/?utm_term=.f173e1d08b4f

https://en.wikipedia.org/wiki/Economy_of_Puerto_Rico#Tourism

https://en.wikipedia.org/wiki/Economy_of_the_Bahamas

119 Mark Thorson September 26, 2017 at 4:40 pm

We need a character who can lead a PR independence movement. Thank God the Philippines won independence in 1946 and is not today a U.S. territory.

120 FYI September 26, 2017 at 4:52 pm

I am not sure if you are being sarcastic or not. How does the Philippines compare to PR?

121 msgkings September 26, 2017 at 5:31 pm

I think his point is the Philippines are an even bigger mess than PR by orders of magnitude, and it’s a good thing it’s not “our” problem the way PR is.

122 FYI September 26, 2017 at 6:34 pm

That makes sense. I know someone else mentioned this before, but I wonder why Hawaii turned out to be an exception here…

123 Roy LC September 26, 2017 at 5:52 pm

Or maybe the Philippines could have become as nice as Puerto Rico. A US Commonwealth of the Philippines could be pretty nice. Of course it would suck for the Filipino political class, which is probably more why it didn’t happen than any other issue.

124 JMCSF September 26, 2017 at 5:06 pm

Probably increased migration to the US will result. Puerto Ricans typically vote democrat and many will settle in Florida. I wonder what Congress will do. Solve for the equilibrium, or whatever Tyler says.

125 Cpt Obvious September 26, 2017 at 5:08 pm

Surprise, surprise: A Latin American country is a Latin American country. Give them the independence…

126 Jay September 26, 2017 at 6:34 pm

Will left-wing lunatics ever reject the cave-man accounting methods of pay-go and ever evolve to accept sophisticated accrual–based accounting for government-run ponsi schemes?

127 Dan Hill September 26, 2017 at 7:29 pm

Tyler, you say (in the linked article) – “Increasingly, it seems that many parts of the Western world might never “catch up,” including Greece, southern Italy, much of the Balkans and much of Latin America, in addition to Puerto Rico. One of the pleasing features of the 1990s, in retrospect a delusion, was the notion that proper policy and good multilateral institutions would bring most of the world into consistent, steady-state growth at a higher rate than what the wealthier countries could manage.”

Seriously? When did Greece and PR and all these other places that are failing to break out of the middle income trap try “proper policy”? We’re talking places with overlarge, corrupt public sectors, taxes focused far to heavily on the productive sectors of society, heavily protected inflexible labor markets and the list goes on.

128 Cooper September 26, 2017 at 7:37 pm

Maybe it should be phrased as “Our ability to create better political institutions in places like Greece, Puerto Rico, etc. is more limited than we once imagined”.

129 Floccina September 27, 2017 at 11:30 am

If Europeans all spoke the same language would Germany be like the USA rust belt and Greece and Italy be growing like Florida, California, and Arizona?

130 chris September 28, 2017 at 1:03 pm

I’ve heard that like Greece, Puerto Rico has suffered brain drain – as soon as they can, smart people leave. If true, it’d be sort of difficult to ‘transform’.

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