Puerto Rico Fiscal Fiasco: Congressional Abdication of Territorial Clause Power

In 1961, President Kennedy signed an administrative order that limited federal oversight in Puerto Rico, creating conditions for the fiscal “perfect storm” now engulfing the island.  The federal control board included  in the House recovery bill for Puerto Rico appears to be the most direct and practical way to correct the mistake Congress made by going along with JFK’s intrusion into its territorial clause powers.  Those in Puerto Rico who oppose the control board have offered no viable alternative, and want federal assistance without accountability.

But accountability at the federal level is the topic of a recent commentary published by Puerto Rico Report that examines President Kennedy’s 1961 directive drastically limiting federal management of Puerto Rico policy affairs by the U.S. Department of the Interior.  With the stroke of a pen Kennedy exempted the “commonwealth” regime of territorial government from coordinated federal oversight that had been provided by territorial policy staff at DOI for decades, and continues to this day for all territories except Puerto Rico.

Just as Congress has accepted for more than a century the federal court decisions that say that the U.S. Constitution applies to Puerto Rico by analogy to the states rather than directly, for more than half a century Congress allowed Puerto Rico to take on debt using the illusion of federal backing.  The local political party favoring the current status quo even invented the myth that “fiscal autonomy” was a “pillar of commonwealth, ” at the same time the illusion of federal backing was being used to debt finance expansion of local government programs and services.

The local party propounding “autonomy” opposes statehood or true nationhood, the only two status options that would mean real autonomy for Puerto Rico.  Indeed, a former Governor from the autonomist party favoring the current status boasted recently that he had helped kill a 1998 bill that passed in the U.S. House of Representatives but died in the U.S. Senate.  That bill  would have allowed a federally sponsored vote in Puerto Rico between statehood, nationhood and the current status as defined by federal law, but the autonomist party lobbyists — including the same former Governor — joined forces with those who denied democratic self-determination to 3.5 million U.S. citizens in the last large U.S. territory.

Yet, only statehood or nationhood would end the current territory status in which a federal control board is within the power Congress exercises over the island.  That is why 54% of voters rejected the status quo in a 2012 referendum, and 61% chose statehood, leading Congress in 2014 to authorize and fund a federally recognized vote to confirm the 2012 results.

The current fiscal meltdown has been used as an excuse by the anti-statehood autonomist party to delay that vote.  Instead of recognizing that the non-sovereign status is the problem and statehood or nationhood is the solution, Republicans and Democrats in Congress are in denial that the “commonwealth” regime that abused its credit authority is a creation of Congress.

It is Congress that allowed the federal entity for administration of local civil affairs it instituted under a local constitution in 1952 to incur $70 billion in unfunded debt obligations.  Yet, beguiled by wily Wall Street lobbyists, whose clients are scrambling for priority in any federal debt workout program for Puerto Rico, most in Congress have been chanting a  “No bailout” and “Blame it on Puerto Rico” mantra.

As Congress evaded and avoided its historical and constitutional role in guiding territories to a permanent status, the local government emulated its “parent” government in Washington by making promises it could not keep without borrowing more money than it could afford to repay.  Those who argue that is not Congress’ problem need to think again.

Congress retains full, unrestrained, plenary powers of sovereignty over Puerto Rico.  The “commonwealth” regime of territorial government exists at the pleasure of Congress, and its delegated powers of “internal sovereignty” are limited to purely local matters not otherwise governed by federal law.  So if we are talking about blame, let’s begin with the advent of the so-called “commonwealth” model of in Puerto Rico since 1952.

It was then in the early 1950’s at the height of the Cold War that “autonomous association” was successfully advocated by left wing local government leaders in Puerto Rico, who had been tutored in the virtues of democratic socialism by FDR’s territorial policy  appointees for two decades during the New Deal era.  These autonomist party leaders convinced territorial policy makers in Washington that “commonwealth” was a clever scheme through which territory status would morph into an unprecedented permanent form of union.

They even persuaded many Cold War policy-makers in Washington that “commonwealth” would be a “new form of statehood,” and Congress was lobbied heavily to believe “autonomy” would make Puerto Rico a proving ground for new U.S. models for client state relations.  No one seemed too concerned that the Puerto Rican leadership at the time also talked a lot about “creative social experiments” to produce “optimal economic outcomes” through public sector enterprise.

Even more importantly, after WWII as the Cold War descended the U.S. was embarrassed that Puerto Rico was classified as a non-self-governing colony by the United Nations.  That made “commonwealth” just the gimmick needed to convince the U.N. to reclassify Puerto Rico under the ambiguous label of “autonomous association.”  In the crucible of the times that also was touted as a way to avoid indefinitely the politically inconvenient and difficult choice between statehood and nationhood that otherwise would have to be made.

The problem was and still is that territory status is constitutionally temporary, defined by federal territorial statutes subject to revision and repeal by Congress under its territorial powers.  So it was on Congress’ watch that  JFK’s directive, coupled with a bloated public sector that is the legacy of New Deal thinking that still exists in local political culture, has led Puerto Rico to the brink of failed client state syndrome.

The historically necessary and inevitable choice between full incorporation leading to statehood or nationhood should have been made before birthright U.S. citizenship was granted to the territory.  That is because no other large and populous territory with a U.S. citizen population had ever been denied statehood (e.g. Alaska and Hawaii in the modern era), and every U.S. administered territory with a non-citizen population has become a sovereign nation (Philippines, Palau, Marshal Islands and Micronesia).

In contrast to those orderly status resolution processes, the failed 60 year experiment called “commonwealth” has caused Puerto Rico to sleep on its right to statehood or nationhood, and cheated the people of the territory and the nation out of half a century of progress toward full democracy and prosperity.  This was rationalized based on the fallacy that adoption of its local constitution Puerto Rico and removal of Puerto Rico from the U.N. list of colonial areas means the “commonwealth” should be treated as constitutionally different from other U.S. territories.

This transfer of federal power by Puerto Rico’s overseers in the Kennedy administration served no federal purpose.  Rather, it was a political trophy for Puerto Rico’s psuedo-nationalist elites, whose cultural nationalism was demonstrated by ending English education in the federally funded public schools, while sending their own children to private schools to be educated to American norms in English.

Kennedy personally admired the “statesmanship” of local anti-statehood leaders who had helped the U.S. gloss over the true legal nature of “commonwealth” in the United Nations.  Yet, these territorial “diplomats” who lead the march to “autonomous association” did so knowing a U.S. legal memo was circulated to the General Assembly confirming Congress retained full sovereignty under its territorial clause power.

Having won in a vote so close it probably would be contested today, Kennedy also was well aware his re-election would be aided by Puerto Rican leaders able to deliver votes in New York and other Puerto Rican enclaves in the states.  Thus, Kennedy’s territorial advisers and the President himself were persuaded by the leader of the “autonomist” party in Puerto Rico to issue a presidential directive ending oversight of the operations, policies and practices of the “commonwealth” regime.

At the same time the White House was unable to provide continuity or sustained leadership on federal policy in Puerto Rico, due primarily to the fact that Puerto Rico policy was not of sufficient priority at that high level of responsibility.  The practical effect of Kennedy’s action was to abdicate Executive Branch responsibility to Congress.

This was unprecedented, because the committees of jurisdiction in Congress responsible for authorizing and appropriating federal finds and oversight of federal programs and services in the territories traditionally had been vigilant and jealous to guard Congressional authority and responsibility to manage all unincorporated territory affairs.  The best explanation for Congressional abdication of its historic role may be that anachronistic federal court jurisprudence still treats Puerto Rico as an unincorporated territory even after Congress granted birthright U.S. citizenship in 1917.

In a sense federal court rulings denying rights of citizenship under the Constitution created a need for autonomy to compensate for denial of equal citizenship rights.  That is why the legal and political asymmetries “commonwealth” was tolerated, even though it undermined and usurped the role of Congress in regulation of territories in the manner contemplated by the Territorial Clause of the Constitution.  This diversion of the Congress from the tradition of the Northwest Ordinance became particularly pronounced when combined with deregulation of local territorial government fiscal policy under the Kennedy directive.

Then in 1961 suddenly the President and seemly Congress were embracing the doctrine of autonomy without accountability as espoused not by the federal courts but by autonomist leaders from Puerto Rico, even though it remained juridically an unincorporated territory as defined by the Insular Cases.

The anomalies of these historical, political and legal developments from a constitutional perspective and the impact of Puerto Rico’s political economy are examined in “Citizens Without A State.”  That study reveals and confirms, among other things, that the advent of local constitutions in a territory did not require or result in a shift of institutional responsibility in the federal territorial establishment for administration of territorial affairs and federal-territorial relations.

Indeed, when the Philippines Territory became an autonomous “commonwealth” in 1934 it remained an unincorporated territory until Japanese occupation was ended and independence was granted.  Thirty-two territories that adopted territorial constitutions before becoming states were governed under federal territorial law and policy as determined by Congress without abdication of its powers to Executive Branch, or the abdication of Executive Branch powers to the territorial government, prior to the transition to statehood.

In 1992 President Bush issued a directive confirming the “commonwealth” remained a territory, calling for periodic self-determination until a permanent constitutionally defined status is achieved, and treating Puerto Rico as a state to the extent practible.  However, neither the Bush Memo nor a 2000 Clinton memorandum on Puerto Rico federal relations and status restored the federal policy oversight  or accountability JFK removed from the Department of the Interior or any other federal agency.

Howard Hills, the author of this post, was legal counsel in the National Security Council for territorial status issues in the Reagan Administration.  He is author of the recent book on Puerto Rico Citizens Without A State.

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