The recent Senate Finance Committee hearing on Puerto Rico’s financial crisis included a lot of discussion of the health care problems in Puerto Rico. There was a lot of talk about the inequality in federal programs like the Earned Income Tax Credit. There was a lot of discussion of tax credits that gave a temporary boost without leading to more or better jobs or to a stronger infrastructure.
The discussions showed that the Senate understands the financial problems affecting Puerto Rico. But they also understand some obstacles to federal help for Puerto Rico.
- Puerto Rico has to be more transparent about finances. The Government Development Bank for Puerto Rico, for example, has not produced audited financial statements in two years. As long as Congress can’t feel confident that they know the island’s financial details, they’re unlikely to feel confident about providing more funds.
- Puerto Rico has to be prepared to balance the budget. That probably can’t happen without a smaller government. Puerto Rico’s government currently is the main employer on the island. Often conversations on this subject focus on teachers and firefighters, but those aren’t representative of the government jobs. There would be hardship for government workers, but that may be unavoidable.
- Puerto Rico needs economic growth. Puerto Rico needs more jobs and more opportunities for residents. The economy has been shrinking, and people are leaving in droves. The recent increase in sales taxes and the high costs of doing business (including electrical power and logistics, both of which are more expensive on the island than on the mainland) work against economic development. A more business-friendly environment could help. Lowering taxes would help.
Senator Wyden said it this way:
Policymakers in Washington and in San Juan need to take a hard look at the origins of the crisis. Puerto Rico won’t be able to move forward until there’s an understanding of what’s holding it back… Just solving the immediate crisis is not a long-term solution. Puerto Rico also needs to find ways to modernize and grow its economy, or it will find itself right back here again.
We believe that statehood is the only lasting solution. Perhaps cooperation with Congress on fiscal actions will put Puerto Rico back on the path to prosperity… and a permanent political status which has been shown so many times before to improve the positions of U.S. territories.