Commonwealth Complicity in Puerto Rico Debt Crisis

Governor Garcia Padilla’s fiscal plan was presented to the PROMESA board and rejected as not meeting the requirements of the bill. The governor refused to submit a new plan, but his successor, Ricardo Rossello, has submitted a plan in cooperation with incoming Resident Commissioner Jenniffer Gonzales. Six other entities are preparing their fiscal plans, and the fiscal oversight board hopes to have its fiscal plan in place by January 31st, 2017.

While the emphasis is on plans going forward, there is still plenty of conversation about the causes of the crisis. One of the clearest voices may be that of Howard Hills, author of Citizens Without A State, an in-depth analysis of the legal and economic history of the relationship between Puerto Rico and the United States.

In a recent post at The Hill, Congress’s blog, Hills wrote that the “commonwealth” government of Puerto Rico and the federal government of the United States were both “complicit” in the bad decisions that led to the current debt crisis.

“The Cold War made it inconvenient to enable Puerto Rico to attain either statehood or nationhood.  So the artificial construct of the ‘commonwealth’ regime as a form of indefinite ‘autonomy’ was contrived,” Hills wrote. “The purpose of federal and local measures propping up the ‘commonwealth’ regime since 1950 was to manipulate rather than unleash the private sector, in order to preserve the status quo.  This was achieved through corporate welfare, market distorting tax exemptions and wealth redistribution schemes far more extreme than FDR’s ‘New Deal’ or LBJ’s ‘Great Society’ programs.”

The result of manipulating the economy to support the political status quo? “A robust, diversified, vibrant entrepreneurial culture grew stagnant, as Congress ignored the relevant historical evidence.” Puerto Rico has become one of the most difficult places for small businesses, even as giant corporations wash money through the Island for tax benefits without creating jobs that last.

“History proves,” says Hills, “that since 1796 each economically underperforming territory that became a State broke through to sustained growth, eventual prosperity and the ability to pay its way in the Union.”

Ignoring that historical fact lets opponents of statehood suggest that Puerto Rico needs to get into a strong economic position before becoming a state. In fact, most of the recommendations of the Congressional Task Force on Economic Growth for Puerto Rico will automatically apply to Puerto Rico when the territory becomes a state.

“Under the U.S. Constitution, the equal right of all persons with national citizenship to consent to laws that govern us can be secured only through the exercise of state citizenship,” Hills concludes. “That is because only citizens in states vote for members of Congress and the president… To suggest the only valid reason to become a state is to get more federal welfare is not merely clever to a fault.  It is misleading and ignores that since 1796 the only proven model for a U.S. territory to remain under the U.S. flag and succeed economically as well as politically has been statehood.”

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