“Welfare state” actually means “a system whereby the government undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits.” That’s what the dictionary says.
But we are seeing plenty of people referring to Puerto Rico as a “welfare state,” and that’s not what they mean. They mean that the state of Puerto Rico will be one of the states that receives lots of government funding.
Which states are “welfare states”?
WalletHub produces an annual list of the most and least dependent states in the U.S. as of this writing, New Mexico is the most dependent state, followed by Kentucky and Mississippi. The least dependent states are Delaware, Kansas, and Illinois. Since Puerto Rico is not a state, it is not included.
Dependence is calculated by how many government contracts and grants a state receives, as well as how much they receive in social services. Arguably, contracts and grants aren’t welfare payments. In fact, the U.S. government uses the term “welfare” for just one program: TANF, or Temporary Aid to Needy Families. Other government benefits may be included when people talk casually about welfare.
HowMuch.net calculates how much each state receives in “welfare” — government support for individuals. California, New York, and Texas top this chart, probably because they have the largest populations. There is no attempt at this website to compare the welfare intake with the amount each state pays in federal taxes. In 2010, a pair of economists calculated Puerto Rico’s “net federal expenditures per capita” and found that 17 states, plus Washington, D.C., received more than Puerto Rico after considering federal taxes paid.
RichStatesPoorStates ranks all 50 states according to economic outlook, from #1 Utah to #50 New York. Judging by income data from the Census, New Hampshire is the richest states and Mississippi is the poorest.
What about Puerto Rico?
One thing you can say for sure after checking all these data-heavy sources is that they don’t agree.
Puerto Rico would receive more federal funds as a state, and wealthier residents would also pay federal income taxes. Gus Portela of the Puerto Rican Chamber of Commerce reports that Puerto Rico is expected to bring $7 million to $10 million in revenue to the United States.
Would Puerto Rico get more in government help than it would pay in taxes?
That would probably be true if Puerto Rico became a state today. Thanks to the current territorial status, Puerto Rico has had a much higher poverty rate and much lower employment rate than any of the 50 states for years. A pair of devastating hurricanes in the fall of 2017 shut down some ten percent of local businesses and created economic catastrophe for many households. Puerto Rico definitely needs some help right now.
The Puerto Rico Admission Bill calls for statehood for Puerto Rico no later than January 2021. If that bill passes, Puerto Rico’s position will change.
Investment from corporations in the past was based on tax incentives that cost the federal government twice what the companies “invested.” In spite of the high cost, these investments created few jobs. It was most profitable for the companies in question to wash lots of funds through Puerto Rico, not to create sustainable jobs. Naturally, that is what they did.
A stable political status and business-friendly policies would change that. Puerto Rico would be able to draw investors interested in establishing businesses in Puerto Rico. The trend of “onshoring” or “reshoring” — bringing manufacturing back to the U.S. from countries like China and Bangladesh — would be a natural fit for the state of Puerto Rico. Puerto Rico, like Hawaii and Alaska, would see strong growth in industries like tourism, construction, and manufacturing. Local entrepreneurs would benefit from federal support for small businesses.
By 2021, Puerto Rico would be in a stronger economic position. Just as territories which have become states are now in stronger economic positions than when they were territories, Puerto Rico will also benefit economically from becoming a state.
Should this affect statehood?
Looking further out into the future, it is impossible to make an accurate forecast. The most recent territories to become states, Hawaii and Alaska, are two of the richest states in the nation. Both were impoverished when they were territories.
It is just as reasonable to assume that Puerto Rico will increase its share of tourism, medical tourism, electronics, and manufacturing to become a wealthy state as to assume that it will be a poor state.
Does that matter?
It has never been the case that the United States chooses rich territories for statehood. Congress has been enthusiastic about statehood for territories that had gold, strategic importance, or a convenient political position. States have also been accepted when they were in debt, at war, and suffering through natural disasters. The myth that territories should be solvent if they want to become states is just like the myths that territories must speak English or apply in pairs or have consensus on statehood before they can become states.
Congress can choose to make Puerto Rico a state because it will be better for the U.S. as a whole to have a prosperous state than to have an impoverished territory. They can make Puerto Rico a state because it is the right thing to do. Either way, there are no financial requirements for statehood.