No More New Deal Gimmicks for Puerto Rico

The current Governor of Puerto Rico stepped into the media spotlight and made national headlines when he declared the territory’s central government agencies unable to meet obligations to creditors and investors. But he was a no-show and ignominiously hid in the Governor’s mansion instead of representing his people before Congress in June at hearings on his government’s fiscal crisis.

Instead, the Governor sent an ineffectual surrogate to tell Washington once again that he stubbornly refuses to address the real cause of economic crisis – the island’s historically unprecedented 115-year status as a territorial dependency that now has become a failed client state. Rather than rise to the challenge history presents to the Governor, he looks to Washington to rescue the anachronistic and now insolvent “commonwealth” regime of local self-government established by Congress in another era 65 years ago.

Instead of honoring the 2012 referendum in which a majority of U.S. citizens in Puerto Rico voted to seek an end to territorial status, the Governor consults with Washington think tanks about new federal fiscal and economic gimmicks that at best will only buy time before the economy gets even worse. Because any feasible federal relief would make sense only if tied to political status solution, the Governor is holding out for things to get so bad Congress is forced to save the day with a package of federal grants, debt relief, fiscal fixes and new federal programs and services.

In short, the Governor wants another New Deal, but this time just for Puerto Rico. Yet, he will not give the U.S. or his own people a new deal by allowing a Congressionally sponsored vote to confirm the 2012 vote for a permanent political status. The Governor is in denial that his own people voted to end the current constitutionally temporary territorial regime in favor of statehood (chosen by 61% of the voters in 2012), even though history shows us that statehood would result in massive investment in the island.

Turning his back on majority rule by his own people, the Governor insists status must be determined by “consensus,” which has no legal meaning. Faced with the exodus of American citizens leaving the island, the spiraling of “commonwealth” into fiscal failure, and the 2012 majority vote for a new status, the Governor has retreated into palatial splendor of the colonial mansion in San Juan to plot inaction and obfuscation with his yes-men.

Into the void created by the Governor’s lack of leadership, recently the NDN think tank affiliated with the New Policy Institute in Washington DC published a proposal by Simon Rosenberg and Robert Shapiro that Puerto Rico double down on social engineering experimentation by emulating Ireland’s economic recovery strategy from the 1980’s.

But the Ireland model for attracting foreign direct investment and attaining comparative advantage over competitors in the EU is based on government policy promoting low wages, low taxes, and “enterprise zones” dependent on artificial sovereign incentives. For this “national” model of domestic and international incentives employed by Ireland so it could compete in the EU common market to have any sustainable efficacy for Puerto Rico it would have to be part of a transition to separate sovereign nationhood.  

The people who live there know Puerto Rico already is within the customs territory of the U.S. and the economy is based on U.S. currency, and that full political and economic integration with the U.S. is the best path to a secure and prosperous future for the next generation of U.S. citizens in Puerto Rico.  In 2012 the voters rejected more of the same old New Deal gimmicks, propping up the “commonwealth” regime by treating Puerto Rico alternately as domestic or foreign to create special incentives for corporate interests that hold sway in Washington and San Juan.    

The Irish model for recovery that Rosenberg and Shapiro postulate would be a return to the New Deal and Great Society era programs aimed at making territorial status under the so-called “commonwealth” regime a tolerable alternative to statehood.  If Puerto Rico is not going to become a state then nationhood with sovereign power over the island economy may be the best model for economic success. But the Ireland model is not the solution if Puerto Rico is to remain under U.S. sovereignty and subject under the U.S. Constitution to the supremacy of federal law.

We have heard it all before. “Puerto Rico can become the Hong Kong of the Caribbean!”   Now it is “Puerto Rico can become to the U.S. what Ireland is to the EU!” But why try to invent a model of success imitating other nation-state economies when Puerto Rico does not have the political economy of a nation-state, and never will as long as it is a U.S. territory? 

There is a model of social, economic, political, legal, moral and cultural success for the U.S. territory of Puerto Rico. It is called statehood.

Every U.S. territory with a U.S. citizen population and the socio-political critical mass to become a state has experienced massive domestic and foreign direct investment, once Congress confirmed statehood would be the eventual status solution.  Historically, once U.S. citizenship is granted in a large and populous territory, equal rights and duties under the Constitution has been the only feasible political solution, and also the best formula to realize the territory’s economic potential.

You want comparative advantage?   You got it.   It is called statehood.

Exemptions from the federal shipping laws so the island can lower import costs, relief from federal minimum wage laws, access to Chapter 9 bankruptcy, or other territorial policy measures may jump start recovery in the short term.  But such measures are controversial in Congress due to inevitable abuses if allowed to continue too long.  If you want to “modernize the economy” and “turbo-charge productivity and growth,” terms employed by Rosenberg and Shapiro, try a little faith in the American idea that all citizens in every region compete on an equal footing.  

Just imagine what would happen in Puerto Rico the morning after Congress restored the historically tried and true Northwest Ordinance promise of statehood to 3.5 million U.S. citizens in Puerto Rico.  For one thing, Rosenberg and Shapiro will be on the first plane headed for San Juan to invest in real estate and find small capital companies looking for partners.  But they may find Puerto Ricans on the island, as well as from New York and Florida, beat them to the low hanging fruit!   

Once statehood is recognized as the future status of the island under federal policy, the old “West Side Story” clichés about Puerto Ricans in America will become a thing of the past associated with the “commonwealth” era.  

Instead, maybe the story of life in a territory told in “Oklahoma!” should be adapted to portray Puerto Rico affirming its cultural character, overcoming adversity, and converging with our nation.  After all, what statehood uniquely has meant for Americans in every territory that became a state is equal rights and freedom for all citizens, so they might use their God-given gifts to pursue and prosper in lives of purpose according to their beliefs.    

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