Yes, with a “B” and we didn’t stutter.
When it comes to leadership, it is an area in which the President often fails. He talks a big game, but the facts are undeniable. In this case, he can’t just wave his magic wand and make the debt disappear.
So how did it get so bad?
Simply put, the government of Puerto Rico had a little translation problem from Spanish to English back in 1952. Don’t laugh, it really happened. The translation of “recursos totales” should have been “total revenue” but the leaders at the time decided it meant “total resources.” Because of this, they issued bonds like crazy, driving up the debt. In the last ten years, they really went aggressive, going from $43B in 2006 to over $70B now.
Oh, and the $73B figure does NOT include the over $40B Puerto Rico owes in unfunded pensions.
So that’s it? A massive debt because of a mistranslation? Not quite. The US Congress had its hand in it too.
I’m sure you knew that was coming.
Unknown to many, Puerto Rico was a lovely tax haven for the pharmaceutical companies. It was far cheaper for them to make their drugs on the island because there was no federal tax on Puerto Rican operations. One small town on the island, Barceloneta, had 14 pharmaceutical companies, including the manufacturer for Viagra. This led for the mayor of that city to proudly say, “We’re responsible for a lot of good moments.” Then, for some reason in the late 1990s, Congress decided it wasn’t going to allow this tax haven any longer and began scaling back all the tax exemptions and ended them in 2006.
Puerto Rico’s economy then tanks, and it still hasn’t recovered.
After hurricane Maria slammed into the island, many were wondering why neighboring countries didn’t send aid to Puerto Rico. Where was their compassion? Well, they wanted to, it is just the US mainland just doesn’t like Puerto Rico that much. Back in 1920, the Merchant Marine Act was enacted which states only U.S. vessels can take goods between Puerto Rico and the US mainland. This means that ships from other countries can’t dock in Puerto Rico’s ports. This means the products Puerto Rico needs to survive far more expensive, but it also means products it produces can only be sold to the U.S. mainland. There cannot be any trade with neighboring islands.
The unemployment rate in Puerto Rico is nearing 12%, and all the skilled laborers have already left to the U.S. mainland. In case you are scoring at home, their unemployment rate is double the national average. Doctors, who are included in the “skilled laborers” are leaving in droves. This makes getting health care harder and costs more. This is why when the Zika virus spread on Puerto Rico it was so difficult to control. To further the problem, poverty rates are near 45% on the island.
But the biggest issue relating to Puerto Rico’s debt is what happened in 1984. Strom Thurmond, the former senator from South Carolina, decided he was going to deprive Puerto Rico of bankruptcy protection that every state in the union has access to.
Thurmond worded part of the bill to make Puerto Rico exempt from the ability to file for bankruptcy under Chapter 9, and no one really knows why he did this to Puerto Rico. Where did he do this? In the definitions section of HR5174, a bill that was fixing the bankruptcy court systems, the definition of the word “state” was laid out, and Puerto Rico was on the outside looking in.
When it comes to leadership, politicians continue to fail us, and we continue to allow them to fail. Make your voice heard.