Here’s a graph that should surprise absolutely no one who pays even the smallest amount of attention to how clueless their fellow Americans are:
Puerto Rico is an American commonwealth. Puerto Ricans have US passports. They can travel anywhere in the fifty states. They don’t get to vote in national elections (which is part of the reason a lot of folks, self included, think they just need to be upgraded to statehood), but they’re still American.
They’re also severely in debt, to the point where hospitals are so strapped for funding that power companies have been known to cut off electricity to hospitals behind on their bills. I mean, they give some notice to make sure they’re not cutting the lights in the middle of surgery, ya know, to be decent human beings about it, but can you imagine living in an area so in debt that the hospital can’t even keep the lights on? That’s Puerto Rico, and a lot of their debt is due to insane legislation passed by Washington that magically only applies to Puerto Rico and is good for businesses based in the lower 48 (yay!) and terrible for the local Puerto Rican population (boo!).
Watch this video. For real, watch the whole thing. It’s the best overview of the economic crisis in Puerto Rico you’re going to get without picking up a journal on current economics.
In case you don’t have 20 minutes to listen to John Oliver’s awkward jokes…
As usual, the average (non-Puerto Rican) American’s view of this issue is served by misinformation and lack of information.
The misinformation is the easy part.
The Center For Individual Freedom is a dark money group that has paid over $2 million dollars on ads like that one to convince ordinary (dumb) Americans to call their representatives and tell them to vote against a bailout of Puerto Rico that doesn’t exist. Nobody in Congress is suggesting we pump a bunch of money into Puerto Rico get them out of debt, but that’s what the ads imply, because if there’s one thing Mary and Joe from Anywhere, USA hate is the idea that their tax money is about to be given to a bunch of brown foreigners (who are actually American, but whatever).
Congress is currently working on legislation across party lines to give Puerto Rico more power to negotiate with their creditors. They payments on the horizon they can’t meet and much of their debt is due to crappy legislation that only applies to Puerto Rico because they aren’t a state. Congress is working on a way to help Puerto Rico come up with a plan to pay their bills, not give money to Puerto Rico. So if we’re not giving them money, why does this Center for Individual Freedom care?
The lack of information is a bit trickier, but I think it’s best understood if you work back from the present.
There are a lot of people, mostly hedge fund garbage, who own Puerto Rican municipal bonds and they want Puerto Rico to pay those bonds back without any butting in from Congress about delaying or restructuring payments. How and why did they get all these municipal bonds? Well, in 2006 when Puerto Rico’s economy tanked, Congress made it very lucrative for other folks to buy municipal bonds from Puerto Rico. In simplest terms Puerto Rico has to pay a bill, but they don’t have the money, so they write an IOU (municipal bond), and someone else buys the bond. At some future date (like….now) Puerto Rico promised to pay back that IOU/bond with interest. So you bought a municipal bond in 2006 worth $100, and now Puerto Rico owes you $110 or whatever. Congress decided that $10 profit you made is triple tax exempt, so you don’t have to pay local, state, or federal taxes on it. Clearly, a lot of businesses and rich folks see the benefit in having all this money come in and not having to pay taxes on it, so they bought a lot of bonds and Puerto Rico was all too happy to sell them, because they needed to keep the lights on in the hospital. Unfortunately, the lights are now being cut off because Puerto Rico wrote into their Constitution that certain bonds were obligated to be paid before government services, so Thad McAllister gets his check before the hospital gets theirs.
The entire global economy was in a recession, so why wasn’t everybody in the same dire straits as Puerto Rico and forced to print municipal bonds? Half of Puerto Rico’s manufacturing sector left the island because Congress decided that all the tax breaks they gave out in the 70s needed to be repealed in order to offset the tax breaks they now wanted to give on the mainland. Puerto Rico was booming for decades because businesses would relocate there instead of overseas due to tax breaks passed by Congress. Once the breaks went away, so did the business. Congress essentially lured businesses down to the island and then took away the bait decades later. By then, the economy was dependent upon those businesses.
Now we have an American almost-state where 45% of the population is in poverty, 150 schools have been shut down in the past few years, and sales tax has been raised 4.5% all the way to 11.5% because the mainland treated Puerto Rico like an island paradise where business regulations don’t matter. They can’t file for chapter nine bankruptcy because of some mysterious legislation passed in the 80s that now makes it impossible for Puerto Rico to do what every other state would be able to do in this position. And, they can’t pay their bills and IOUs being held by the worst kind of opportunistic business creeps because Congress made it uber beneficial to buy up all those bonds. So if you can’t pay your bills and you can’t file for bankruptcy, what are you supposed to do? Just let the entire infrastructure of government fall apart and watch your people suffer so Thad McAllister can get his money? And none of this would have happened if Congress hadn’t specifically allowed things to happen in Puerto Rico that would never happen in any other state because it’s against the law on the mainland. That’s why we need to give Puerto Rico all the help we can. We helped make the mess, but we don’t want to help clean it up, and our legislation won’t even let Puerto Rico clean it up themselves.