With news of Greece’s financial woes dominating the international scene, not as many people realize that a similar financial crises looms in our own backyard, Puerto Rico. Unfortunately, over the years Puerto Rico has fallen on hard times due to mismanagement, corruption, and intense government involvement in the economy.
Given that the island is a territory and not a state, it falls into a different set of Constitutional circumstances than say the city of Detroit. Thus, legally, they can’t simply declare bankruptcy like some municipalities. However, there is a bill pending before Congress, HR 870, that would treat Puerto Rico as a state for these purposes. But is that idea really the right answer?
Bailouts and bankruptcies seem to be all the rage these days. Governments meddle excessively in economies through crony capitalism and, when that scheme invariably fails. they then further reward their allies by placing the U.S. taxpayer on the hook for the bill. We’ve already seen it with the Wall Street crisis and the auto industry bailout. Now, they are looking to soak the average citizens again for the mistakes of D.C. and San Juan. To borrow a quote from Pete Sepp of the National Taxpayers Union, “taxpayer-funded bailouts or bankruptcy proceedings that shortchange bondholders and citizen investors alike cannot be regarded as ‘easy outs’ for Puerto Rico. If Congress takes the significant step of extending Chapter 9 to Puerto Rico’s public entities, but ignores the need for reforms…it will be sending the wrong kind of message: that governments can spend recklessly and abuse the public trust without risk.”
Although one cannot help but feel for the people of Puerto Rico and certainly most, if not all of us would like to see them prosper, simply trying to ignore the debt or shifting the burden to those who did not create the problem isn’t the solution.
Let me conclude by saying that given that Puerto Rico is and has been in constitutionally murky water since the United States acquired the territory from Spain in 1898, perhaps it is time to finally answer the Puerto Rico question by making them a full-fledged state or allowing them to become their own country. Obviously, this is a decision that the citizens of Puerto Rico ought to make for themselves (followed by the citizens of the United States if they seek statehood). Either way, this move would allow the Puerto Ricans to better chart their own destiny and not simply continue to be a U.S. colony with second-class citizen status.