Puerto Rico May Never Be Ready for Statehood

Puerto Rico overwhelmingly approved a non-binding referendum to become the 51st state after 50 years of no votes, and the time has come to tell people living on the Caribbean island that now is not the time.

The June referendum drew a record 97-percent support for statehood. Oddly, voter turnout had plummeted from its normal 80 percent rate to an astonishing 23 percent. Several votes have been taken during the last half-century, and none have demonstrated a strong desire for statehood.

In 1967, more than 60 percent voted against joining the union. In 1998, a majority chose to remain a U.S. territory, and reap many of the perceived tax and economic benefits enjoyed by the island. In 2012, residents appeared to want statehood, but a variety of referendum questions watered down the percentages and blurred the statehood issue. That underlying shift may have been driven by a downward spiral created by American policy.

While the recent vote doesn’t seem to indicate a particularly strong desire for statehood, the political fallout demands a thorough examination of what upgrading the island’s political status would look like. As it turns out, Puerto Rico may never be ready to become the 51st state – here’s why.

A Faltering Economy

After President Truman pushed for Puerto Rico to adopt its own constitution in the early 1950s, it has enjoyed a tweener status that allowed the island to enjoy federal subsidies and businesses gain tax breaks.

But in 1996, President Bill Clinton signed legislation that dropped many of these key economic advantages over 10 years. Much like the effects NAFTA had on mainland manufacturing, the move caused companies to migrate off the island and tax shortfalls ensued. Mirroring U.S. deficit actions, Puerto Rico took on debt to pay the bills and eventually couldn’t even pay the interest.

Despite attempts at austerity measures, the small island of only 3 million residents is now $73 billion in debt.

Puerto Rico Is A Burden

When the U.S. made the Louisiana Purchase in 1803, it added 828,000 million square miles of rich farmland and natural resources for $15 million. That would be equal to about a quarter-billion today, but the economic growth and national security interest had virtually no ceiling. If the president and Congress bring Puerto Rico fully into the fold, it would be taking on a financial nightmare.

Beyond the initial $73 billion debt mainland and upper state citizens would have to pay for, the territory suffers tremendous unemployment. Recent data shows between 11-12 percent joblessness with the worst sectors including construction and information services.

Although employment has been pulled up slightly by an improved mainland economy, taxpayers would have to foot the unemployment bill going forward.

The primary issue isn’t that Puerto Rico has been harder hit by the failed globalist policies of past administrations. The real problem is that the its political leaders have grossly failed to manage tax revenue, widespread economic disparity and prevalent institutionalized corruption.

Failed Leadership

Despite being in full crisis mode, Puerto Rico’s Department of Treasury failed to collect 44 percent of reported Sales and Use Tax to the tune of about $900 million. The same department is so incompetent that it routinely publishes its revenue reports as late as 15 months after a fiscal year ends. That’s basically two fiscal years later. The island’s government has been criticized for an inability to make reliable governmental needs forecasts. As President Trump might say, “It’s a mess.”

A tremendous disparity exists between private and public-sector salaries, and a political job could pay triple what a public school teacher earns. The island retains an unwieldy 78 separate municipalities with unique budgets topping $2.2 billion, and the mayors alone pull down $4.8 million annually. It’s not surprising that nearly half of the cities are financially distressed.

Throughout the tough economic times, these municipalities have preferred to issue bonds and incur debt rather than bring spending and revenue in line. In 2014, Puerto Rico’s Governor Padilla actually tried to file bankruptcy on debt accrued by the power, sewer and transportation authorities. He was denied in court, and the case was affirmed by the U.S. Supreme Court that Puerto Rico must square its debts.

More than 60 percent of people living in Puerto Rico are on the Medicare or Medicaid system. However, as a U.S. territory less than $400 in federal money is portioned out. Many states receive billions for these entitlements annually. If statehood was granted, entitlement spending would increase by billions.

It might be fair to say that Puerto Rico’s prosperity was built on enjoying its unique tax status, and that President Bill Clinton’s reversal of those perks created financial hurdles. But the gross negligence and inherent lack of political will to right the ship demonstrates that full statehood would be a drag on the country.

Until Puerto Rican leaders learn to manage their affairs responsible, statehood should be off the table.

~ Conservative Zone


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