A Way To Save Puerto Rico

By Dmitriy

Hurricane Maria decimated the U.S. territory of Puerto Rico. The entire island of nearly 3.5 million Americans could be without power for four to six months. Nearly all wireless service is down, roads across the island are unusable, and a major dam might collapse. Elected officials call the situation “apocalyptic”. A bit of economic backstory:

Puerto Rico’s residents are U.S. citizens, but Puerto Rico is a U.S. territory rather than a state. But bad debt always has two parents — the lender is as responsible for the failure as the borrower.

If Puerto Rico was a U.S. state, federal spending on the island’s welfare aid would increase, injecting demand into its economy from outside. This was the sorry state of affairs before Maria came storming in.

Then there’s the repair of roads, buildings, food aid, medicine, repair of water systems, and more. It’s way too soon to know how much it would cost.  For context, $200 billion is less than 6 percent of one year of total federal spending.

Basically, it’s a public option for employment.  

Economists from the Obama White House, the Clinton White House, and even the Trump White House have endorsed the idea or something similar.

Plenty of Puerto Ricans is available to help.
Some might argue the job guarantee shouldn’t pay more than that median. That would reduce the cost by around one fourth.

Over the long term, the program would stabilize at a far smaller annual cost. Collapse is near, however, and the debate in Washington about appointing a Federal Financial Control Board signals that an intervention is high.

Some of the ways are:

1.Equality
Equal rights for civil, structural, financial and municipal rights will be acknowledged as being a US territory island inhabitants as they were enjoyed on the mainland. Chapter 9 of the bankruptcy code must form part of this turnaround strategy.

2.Consensus and Centralisation
Streamlined island politics and policymaking. Wool of bureaucracy and special interests will leave the narrowest of social fabric island to protect its people along with the municipalities on an island i.e. 110 miles by 40.

3.Shared Prosperity
If John Paulson’s vision of Puerto Rico becoming the “Singapore of the Caribbean” is to be realized, the era of zero-risk, zero-reward investment must come to an end.

4.Revenue Positive
End revenue neutrality. This puts downward pressure on the revenue base against upward pressure on the island’s debt burden.

5.Right-Sizing
Privatization of non-performing, financially strained state-owned enterprises. Public-private partnerships can be explored ensuring that the most strategic assets continue to have some public oversight and accountability.

6.Economic Integration
Create, strengthen and improve regional economic linkages. Internal focus on the ease of starting a business and operating on the island are essential. As a measure of this progress, moving up the World Bank’s ease of doing business rankings from 57 to parity with the U.S., which is number 7, is a worthy target. Highlighting the distance to Paulson’s vision, Singapore ranks number 1 on the list.

7.Lifting Legacy Legislation
Chief among these strangling rules is the Merchant Marine or Jones Act, which strangles ship-borne trade – the veritable lifeblood of an island economy.

8.Safety and Security
Broad-based improvements in public safety and security.  

9.Education
No investment pays better dividends than education and Puerto Rico’s latent bilingual abilities in its people can be propelled with a curriculum that emphasizes in-demand careers, technical and vocational training.

10.Entrepreneurship
Puerto Ricans who is famous and renowned for his can-do spirit and optimism will begin to create the despair and hopelessness of a decade of recession. This will create a new story.  The central actor in a story (and the elephant in the room) is the island’s final status with the U.S.