Puerto Rico Plight

The Washington Times (Washington, DC), August 2, 2006 | Go to article overview

Puerto Rico Plight


Byline: Lawrence A. Hunter, SPECIAL TO THE WASHINGTON TIMES

Congress struggles over what to do about illegal aliens coming to the United States from Mexico and Central America. Yet a huge problem within the Hispanic branch of our own American family is overlooked. Four million American citizens of Hispanic origin struggle in Puerto Rico under circumstances that can only be described as totally un-American. The Institute for Policy Innovation described this in a report three years ago ("Leave No State or Territory Behind"). The Brookings Institution is publishing a book with virtually the same findings.

People born in Puerto Rico are American citizens with U.S. passports who have all the rights of citizenship, including dying for their country in the American military all the rights that is except the right of electing voting Members of Congress or voting for the president. Few "mainlanders" recognize the U.S. has a colony, which they can visit without a passport and whose residents may freely come to the mainland to visit, work or live permanently without presenting a passport, obtaining a visa or a green card or going through customs.

Between 1950 and the mid-1970s, Puerto Rico was considered by many a showpiece of economic growth and educational advancement. Since then, however, Puerto Rico's economy has been stagnant, its standard of living has lagged, and the educational system has deteriorated. Unemployment persists at 11 percent, and labor force participation (60 percent) is less than two-thirds the rate in the States, much lower than any member country of the Organization for Economic Cooperation and Development, including Mexico (82 percent).

Nearly half of Puerto Rico's residents still live below the U.S. poverty line, and the gap in income relative to the mainland continues to widen.

The Brookings book and the IPI report constitute a consensus among economists. Puerto Rico's lack of prosperity derives from flawed tax policy and a bloated welfare state stimulated and perpetuated not only by the government of Puerto Rico but also by very smart tax lawyers who designed fatally flawed tax policy for the U.S. government, which benefited large multinational firms with territorial tax credits but barely benefited the people of Puerto Rico.

While the strategy did attract multinationals to Puerto Rico and demonstrated for the relatively few hired how productive the Puerto Rican people can be, the strategy ultimately backfired. It was immensely costly to the Federal Treasury on the order of $2.67 in tax benefits received for every dollar of labor compensation paid and not only distorted Puerto Rico's local politics, by making the tax incentive dependent upon Puerto Rico's continued territorial status, but also distorted the structure of production and employment in Puerto Rico.

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