Getting Serious About Helping Puerto Rico

I recently penned a major op-ed in the Hill, "Getting Serious About Helping Puerto Rico." The story appears today in both the print and digitial editions. You can find the digital version here or below. 

Getting serious about helping Puerto Rico
By Simon Rosenberg

Whatever the United States government does in the coming months to help Puerto Rico, it is important that policymakers act with a deep sense of urgency about the scale of the problem the island faces. The crisis is far more than a fiscal one. If working-age and young Puerto Ricans continue to leave the island at current rates, soon the island will hit a demographic tipping point where the ratio of retiree to worker will make it nearly impossible to ever restore to a virtuous cycle of economic growth and prosperity. Simply put, we have to get it right this time or the future of Puerto Rico will be very bleak indeed.

Getting it right also means that policymakers in the United States will have to accept two inconvenient truths: The people of Puerto Rico are American citizens and deserve the same kind of attention the people on the mainland would receive, and our Congress has played a significant role in helping push Puerto Rico to the brink. There is little doubt that years of bad governance and fiscal management by both political parties in Puerto Rico are the central cause of today’s crisis. But as Washington readies to act, acknowledging that a series of decisions by the U.S. Congress — including the removal of a job-generating tax break a decade ago and inequitable treatment of Puerto Ricans across many U.S. government programs — have made matters worse. In practical terms, this means that the only way to truly address the crisis will be through deep, sustained coordination among the administration, Congress and political leaders of both parties on the island, as everyone will have to do their part, together.

Given the coming elections in the U.S. and Puerto Rico, and rancorous politics in both Washington and San Juan, how will this level of complicated political cooperation be established? I’ve come to believe that the only way forward will be through a package of joint Washington and San Juan led reforms that include establishing an inclusive federal financial control board akin to what was successfully implemented in New York and Washington, D.C. decades ago. 

For Puerto Ricans, the virtue of a federal financial control board are: 1) It has worked before; 2) despite a well-intentioned reform package from the Padilla administration, it is highly unlikely that the Congress and international financial markets will view any locally led, partisan-led reform effort to be credible; and 3) it binds the United States to the process, preventing it from walking away and not doing its part in restoring prosperity to the millions of American citizens on the island.

For Puerto Ricans wary of this level of federal involvement in their affairs, it is important to remember that here in Washington, D.C., the head of our control board became so politically popular that he was able to run, win and become a very successful mayor of our city. In this case, like is often the case, the very best politics is good governance. Local leaders in Puerto Rico will only be rewarded now through results, not empty posturing or overly cautious measures.

In exchange for San Juan accepting and participating in a federal financial control board, Washington should agree to:

Treat Puerto Ricans as Americans. Without diving into the clearly antiquated political status question of the island, what is simply true is that Puerto Ricans are American citizens and should be treated as such. Over the years, Congress has often treated the residents of Puerto Rico as second-class citizens, repeatedly legislating inequitable treatment and funding. These discrepancies should be addressed, and in programs including Medicare and Medicaid, parity should be restored. This is not just about equity. Taking these steps will provide a short-term fiscal stimulus, help stem the flow of healthcare professionals and other productive workers from the island and make an economic recovery far more likely.

Amend U.S. bankruptcy laws. The same laws that apply to U.S. states should apply to Puerto Rico. Congress should amend current U.S. bankruptcy law to allow San Juan to restructure its municipal and public corporate debt. This step would enable a rapid, orderly restructuring of almost all of Puerto Rico’s debt without taking on the general obligation debt — a risky step that could cause a legal, political and financial backlash strong enough to interfere with the implementation of the rest of the reform package.

Focus on sustained growth and prosperity. The U.S. government should begin a serious dialogue with the island’s political, economic and civil society leaders about its long-term economic future. Congress’s ending of the 936 tax credits for U.S. businesses investing on the island a decade ago stripped Puerto Rico of its primary economic development approach without offering an alternative. A new approach is needed, and as Rob Shaprio and I wrote recently, Puerto Rico should look to Ireland as its inspiration for crafting a 21st century economic strategy. Thirty years ago Ireland set out to become a low-cost manufacturing platform for multinationals seeking access to the vast European market. Puerto Rico, with its wonderful climate, extraordinary natural beauty and direct access to the North American (Canada, Mexico, U.S.) market, should adopt a similar approach to foreign multinationals looking to break into this region. With such a farsighted plan, Ireland was able to attract more than 1,000 multinationals over a 20-year period. The U.S. and Puerto Rico should study this model and build some of its premises into its coming fiscal reform plan.

The economic and fiscal crisis in Puerto Rico was many years in the making, and there is plenty of blame to go around in both Washington and San Juan for how we got here. But it is important now for the leaders in both capitals to realize the gravity of the situation and find a coordinated and respectful path forward that gives the millions of American citizens in Puerto Rico the future every American deserves.

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"Getting Serious About Helping Puerto Rico," is the latest in a series of thought pieces NDN has written on the crisis. Feel free to review these other pieces, in both Spanish and English: