NDN Blog

Op-Ed - "To Restore Prosperity, Puerto Rico Should Look to Ireland"

Dr. Shapiro and I have op-eds running in English and Spanish now on Fusion/Univision on the future of Puerto Rico. The English version can be found here, and below.  And the Spanish version here.  The op-eds are derived from Rob's recent paper on the subject which you can find here


To Restore Prosperity, Puerto Rico Should Look to Ireland

How much longer will the people of Puerto Rico have to live with failed economic policies? It must be clear by now that the Commonwealth reliance on U.S. corporate tax preferences for U.S. companies locating operations there ran its course many years ago. Low tax rates matter to foreign investors, but it’s time for Puerto Rico to expand its horizons well beyond the United States. Rather, the Island should consider the example of Ireland, which a generation ago was the poorest member of the European Union (EU) – and became one of its most prosperous members by 2006.

In the late 1980s, Irish policy planners recognized that the fastest way to modernize their economy and turbo-charge productivity and growth was large-scale foreign direct investment (FDI). They also knew that with scores of middle-income countries vying for FDI, Ireland needed a comparative advantage. So they offered up Ireland as a low-wage, low-cost platform for multinationals from everywhere but Europe to enter the huge EU market. But they also had to make Ireland the most attractive place in the region for foreign investment. So in addition to the tax breaks that countries offered, the Irish government ramped up its public investments in modern infrastructure, they created 10 "enterprise zones" for foreign investors and equipped each zone with a new institution for advanced training and education, and they rolled out an array of special services and subsidies for foreign multinationals. The program even included helping foreign companies find the best locations and workers to meet their needs and providing relief from selected regulations and taxes for individual companies.

From 1987 to 2006, more than 1,000 multinational companies established new facilities in Ireland, including Microsoft, Dell, and Citicorp. The country’s real GDP grew at an average annual rate of 6.9 percent over that period, unemployment fell from 17 percent to 4 percent, the brain-drain of highly-educated young Irish was reversed, and the government’s debt as a share of GDP declined from 112 percent to 33 percent.

Like Ireland and the E.U., Puerto Rico and the mainland United States share a common currency, and virtually everything made in the Commonwealth enters U.S. markets without cumbersome customs and other import regulation. In short, Puerto Rico has a real opportunity to attract large-scale FDI from around the world by offering itself as a low-wage, low-cost platform for multinationals from Latin American, Asia and Europe to sell into the huge American market.

To succeed as Ireland did, Puerto Rico will have to undertake a comparable commitment to undertake difficult spending and tax reform, including targeted increases in public investments in education and infrastructure while still bringing down budget deficits. The Commonwealth government also must repair its tattered image with large foreign investors. To restore their confidence, Puerto Rico must step back from a possible debt default and from proposed changes in its bankruptcy laws to word off technical defaults by its public utilities. In this context, Puerto Rico also can ill-afford widely-publicized controversies that cast doubt on the Government’s commitment to keeps its word, such as current efforts by the Commonwealth Treasurer to negate its legal agreement to provide tax credits for tax over-payments to one of the Island’s major financial institutions, the Doral Financial Corporation.

The alternative is that the future for Puerto Ricans will look much like their present and recent past. After nearly a decade of stagnation and recession, the economy is 13 percent smaller than it was in 2004 – compared to Puerto Rico’s 13 Caribbean neighbors, which have averaged 2 percent annual GDP growth over the same period. That’s unsurprising. Business investment has grown in Puerto Rico at half the rate as elsewhere in the Caribbean. Capital flight has accelerated: foreign financial flows have been negative since 2006; and more recently, FDI flows turned negative as well. Unemployment is double the rate of the U.S. and nearly percent among the young, and the labor participation rate is the lowest in the Western Hemisphere. Moreover, public debt has soared from 66 percent of GNP to 96 percent, and both Moody’s and Standard & Poors rate the Commonwealth’s bonds as junk.

Here’s what ought to be the bottom line: While the per capita income of the Irish people increased from 60 percent of the EU average in 1987 to 136 percent of the average in 2003, per capita income in Puerto Rico today is seven percent less than it was in 2006. The choice – a hard road to long-term prosperity or the easy road to further decline – is Puerto Rico’s.

Dr. Robert Shapiro, former Under Secretary of Commerce for Economic Affairs in the Clinton administration is chairman of Sonecon, LLC, an economic advisory firm in Washington D.C. He is also an advisor to the Doral Financial Corporation and the International Monetary Fund.

Simon Rosenberg is president of NDN, a Washington-based think tank, which works on US-Latin America policy issues.

Tue, Sept 23 - Simon to Join Panel On The Latino Vote in 2014 at George Washington University

Next Tuesday, 9/23, I will take part in a panel to discuss on the role of the Latino Vote in the midterm elections. I will join representatives from the Center for American Progress, the National Council of La Raza, the Heritage Foundation, and Libre Initiative. 

The panel will touch on the role of the Latino electorate in American politics thus far, including how it played a pivotol role in President Obama's 2012 re-election effort. We will also discuss how the growing electorate will impact the midterms and the what issues the Latino community is most concerned about in 2014. 

The event is on September 23rd at 7 PM at the GWU Marvin Center's 3rd Floor Amphitheather. For more information, please contact olas@gwu.edu

Today, Sept 16th - NDN Hosts DHS Deputy Secretary Mayorkas at the National Press Club

NDN and its "21st Century Border Initiative" are pleased to invite you to an important today by Deputy Secretary of the U.S. Department of Homeland Security, Alejandro Mayorkas.

Deputy Secretary Mayorkas will discuss the Obama Administration's border security strategy and comprehensive response to the influx of unaccompanied minors in the Southwest border. Over the summer, the Administration engaged in an aggressive response to stem the flow of Central American migrants. In July and August, we have seen a dramatic drop in the number of migrants attempting to cross the southwest border.   

The event will take place today Tuesday, September 16th in the First Amendment Lounge at the National Press Club529 14th Street NW, 13th Floor. Please arrive by 9:50 am, so the event can begin promptly at 10 am. 

If you have any questions or issues, please contact ccantor@ndn.org.

We look forward to seeing you this morning! 

Paper: To Reclaim Prosperity, Puerto Rico Should Adapt Ireland’s Model for Modernization

Today, NDN has released a new paper from Dr. Rob Shapiro: “To Reclaim Prosperity, Puerto Rico Should Adapt Ireland’s Model for Modernization And Focus on Attracting Investors from Around the World.”  You will be able to find the full paper below in pdf form.  

In this thoughtful prescription for Puerto Rico’s future, Dr. Shapiro writes:

“Puerto Rico’s current and long-standing program for economic growth has clearly failed, and the Commonwealth government and the people it serves need a new approach.  For nearly two generations, the Island’s economic policy has focused on preserving U.S. corporate tax preferences for American firms that locate operations in the Commonwealth.  The record shows that this singular focus has produced economic decline.  Instead, Puerto Rico should adopt a version of Ireland’s economic approach, which used targeted public investments, tax preferences, and the country’s low-cost access to markets in the European Union (E.U.), in order attract large scale foreign direct investments (FDI).  In the process, Ireland transformed itself over one generation from the poorest country in the E.U. to one of its most prosperous members.”

“NDN is proud to release this new paper which we hope will become an important part of the debate about Puerto Rico’s future,” said Simon Rosenberg, President of NDN, a DC based think tank. “The commonwealth's economic course is unsustainable.  Dr. Shapiro offers a powerful vision for how Puerto Rico can regain control over its own destiny, and stride confidently into the far more competitive world of the 21st century.” 

Started in 2005, NDN and its sister educational arm, the New Policy Institute, are well established thought leaders on US-Latin American Relations, the US-Mexico partnership and Latino issues in domestic US politics.   Dr. Rob Shapiro, former Under Secretary of Commerce for Economic Affairs, Chairs NDN’s Globalization Initiative.  

NDN/SR Statement on Obama Immigration Decision, Deportations

Today’s decision to delay is a pragmatic recognition that given the election, and a very crowded Presidential agenda, the Administration will be more likely to successfully sell whatever action they take to the public after the election than before.  Am sure this was a tough decision but I think it is was the right one.

Immigration advocates should be careful to temper their reaction.  At the end of the day we are talking about a six week delay on an issue of enormous consequence.    It is more important that it get done right than fast.  

In discussing deportations, it is also important to consider how much the President has already done.   The 2011, DHS’s “Morton Memos” made it official government policy to end deportation of undocumented immigrants without criminal records.   Just a few years into this new policy, in 2013, we saw the results of this new strategy – all but 10,000 of the 370,000 deported either had a criminal record or were caught entering the country without permission; and the total number of people deported from the interior of the US had plummeted.   The practical effect of these changes is the threat of deportation has already been lifted for the vast majority of undocumented immigrants living in the United States.  The assertion by some that delay means tens of thousands more “innocent” immigrants will be deported are at best exaggerating the short term impact of today’s decision.     

For the data backing all this up see our recent report: http://www.ndn.org/blog/2014/07/timely-new-ndn-report-central-american-migrants-obama-borderimmigration-enforcement-rec

-          Simon Rosenberg, President, NDN/New Policy Institute

Update: I am quoted in stories today on the President's decision in MSNBC, Huffington Post, Fusion and The New Republic.

Exports in Metropolitan Areas Across America Continue To Grow

The U.S. Department of Commerce’s International Trade Administration (ITA) recently released two reports showcasing how exports are helping businesses and communities grow across the country. ITA found that exports in the surveyed Metropolitan Areas had increased by 50% since 2009. The second report shared that 7.1 million US jobs were supported by the export of goods last year. The Obama Administration has made increasing exports a key Commerce priority under the National Export Initiative (NEI).

Metropolitan Area Exports Report

 Department of Commerce

ITA calculated that a record number of goods and services—valued at 2.3 trillion dollars--were exported in 2013. 387 Metro Areas were surveyed overall, with 208 seeing positive growth in 2013. Of those that grew, 156 of the Metro areas surveyed exported over $1 billion of goods. 134 areas recorded export numbers that were an all-time high. Five Midwestern metro areas, located in the states of Louisiana, Mississippi, Ohio, Wyoming, Kentucky, Michigan, and Utah, exported over $1 billion in goods for the first time ever. Overall, there was a growth in exports in Metropolitan Areas of $42.8 billion or 3.1% from 2012 – 2013. This is excellent news as we are seeing areas across the country continue to grow and expand trade internationally.

Jobs in States Supported By Exports Report

This is the first time that Commerce Department has produced this report, which focused on the relationship between states that export and job growth. The Census Bureau contributed to the report via offering “origin of movement” data—which showcases where an export begins its journey (i.e. within a particular state). In 2013, 7.1 million jobs across the country were shown to be directly supported by the export of goods, and a total of 11.3 million jobs supported by exports, when including service exports (these are not tracked by the Census Bureau). The Department of Commerce noted separately that exports of manufactured products supported 6.2 million jobs.  

Pew Report: Undocumented Immigrant Population Has Not Grown Since Obama Took Office

There are many interesting takeaways from the new Pew Hispanic report on the undocumented immigrant population in the US, but one to draw attention to is that the undocumented immigrant population under President Obama has not grown, and is now almost a million less than in the latter years of the Bush Presidency.   The report can be found here

As we wrote in a recent report, that there has been no increase in the undocumented population during the Obama Presidency has to taken as a sign of the success of the Administration’s management of the border and immigration system in the US.   In the Clinton era Presidency the nation gained on average over 600,000 undocumented immigrants each year.  Under Bush is was over 400,000 a year.   Under Obama, it has been on zero.   It is a sea change.

While the slower economy of this era is certainly a factor in this decline, our report argues that changes in Mexico and tougher enforcement at the border has contributed to the plummeting of flow of undocumented immigrants into the US.   Remember, the unemployment rate has dropped almost 4 entire percentage points during the Obama Presidency.   So while the economy is in far better shape and producing far many more jobs than during the Great Recession, there has been no parallel uptick in the undocumented population.    From a statistical standpoint this means of course there are other factors at play.   The two we dwell on is the enhanced deterrent effect of the prioritization of apprehending illegal entrants in the Obama era, and improving socio-economic circumstances in Mexico itself.  


Addressing the Central American Migrant Crisis (Aspen Idea Blog)

The Aspen Idea Blog published a new piece that has a take from four fellows on how to address the Central American Migrant Crisis in both the short and long term. I wrote from the US perspective on how the Obama Administration has already addressed aspects of the crisis and how we can do more morving forward. 

4 Perspectives Addressing the Central American Child Migrant Crisis in the US

The causes of the Central American migrant crisis are not simple, nor will be our nation’s response if it is to be successful. 

A lot has contributed to the crisis: expanding regional influence of the Mexican cartels and transnational organized crime, weak regional civil society and legal authority, lack of economic opportunity for people in the region, and holes in the American immigration system, which have been relentlessly exploited by human traffickers and other criminal actors. So far the Obama Administration’s whole of government response has been smart: providing support to the three countries producing the migrants, unprecedented cooperation with Mexico in addressing the crisis, adherence to existing American laws for the processing of the children and families apprehended, and rapid deportation of those not qualified to remain in the US. The flow of child migrants is slowing, regional cooperation is on the rise, and a degree of order is being restored. 

But over the long haul the US will have to develop and then implement a much more robust regional strategy to create regional economic opportunity, strengthen civil society and citizen security, and modernize and improve our own immigration laws. Perhaps drawing from other successful initiatives like the Marshall Plan or Plan Colombia, the US needs a new and far better sustained strategy to improve the lives of our neighbors to the South. This effort will also have to include discussions about our own lax gun laws, which have helped arm criminal elements in the region, and our own insatiable desire for illegal drugs, which is helping create the breeding ground from which the increasingly powerful transnational organized crime syndicates have spawned.


To read the full feature, and the insights of three other Aspen fellows, visit here. In order to read some of our other work this summer on the Central American Migrant Crisis, see here.   


Early Reports: ACA having a Positive Impact on U.S. Healthcare System

In recent weeks there has been a slew of good news about the Affordable Care Act (ACA). These early reports indicate that the ACA is achieving some of its main objectives of reducing the number of uninsured Americans and bending the cost curve. Consider these facts:

The number of uninsured Americans has dropped dramatically.

  • The rate dropped dramatically in states like Arkansas and Kentucky, where the uninsured population fell by 10.1 and 8.5 percentage points respectively.
  • Studies show that the ACA’s first year has led to about 9.5 million less uninsured Americans.


Premiums rate increases are below historical averages

Map, credit to Vox.com

  • According to Vox, the average premium increase would be 8.2%, less than the healthcare market typically grew in the years prior to the passage of healthcare reform. 


The ACA is contributing to a lower federal budget deficit and helping to reign in healthcare costs

Chart, credit to HuffingtonPost 


  • Healthcare spending as a percentage of GDP has decreased for two consecutive years. This is the first time that this has happened in 15 years.
  • The New York Times highlighted a report that the expected cost of Medicare continues to drop drastically from previous projects. Between a report released in 2006 and the most recent estimate, there is a $95 billion difference in how much Medicare is expected to cost the government. The Times notes that the ACA has played a role by helping to bend the cost curve.
  •  National Health Expenditures is projected to increase over the next decade according to a report by the Center for Medicare & Medicaid Services.  NHE will only grow by an average rate of 5.8% from 2012 - 2022, which is lower than the historical average.

Recent Data Points to Improved U.S. Economic Conditions

Today, the U.S. Department of Labor announced that once again first time unemployment benefits claims had fallen by 14,000 and the one-month average hovers at about 300,000 claims. At the start of the recession, each week brought about 650,000 additional unemployment benefit claims. As more Americans have found work and the economy has improved under the Obama Administration, this number has plummeted. This positive economic news follows the Commerce Department’s GDP report in July that the U.S. economy grew by 4.0%. In addition, the U.S. economy created over 200,000 jobs for six straight months for the first time since 1997.  

Credit to Steve Benen, TheMaddowBlog

This flurry of positive economic news reinforces a trend that has accelerated over the past two years of the second Obama term:  the economy is getting better. The unemployment rate continues to fall and by early next year could drop below the 6% mark.  The President has successfully cut the deficit by 2/3rds since its high-point when he entered office, when the country stood on the precipice of an economic depression. The rate of uninsured has also continued to drop—even dramatically in states like Kentucky and Arkansas (by 8.5 and 10.1 percentage points respectively according to Gallup).

The way that Americans view the economy is also beginning to change, according to recently released Pew Data. Over the past six months, Americans who feel like they hear mostly bad news on the economy has dropped from 33% to 24%; many people now feel as that they are receiving mixed signals (64%). Feelings on the job market is more positive with about 20% of the population now feeling as if they are hearing only good news, 44% mixed, and 34% only bad news. Though the negative numbers remain high, Pew calls the overall picture a “modest improvement in views of economic news”.     

This summer has brought new challenges for the United States, such as tension in the Middle East, in Ukraine, or resolving the Central American Migrant Crisis (see here for more of NDN’s work on the issue). These positive economic developments have flown under the radar during this hectic summer. They are important to acknowledge: the President has made prudent choices that have put the U.S. economy on a more stable path moving forward.      

Syndicate content