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Puerto Rico’s Economy’s in Trouble (You’ll Probably Not Guess Why If You Read the Wall Street Journal)

The Wall Street Journal published a piece talking about how the island’s population has decreased due to continued economic problems. I’m not sure if the author Nick Timiraos was avoiding any context for his reporting, not aware how several of his points are nonsensical given the situation, or if he is engaging in the type of glib misdirection that passes as journalism these days.

Case in point:

The island’s bondholders and the insurance companies that have guaranteed those bonds say Puerto Rico’s elected leaders have made the crisis worse by resisting deeper spending cuts and tax increases.

When he refers to “resisting deeper spending cuts and tax increases,” this means: closing more than 150 schools which have already been shuttered, cutting pension plan payments to retired public service people, which are used to pay for everyday things like groceries, rent or mortgage payments, and the insanely high electric bills. Add to these costs, the general inflated cost of everything in Puerto Rico, it would be immoral to not “resist”.

With the most recent figures, Puerto Ricans who have the wherewithal to leave are doing so, leaving for Florida, California, even Hawai’i. The vacuum left behind by these families will leave an even larger hole in the economy.

Back to the Wall Street Journal.

Puerto Rico has struggled to grow its economy since the expiration of tax credits last decade. Economists say a bloated welfare state has discouraged work while a minimum wage that is high relative to productivity and local income has made it harder for the island’s tourist and manufacturing sectors to compete against Caribbean peers.

There are several things here that are at best, misinformed; at worst, deceptive. The first sentence is true; with the expiration of the Section 936 tax credits in 2006 Puerto Rico’s recession began. However, Puerto Rico had no control over whether the tax credits would continue. With tax credits of 65-40% corporations received welfare, tax revenues for the local government were diminished.

So, as is often the case, corporations in Puerto Rico were subsidized, receiving a welfare package in the form of very favorable tax credits.

In the second paragraph of the article, Mr. Timiraos reports Puerto Rico is a U.S. Territory, but neglects to connect with what this information means. As a territory, Puerto Rico is tied to U.S. Federal Minimum Wage laws. All the economists in the world could not compel Puerto Rico to violate Federal wage and hour laws.

Comparing Puerto Rico to other Caribbean economies is deceptive. Much like the U.S. Virgin Islands, Puerto Rico should be compared to the mainland states they share an economy with, and not independent Caribbean economies.

Suffice to say, it saddens me to see my home continue to fall, have economic troubles. When I read articles like this one, however, it makes me angry.