With all that natural attraction you’d think Puerto Rico would be knocking it out of the park economically. Tourism alone should be the driving force to keep the economy rocking. Every American should want to go Puerto Rico. Then why do most Americans not even know where it is? Several reasons. The island is poorly run, poorly marketed, and generationally corrupt, like many Caribbean islands.
Puerto Rico is in trouble and wants a bailout from Washington. And why wouldn’t they? They’ve seen car companies get one, Wall Street got one, now it’s their turn. They want to declare bankruptcy on about $72 billion. Federal law prohibits them from accessing the Chapter 9 bankruptcy protection, but that may not stop lawmakers in Washington from making an exception.
During the Democratic debate in Jan. 17, presidential candidate Martin O’Malley used his time to mention the plight of Puerto Rico. “We haven’t discussed the shameful treatment that the people of Puerto Rico, our fellow Americans, are being treated with by these hedge funds that are working them over.”
So what’s the deal with Puerto Rico? How did they get in such dire straits? Is it really some hedge fund guys working them over? No. Sorry, Martin.
Basically, here it is in a nutshell. Puerto Rico has a 12 percent unemployment rate, and a less than 40 percent workforce participation rate. The largest employer on the island is the government and it is protected by a strong union. Crime is also through the roof. Combine that with a super high minimum wage and a more than 5 percent loss in population over the last five years, and you’ve got a recipe for disaster. The 5 percent who bailed on the Puerto Rican paradise mostly went to Florida and by and large are the successful people: the doctors, business owners, engineers and teachers.
Simply put, they’re a massively bloated, over-regulated, big government state. They’ve been paying for all this and more by selling municipal bonds. Their default would rock the $3.7 trillion bond market. This pulls in Wall Street and Congress. Remember Detroit? This is more than three times the size of Detroit’s bailout/bankruptcy and theirs didn’t rewrite federal law.
Sounds bad. Maybe we should just give them the bailout and a margarita. No! That won’t fix anything. It will make things worse, much worse in the long run.
First, the leaders of Puerto Rico must be told no. No, they will not get an exception to bankruptcy law to file Chapter 9. Then when it all hits the fan, they will call up their creditors and start working out a payment plan. Start to dig their way out of it. Puerto Rico is our Greece. It’s time to make the hard choices. Slash and burn government on all levels. Implement massive structural reforms that will allow them to meet their financial commitments now and in the future.
Politicians in D.C. need to stand firm and help our partner out of this, not bail them out. A bailout and/or a bankruptcy will only send a signal and set a bad precedence for every other state in the union with a bloated government and overwhelming debt (Illinois, California, New Jersey, Connecticut).
Now is the time to show Puerto Rico the way, not lead them down the path to destruction. No bailout. No bankruptcy protection. Make the hard choices. Revamp the entire system leaving nothing sacred. Then Puerto Rico would see investment capital flood their island followed by a horde of Americans looking for a safe, English-speaking, white sand beach experience.
The big question remains. Will anyone in D.C. be the grown up in the room? Someone has to cut up the credit card or the party’s over and it won’t be coming back any time soon.
STEVE SHERMAN of North Liberty is a writer, radio commentator and a former Iowa House Republican candidate. Contact: steve@scsherman.com
The big question remains. Will anyone in D.C. be the grown up in the room? Someone has to cut up the credit card or the party’s over and it won’t be coming back any time soon.
STEVE SHERMAN of North Liberty is a writer, radio commentator and a former Iowa House Republican candidate. Contact: steve@scsherman.com
Don’t Bail Out Puerto Rico
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