Congress Helped to Make Puerto Rico’s Mess

Regarding “Puerto Rico’s Inflection Point” (Review & Outlook, June 11): Puerto Rico’s economic wounds are largely self-inflicted, the result of government largess, cronyism and corruption, lax tax collection and progressive policies. But Washington has also played a major role.

In the 1970s, Congress raised Puerto Rico’s minimum wage to match that of the mainland. A National Bureau of Economic Research report concluded that this change “reduced total island employment by 8%-10%” and “reallocated labor across industries, greatly reducing jobs in low-wage sectors.” Further, many mainland manufacturers abandoned Puerto Rico after the 10-year phaseout of IRS Section 936 tax incentives, ending in 2006. With only four of every 10 adults now employed, it’s no wonder Puerto Rico’s economy has suffered a decadelong recession.

Recent Federal Reserve policies must share the blame. Bond king Bill Gross recently observed, “Puerto Rico follows Detroit not just because of overpromised benefits but because they cannot earn enough on their investment portfolios to cover the promises. Low/negative interest rates do that.”

Congress can undo some of the damage by having the oversight board not only restructure debt but also reform the island’s corporate tax code, privatize public utilities, airports and seaports, reform the educational system by consolidating schools, cutting staff and raising university tuition, repealing overtime pay and impose other growth-friendly structural changes to help Puerto Rico live up to its name, which literally means “rich port.”

Charles D. Eden

Atlanta

Puerto Rico’s economic wounds are largely self-inflicted, but Washington has also played a major role.

Congress Helped to Make Puerto Rico’s Mess