Give Puerto Rico a Shot at Growth

Last week's declaration of a public health emergency on Puerto Rico is a reminder of just how badly the commonwealth still needs federal help. The unchecked outbreak of Zika -- more than 10,000 reported cases -- will potentially cost Puerto Rico millions of dollars it doesn't have and make restoring economic growth that much harder.

To be sure, Congress deserves bipartisan credit for passing a bill that enables the orderly restructuring of Puerto Rico's staggering $70 billion in debt and creates a strong federal control board to balance its books. But Puerto Rico can't dig its way out of its debt hole without growth. Its economy is expected to shrink by 2 percent in fiscal 2017.  In fact, the International Monetary Fund has forecastthat Puerto Rico's gross domestic product, labor force and population could keep falling through 2021.

The best thing Congress can do for Puerto Rico's 3.5 million U.S. citizens is to help get more of them working and paying taxes. Puerto Rico has the lowest labor market participation rate in the U.S. and its territories. One way to change that is to extend the earned income tax credit and child tax credit, proven policy tools that help the poor and provide incentives for them to join the formal economy.

To counter what some have called "rich uncle" syndrome, federal housing and welfare benefits for Puerto Rico could also be made more work-friendly or work-dependent. Congress should also support modernizing Puerto Rico's financial reporting systems -- an investment that will combat benefits fraud, improve tax collection, and help the control board to do its job.

Sadly, the whopping potential costs of the Zika epidemic -- over a lifetime, caring for even one child with microencephaly can cost well over a million dollars -- are an ugly reminder not just of the unfair disparities in Medicaid between Puerto Rico and the mainland, but also of Congress's fitful neglect of the territories under its care. Even if Congress has so far refused to provide funds for fighting Zika, Senator Orrin Hatch and his colleagues on theCongressional Task Force on Economic Growth in Puerto Rico have a chance to make some amends by fixing the Medicaid gap. Leaving some of the poorest U.S. citizens even less able to bear the brunt of an epidemic is as unworthy as it is unwise. 

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.

Give Puerto Rico a Shot at Growth