Puerto Ricans “want everything to be done for them,” grumbled US president Donald Trump on Twitter over the weekend.
It was one in a series of comments he made that appeared to blame Puerto Ricans for the fact that more than a week after Hurricane Maria made landfall on the island on Sept. 20, vast swaths of the US territory remained without power or drinking water. Trump tweeted that Puerto Rico’s infrastructure was broken, and it was in massive debt before Maria, then chided local elected officials with “poor leadership ability” for not getting government employees to help.
On Tuesday (Oct. 3), during his first visit to the island since Maria, Trump seemed to begrudge Puerto Ricans the recovery costs. “I hate to tell you, Puerto Rico, but you’ve thrown our budget a little bit out of whack because we’ve spent a lot of money,” he said. It was a tongue-in-cheek remark, but one that likely grated on Puerto Ricans’ shattered nerves.
All this time, Trump has failed to mention that if Puerto Ricans don’t have the means to help themselves after this crippling storm, it’s because the US has gotten in the way.
Since the US took over Puerto Rico from Spain in 1898, the country has limited the extent to which the island’s residents—US citizens—can decide their own fate. The lack of self-determination is most evident in the catastrophic state of the Puerto Rico’s economy. Yet until Maria hit, “the island of enchantment” and “the shining star of the Caribbean,” as Puerto Rico has been dubbed, was low on the priority list for the mainland lawmakers who are the island’s overlords. In some ways, it’s not unlike tying somebody’s hands, and then casting them adrift in the middle of the ocean.
World’s oldest colony
For years, islanders have been flagging their plight to Congress. They’ve begged for more leeway to get their affairs in order, to little avail. With the mainland’s TV cameras pointed at them after Maria, they are renewing their pleas. “Think of Puerto Ricans as constituents of your own state,” said Puerto Rico’s governor Ricardo Rosselló during an Oct. 2 press conference. “Think about it as a moral imperative because we are US citizens, but more importantly, we’re all equal as human beings.”
Puerto Ricans have not fully owned their destiny for more than 500 years. On his second trip to the Americas in 1493, Christopher Columbus planted Spain’s flag on the Caribbean island, turning its residents into Spanish subjects for the next 400 or years or so. Puerto Rico later became part of the spoils of the Spanish-American War of 1898, which Spain lost. In the words of one present-day Puerto Rican commentator, the island’s sovereignty was passed like a ball “from vanquished to victor without any consultation or notice to the affected.”
Puerto Rico’s political status has changed little since then. It is a territory governed by the US constitution, which states that “Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States.”
Over the years, the US has made some concessions. In 1917, Puerto Ricans were granted citizenship. In 1950, Congress passed a law letting islanders create their own constitution. Three years later, the United Nations, on a decolonization quest at that time, removed Puerto Rico from the list of “non-self-governing territories.”
Yet as two US Supreme Court decisions last year reiterated, Puerto Rico remains under the jurisdiction of the US Congress, where it has just one “at-large” representative who has no vote. Its citizens cannot vote in presidential elections. The island’s elected officials have even recently lost the authority to decide how much to tax its citizens, and how to spend what they collect. Under the Puerto Rico Oversight, Management, and Economic Stability Act, (PROMESA, or promise in Spanish) passed by Congress in 2016 in response to Puerto Rico’s debt crisis, a board appointed by the US president has the final word on the island’s fiscal policies and its budget. The island’s governor gets a seat on the board, but like Puerto Rico’s representative in Congress, he or she is not allowed to vote.
The incentive bubble
As Trump points out, the debt that prompted PROMESA is massive: $73 billion.
It was no doubt fed by Puerto Rico’s expansive government apparatus, which includes 78 municipalities, each with its own mayor. The island’s elected officials are also guilty of mismanaging the crisis. Still, those are not the top reasons why Puerto Rico finds itself in such dire straits, says José Caraballo Cueto, a Puerto Rico University professor who has studied the factors that inflated the island’s debt.
Much of Puerto Rico’s economic pain can be traced to Section 936 of the US tax code, which in 1976 laid out an incentive program under which US companies didn’t have to pay any federal taxes on what they earned in the territory. The policy was used to foster economic development during the Cold War, when the US was trying to offset the allure of communist Cuba. Puerto Rico, whose economy rapidly improved with the help of its new corporate settlers, became a showcase for the advantages of free markets, says Caraballo Cueto.
In 1996, a few years after the Soviet Union dissolved and the presumed threat of communism subsided, the US decided to phase out the tax breaks. With nothing to replace the “manufacturing by invitation” program, the territory has lost more than 85,000 manufacturing jobs, according to data from the US Bureau of Labor Statistics.
Furthermore, manufacturing went from employing roughly 17% of non-farm workers in 1995 to just 8% today. That decline was the biggest contributor to Puerto Rico’s ballooning debt, according to Caraballo Cueto’s findings. The big hit to the manufacturing sector led to lower tax collections, and a larger need to borrow. “We have a smaller economy with a bigger debt,” he said.
An island of tied hands
Puerto Rico is hobbled by a number of US policies that make it hard for the island to emerge from its financial mess. Some of them stem from its territorial condition. For example, until the passing of PROMESA, Puerto Rico could not file for bankruptcy, and even now, it still can’t do it directly. In order to seek court protection, it must get approval by the PROMESA board. It is that board, not Puerto Rico’s government, which represents the island during the proceedings.
Other policies are crippling simply because they have been tailored for the world’s biggest economy, not a small island whose economic bottom has fallen out. Monetary policies, including interest rates, top that list: the US federal reserve system makes its decisions based on the situation in US states, not in Puerto Rico, even though the island territory is still impacted by those decisions.
Puerto Rico even suffers from one of the biggest perks it gets from the US: citizenship. The blue passport conferred to its residents by the US federal government means that all Puerto Ricans need to leave for the mainland is a plane ticket. From 2006 to 2015, more than 400,000 Puerto Ricans moved to the US, according to the island’s statistics institute.
Then there’s the Jones Act, which given its huge impact on Puerto Rico, could be considered a category unto itself. The obscure maritime law, which requires goods moving between US ports to be transported by US vessels, is practically irrelevant for most of mainland US, where goods are mostly shipped by truck. When applied to import-dependent Puerto Rico, it created a de-facto shipping monopoly controlled by a few US shipping firms. That, in turn, has led to higher costs for many of the products Puerto Ricans buy.
Partly because of this, the cost of living in Puerto Rico is more expensive than on the US mainland, even if the average income is considerably lower—residents of the territory’s capital, San Juan, pay 20% more for groceries than average Americans.
“You have a consumer market that is really held hostage because we cannot use any ship that does not have a US flag,” said San Juan mayor Carmen Yulín Cruz in a 2014 interview. What Puerto Rico needs, Cruz said, is to adopt measures “so that our economic prosperity depends on us and does not depend that much on money that comes from the US.”
Back then, she couldn’t have imagined that her island would be so ravaged by a storm named Maria, or that she would become the target of Trump’s angry tweets.
Stopgap measures
Maria’s devastation has made Puerto Rico even more reliant on the US, at least temporarily. But if Trump wants Puerto Rico to pay back what it owes, he should allow the island to start moving in a direction it charts for itself.
Permanently lifting the Jones Act, as some in Congress have already suggested, would be a good start. Doing so wouldn’t likely raise much controversy, beyond the shipping companies that benefit from it. After all, another US territory, the Virgin Islands, is already exempt.
The US could boost tourism by waiving visa requirements for visitors from certain countries who are eager to vacation in Puerto Rico, suggests Caraballo Cueto. The US lets the Mariana Islands welcome non-visa-holding Chinese and Russian travelers due to their “significant economic benefit.” Russians are afforded the same courtesy in Guam, another US territory in the Pacific.
Congress can also start brainstorming about other ways it could give Puerto Ricans a bigger say in their economic fate. If not, islanders themselves may apply pressure. There are already 5.4 million Americans of Puerto Rican origin in the continental US. That number will surely grow if the US does nothing, as Rosselló warned in his press conference.
“That presumption of thinking of Puerto Ricans as your constituents might come true because of the massive exodus that it will provoke,” the governor said.