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Blue Model-Wall Street Coalition Burying Puerto Rico


It looks like the Wall Street-blue model axis that has plundered cities like Detroit and Stockton is also one of the major forces sinking Puerto Rico. The Washington Post reports that the US territory’s $70 billion public debt and collapsing economy have been fueled by the codependence of spendthrift blue politicians and Wall Street investment bankers collecting enormous fees:

How Puerto Rico got into this mess is a long story, with plenty of villains: The island’s government frittered away funds on unproductive investments and bloated payrolls; Wall Street bankers enabled more borrowing, collecting $880 million in fees since 2000; the U.S. government’s policy of tax-free status for Puerto Rico bonds, meant to boost its economic development, subsidized the island’s habit of living beyond its means.

Accompanying this mess has been near-total economic failure:

Puerto Rico’s output has declined 16 percent since 2004. Its recession, triggered by the 2006 phaseout of a federal manufacturing tax break, began before that of the mainland and lasted longer. Only about a million of Puerto Rico’s 3.6 million people are employed. Not coincidentally, Puerto Rico’s population shrank 4 percent in the past decade, as many of the best and brightest sought opportunity on the U.S. mainland.

As the Post explains, Puerto Rico also finds itself in a somewhat anomalous legal pickle. Being neither a city nor a sovereign country, it’s ineligible for either Chapter 9 bankruptcy under US federal law or a bailout from the IMF.

It was not so long ago that Puerto Rico sought to make acceptance as America’s 51st state a serious possibility. Since a 2012 referendum on the matter, however, any Puerto Rico-related story has been dominated by facts that make this a toxic prospect. With massive debt, high unemployment, a shrinking population and economic failure, Puerto Rico won’t endear itself to Congress any time soon.

[Puerto Rican flag image courtesy of Shutterstock]

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  • Andrew Allison

    I would have thought that the absolute dependence of Puerto Rico’s population on government handouts would have made it extremely attractive to the Senate majority!

    • bigfire

      The Senate is a very exclusive club. Only 100 member. They’re NOT about to open up membership without good reason.

      • Bruce

        I’ll take the other side of that. Andrew has it right. If the majority party can increase its majority by two more, they would do it. Politics isn’t about “serving.” It’s about power and two more reliable Dems in the Senate would be alluring to them.

  • charlesrwilliams

    It’s time to spin Puerto Rico off. Let them default on their debts and start with a clean slate. I don’t want to be responsible for them.

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