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]