December 01, 2013
That is the question that readers of this front page Washington Post piece on the island’s $70 billion debt were undoubtedly asking. For some reason the paper never bothered to give this information, although it did compare the debt to that of other states.
Puerto Rico’s GDP is a bit over $100 billion, which means that its debt-to-GDP ratio is a bit under 70 percent. That is low for wealthy countries; however it would be a very high ratio for a state. Puerto Rico, as a territory of the United States, falls somewhere between the two. Most of its residents are not subject to the federal income tax, which means that the Puerto Rican government has access to money that other state governments would not. On the other hand it is subject to Social Security taxes, but Social Security benefits are a major source of income for people on the island.
Anyhow, it would have been helpful to include information on the size of Puerto Rico’s economy. Without this information it is impossible to assess the size of the burden of the debt.