Puerto Rico’s Dual Crises Show Its Territorial Status is the Worst of Both Worlds

October 22, 2017

Dan Beeton
InsideSources, October 22, 2017

Globe Gazette (IA), November 1, 2017
Palm Beach Post (FL), October 31, 2017
TruthOut, October 29, 2017
The Free Lance-Star (VA), October 28, 2017
Northwest Indiana Times, October 26, 2017
Herald and News (OR), October 26, 2017
Common Dreams, October 25, 2017
Jacksonville Journal-Courier (IL), October 24, 2017
The Star (FL), October 23, 2017
Washington County News/Holmes County Times-Advertiser (FL), October 23, 2017
Apalachicola Times (FL), October 23, 2017
Houma Today (LA), October 23, 2017
Daily Comet (LA), October 23, 2017
Newsday (NY), October 20, 2017

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Almost a month since Hurricane Maria struck Puerto Rico, most of the island still lacks power ? and it may be six months or more before it is restored. Many residents do not have access to safe drinking water, and the EPA has expressed concern about people drinking dangerous water at “hazardous waste ‘Superfund’” sites. About half the population is estimated to still be without cell phone service, making reports of ongoing urgent needs in isolated areas difficult to relay. Professionals worry about disease outbreaks and new health crises emerging.

The federal government response has been scandalous. President Trump’s treatment of Puerto Rico, in contrast to hurricane-hit Florida and Texas, has raised suspicions of racist indifference, or of other motivations for deliberate neglect. The response has been lacking in part because Puerto Rico is not a US state. Nor is it an independent country, in which case it would be free to receive aid unhampered by US restrictions.

President Trump infamously touted the low death toll from the hurricanes, in comparison with the Hurricane Katrina disaster, yet the death toll is still being tallied. People continue to die from preventable causes as the relief effort dawdles, hampered by the resumption of the Jones Act, which prohibits non-US flagged ships from docking at successive US ports, and other political calculations in Washington.

Unfortunately, Puerto Ricans are treated as second-class citizens; its government made subservient to Washington.

The island’s colonial status goes back to the Spanish-American War, when US forces invaded Puerto Rico and the US claimed the territory for its own. The US gave Puerto Ricans citizenship a few decades later, so that they could serve in the US military in World War I, but no voting representation in Congress. The second-class nature of their nationality was effectively made permanent.

This second-class citizenship is now hampering Puerto Rico’s ability to recover from a historic double crisis, while the US federal government response is one of relative neglect. Aside from the remarkable lack of initiative to get aid to people in need in Puerto Rico, Trump has blamed Puerto Ricans for their current (prehurricane) economic crisis, and has complained that Puerto Rico’s disaster is hurting his plans for the federal budget.

Puerto Rico’s debt woes are not “largely of their own making,” as Trump tweeted. They are much more of Washington’s making, as it was the US Congress that passed the Jones Act. The US Congress passed NAFTA, WTO, and other trade legislation that hampered the Puerto Rican manufacturing sector. The US Congress repealed Section 936 of the US tax code that had provided tax breaks to US companies producing goods in Puerto Rico. More recently, it was the US Congress that imposed the unelected Financial Oversight and Management Board on Puerto Rico, which now makes the most important economic policy decisions for the island. The Board has pushed for an economic austerity plan that has hampered the island’s recovery; after a lost decade of no economic growth, Puerto Rico was already on track to experience another before hurricanes Irma and Maria hit.

Since it is not an independent country, Puerto Rico is unable to consider monetary and fiscal policy options that might allow it to recover from its recession. These might include driving a hard bargain with the creditors who have barely paused in demanding full repayment of Puerto Rico’s debt, even though it is clear that Puerto Rico will not be able to repay it ? something that even Trump admitted, before the statement was walked back by Budget Director Mick Mulvaney.

Republicans are heaping more debt on the pile with financial aid in the form of loans over the objections of the Congressional Progressive Caucus, who says “The reconstruction of Puerto Rico is an opportunity to reboot the island’s economy” through “bolstering basic services such as healthcare, education, electricity and renewable energy.”

One of the reasons Puerto Rico racked up such a substantial debt was because it had to borrow to fund its Medicaid program, and here again we see how Puerto Rico is punished by its territorial status. Rather than reimburse the island’s Medicaid program at the 55 percent rate as it does for other territories, or the 83 percent rate that Puerto Rico would receive if it were a state, the US government capped the reimbursement at about $300 million per year ? less than a 15 percent reimbursement rate. The Affordable Care Act offered a one-time grant of $6.4 billion to Puerto Rico in 2013, but the money is now running out, and there is currently no funding for Puerto Rico’s Medicaid for next year.

Even worse, Puerto Rico’s Medicaid needs are greater because the poverty rate in Puerto Rico is 46 percent, compared to 15 percent for the US as a whole. Yet it will cost the US government more to not fund Puerto Rico’s Medicaid shortfall than if it does fund it. Why is this? Health care costs in Puerto Rico are less expensive than on the US mainland. If the US Congress approves Medicaid funding in Puerto Rico, it will be far less costly than were those same Medicaid patients to move to the mainland US and get treated here. Yet more and more Puerto Ricans will keep out-migrating as the island continues to suffer neglect in the wake of the hurricanes and its economy continues to limp along. A Medicaid crisis would be another factor pushing people to leave the island for US states.

It is not our place to weigh in on whether Puerto Rico should become a US state, or an independent country. But under the status quo, the island’s residents seem to be experiencing the worst of both worlds.

Dan Beeton is International Communications Director at the Center for Economic and Policy Research (www.cepr.net) in Washington, DC.

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