Why Puerto Rico's Crash Matters

Joe Guzzardi
August 10, 2015
As seen in:
GOPUSA
Wabash Plain Dealer
Daily Iowegian
Huntington Herald-Press
The Westerly Sun
The Waxahachie Daily Light
Newark Advocate

The Puerto Rican crisis may mean bad news for the major U.S. cities and states that islanders are fleeing to. Large metropolitan areas are already struggling with high unemployment, overcrowding, and urban sprawl. A new influx of job seekers, potential home owners, and motorists will exacerbate an already grave situation in those heavily populated states and municipalities. In order, Connecticut, New York and New Jersey have the most Puerto Rican residents. About one third of the five million Puerto Ricans living stateside were born in the Commonwealth.

Puerto Rico is broke. Last week, Puerto Rico defaulted on $58 million of its $483 million outstanding indebtedness. Moody's Investors Service predicted that in the coming months Puerto Rico would default on more of its total debt. Two years ago, Moody's and Standard & Poor's downgraded Puerto Rico's debt to junk status. Accordingly, Governor Alejandro GarcÃa Padilla recently admitted that Puerto Rico is in a "death spiral." Analysts agree, and call the Puerto Rican crisis "America's Greece."
 
The Commonwealth's finances are a disaster; Puerto Rico, population 3.6 million, has the same debt level as New York, 20 million, but its economy is only a fraction of the Empire State's $1.9 billion. Puerto Rico's 12.6 unemployment rate is nearly twice the stateside level which has forced natives to seek refuge in the U.S. But as Puerto Ricans leave, the tax base there shrinks further, and makes recovery more challenging. Since 1917, Puerto Ricans have been designated American citizens at birth and can move freely to and from the U.S.

Between 1980 and 2000, an average of 12,000 Puerto Ricans migrated to the U.S., but from 2010 to 2013 when the economy began its "death spiral," average annual migration quadrupled to 48,000 annually. The slump deepened in 2006 when Congress discontinued an important tax break that encouraged new manufacturing.
 
Among those who have left Puerto Rico are more than 3,000 medical doctors seeking more lucrative, less stressful mainland jobs. As a result, Puerto Rico's health care system, where more than 60 percent of residents receive Medicare, is on the brink of collapse.
 
An overly generous welfare system that undermines the incentive to take jobs led to Puerto Rico's troubles. Only 40 percent of Puerto Ricans work. According to estimates, a household of three that's eligible for food stamps, AFDC, Medicaid, and utility subsidies could receive $1,743 monthly, an amount higher than the island's median family income. Per capita income there is only half that of Mississippi, the poorest state in the U.S.

Puerto Rico's future is grim. Not every Puerto Rican can afford to leave; many have neither the money to make the trip nor stateside relatives who can house them. The Obama administration has repeatedly said that it won't bail Puerto Rico out. As a non-incorporated U.S. territory, Puerto Rico cannot declare Chapter 9 bankruptcy, an option all 50 states have.
 
Most of the media scrutiny has focused on how Puerto Rico's financial despair will affect its natives. But mainlanders will be indirectly impacted, also. Every Puerto Rican job seeker that comes to the United States represents more competition for an unemployed stateside Americans.
 
What the Puerto Rican saga proves is that there are too many people searching for better lives. But the global economy doesn't have enough money or jobs to provide for everyone. The cycle of crashed economies like Puerto Rico will continue indefinitely until population stabilizes.

Joe Guzzardi is a Californians for Population Stabilization Senior Writing Fellow whose columns have been syndicated since 1987.