What Does the United States Owe Puerto Rico?

Just what does the United States owe Puerto Rico?

It’s a question that has come up over the years since Puerto Rico was acquired from Spain in 1898 after the Spanish American War, and it is arising with increased frequency since Governor Garcia Padilla announced in June that Puerto Rico’s debts are “not payable.”

Joseph E. Stiglitz, a nobel laureate in economics, and Mark Medish, a former senior Department of Treasury official, have attempted to answer this question in an opinion piece published in the Wall Street Journal today.

The authors begin by noting that German Finance Minister Wolfgang Schäuble recently mentioned to his American counterpart, Treasury Secretary Jack Lew, that he would gladly trade Greece for Puerto Rico.  It is clear from the beginning that Puerto Rico has captured the world’s attention.

Stiglitz and Medish distinguish Puerto Rico from Greece, noting that Greece chose to join the eurozone while Puerto Rico never chose to become an unincorporated U.S. territory. They then describe Puerto Rico’s relationship with the United States since becoming a U.S. possession:

“Washington has since been content to play absentee landlord. The commonwealth of Puerto Rico is neither fish nor fowl in the constitutional order. It lacks both the privileges of a U.S. state and the powers of a sovereign. Indeed, its relationship to the U.S. gives the lie to the notion of a ‘commonwealth.’ The U.S. wants the benefits of an offshore tax haven without the responsibilities to rescue it in time of need.”

Noting that “Washington treats Puerto Ricans as second-class citizens,” the authors list examples of slights of the U.S. government towards its most populous territory – a list they characterize as “long and depressing” – such as reduced Medicare and Medicaid coverage and corporate tax holidays that are “granted and capriciously withdrawn by Congress.”

Stiglitz and Medish recognize that some of of Puerto Rico’s private creditors claim that Puerto Rico merely has a serious short-term liquidity problem but is not insolvent, a situation they describe as “a distinction without a difference.”

“The territory can’t pay its debts today, and with short-term debt financing at the high interest rates demanded by creditors, it will be even less able to pay its debts tomorrow,” the authors conclude.

So, what can be done?

Aside from changing Puerto Rico’s political status, the authors acknowledge that Puerto Rico’s options are limited.  Yet they nonetheless maintain that “action by Washington is imperative to prevent further social hardship.”  Their list of suggested federal reforms include amending Chapter 9 of the U.S. bankruptcy code to encompass Puerto Rico and provide orderly debt relief. Absent federal action, Puerto Rico should be allowed to promulgate its own bankruptcy law.

Ultimately, the authors conclude, “the U.S. must take responsibility for its imperialist past and neocolonial present. Washington owes Puerto Ricans a future based on democratic legitimacy and a financially and socially viable development strategy—a development strategy that is more than a set of tax breaks for profitable U.S. corporations.”

Read more of the U.S. obligation to Puerto Rico here.

8 Comments

Chris

There must be a binding referendum between two choices: statehood vs independence … and Congress must commit to honoring the results understanding that statehood is virtually guaranteed to win by a landslide. The latest poll by Gaither shows that over 60% of island residents would support statehood in a referendum.

Emmanuel Caceres

No statehood to Puerto Rico it is better off as sovereign free association meaning a independent country but having negotiated ties with United States.No more states don’t get me wrong United States is a great country and I love it a lot but is better off with only 50.I been observing how countries of the world are happy to represent their cultures,heritages,sports,you name it why take it from one another.Puerto Rico is a beautiful country and it can become a strong nation.

Chris

@ Emmanuel Caceres, Puerto Ricans do not want independence … such “free association” has been a total disaster in Palau, the Marshall Islands, and Micronesia. Also, such a status cannot include US citizenship.

Who are you to say 50 states is the limit? That would be like saying 193 nations is too many.

Anita

Become independent
No state hood!!!
Puerto Rico needs to stand on its own
Other smaller nations have done it.
Anyways the U.S. Can’t afford to keep Puerto Rico
We have made the island practically a slum where everyone gets food stamps and is looking for more entitlements.

leslie

The United States should give Puerto Rico back to Spain where history began and so our culture can be preserved. It is true that other countries like Cuba and the Dominican Republic have gone on to be independent but Puerto Rico could not stand on its own. It has been proven with the way the government handles the islands issues and its a small island !! It has proven they dont have what it takes to function independently as other nations. It belongs to Spain as it was taken by the United States. When it returns to Spain the culture will be preserved and history corrected. The United States has never wanted Puerto Rico and it continues to be forgotten.

Chris

@ Anita, if the US cannot afford Puerto Rico than we cannot afford Mississippi, Louisiana, and Georgia either. The welfare and dependency stats for Mississippi are barely lower than Puerto Rico.

The vast majority of those on welfare are White Southerners.

ed

I encourage to read this book Puerto Rico: A socio-historic interpretation by Manuel Maldonado-Denis. This book has really thought me a lot about the Spaniard invasion, our culture, government, and the parties involved. It’s amazing that our island has yet to really enjoy it’s freedom, once Spain left, US took over. Never knew that at one point according to the book that Culebra was used for military operations, the folks stood up and fought hard to take back and they did. Also a great link below that talks about the economy and for those that think Puertoricans in the island are dependent on welfare and all the benefits. https://youtu.be/4Kdvw7Ab4uM

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