Puerto Rico's Financial Crisis Is U.S.' Crisis, Too

IBD ^ | 07/01/2015

[SeekAndFind]

With the financial world transfixed by Greece's debt-driven meltdown, Puerto Rico announces it can't pay its $73 billion in debt. Once again, we're learning that welfare statism is no replacement for fiscal responsibility.

Compared to Greece's $353 billion in debt, Puerto Rico's $73 billion doesn't sound so big. On a per capita basis, it's about a third less.

But appearances deceive. Puerto Rico is in deep, owing actually much more than that amount.

We learned this after a report on Monday, co-authored by former International Monetary Fund No. 2 Anne Krueger, revealed the island's finances are a shambles.

The devastating analysis noted that some 150 agencies ran up deficits that couldn't even be accurately counted, so the true indebtedness might be even higher — as much as $100 billion by some estimates.

The government has funneled public money to state-owned enterprises that are supposed to be financially independent. Worse, the report said, many workers no longer even look for jobs, since welfare benefits pay more than actual work.

In short, the government has been horrendously mismanaged. Puerto Rico's Democratic Gov. Alejandro Garcia Padilla said: "This isn't about politics: It's about math." He's wrong. It's about both.

As far as math is concerned, Padilla acknowledges that he borrowed to balance the budget. The problem is, Puerto Rico's dysfunctional economy means the debts only piled higher, with no way to pay them. Deficits grew, too, since spending was never really cut.

Now, as a commonwealth, it can't declare bankruptcy. It can default, however. That would be messy, creating a financial crisis in the territory, causing businesses to close and sending thousands fleeing to the U.S. mainland. Yet the Democrat-led government has said that, while it hopes to avoid default, it won't cut either pensions or spending. So disaster looms.

[Moonman62]

We should have cut them loose when they wanted to be cut loose.

[Daveinyork]

“The problem with socialism is that sooner or later you run out of other people's money.” Margaret Thatcher.

[jsanders2001]

Like a spoiled teenager, their hands are out waiting for the dinero. And the U.S. wonders why their deficit is so high.

[oh8eleven]

Puerto Rico's Financial Crisis
Isn't this the country that receives US Federal benefits - but whose citizens pay no US personal income taxes?

[SeekAndFind]

RE: Like a spoiled teenager, their hands are out waiting for the dinero. And the U.S. wonders why their deficit is so high.

A little perspective.

Puerto Rico’s GDP is close to $103 Billion.

Their current debt ( which they can’t pay ) is $72 Billion.

This is just $30 billion less than their GDP.

Now consider the USA, which is supposed to help them.

Our GDP is $17 Trillion. However our debt ( which does not include unfunded future obligations ) is $18 TRILLION !!

That’s MORE than our GDP.

The difference is we can print money and Puerto Rico can’t.

So, what makes people think that what’s happening in Puerto Rico won’t in the near future, happen HERE?

[1Old Pro]

Here’s what’s happening:

Crisis in PR, proper handling (our money to them) by Obama will get Hillary the much needed PR vote from PR’s in the U.S.

[RayChuang88]

The biggest problem with Puerto Rico is that they can't use the Chapter 9 bankruptcy laws to reorganize government finances. That's a huge problem for that territory.

Look at Detroit--after they were able to use Chapter 9 bankruptcy laws, with those expensive pension obligations out of the way, the city has finally begun the long process of reinventing itself to be less dependent on the auto industry and more on trans-border trade between Canada and the USA--especially now with the start of the construction of the Gordon "Gordie" Howe International Crossing bridge, a project 30 years overdue.

[outofsalt]

A brief history of Puerto Rico’s governors
Governors under the Constitution of the Commonwealth of Puerto Rico

1 Luis Muñoz Marín
1949 1965 Popular Democratic Party Independen

2 Roberto Sánchez Vilella
1965 1969 Popular Democratic Party Democrat

3 Luis A. Ferré
1969 1973 New Progressive Party Republican

4 Rafael Hernández Colón
1973 1977 Popular Democratic Party Democrat

5 Carlos Romero Barceló
1977 1985 New Progressive Party Democrat

6 Rafael Hernández Colón
1985 1993 Popular Democratic Party Democrat

7 Dr Pedro Rosselló
1993 2001 New Progressive Party Democrat

8 Governor Sila Calderon
2001 2005 Popular Democratic Party Democrat

9 Aníbal Acevedo Vilá
2005 2009 Popular Democratic Party Democrat

10 Luis Fortuño
2009 2012 New Progressive Partites

11 Alejandro Garcia Padilla - Democrat Party

https://en.wikipedia.org/wiki/List_of_Governors_of_Puerto_Rico

[outofsalt]

11 leftist governors, $73 billion debt in only 65 years!

[reed13k]

I’m not aware of that every passing in a vote - I think it has always been defeated. They also haven’t passed becoming a state.

[Oatka]

Thanks for posting. Archived for various comments sections that cry about the issue.

[JRios1968]

PING

[cll]

To the list: I will mercifully not be pinging you to each and every story that comes out about Puerto Rico's "financial crisis". If you want more, you can do a FR search for "Puerto Rico". I will be tagging those stories s such.

Puerto Rico Ping! Please Freepmail me if you want on or off the list.

[Eric in the Ozarks]

Hallelujah, we're opening an embassy in Cuba...