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Opinion

The Political Fallout of Puerto Rico’s Debt Crisis

Photo by Jose Santiago on Unsplash

Puerto Rico is an idyllic Caribbean paradise that’s fallen on extremely hard times. A decade-long super-recession has devastated this American territory, and it doesn’t seem to be getting better. The future is grim on the isle of enchantment, as the local government is currently dealing with an eye-popping 72 billion dollars in debt. Considering only California and New York have more debt, there’s little doubt Puerto Rico is on an inevitable collision course that ends with a massive default. The governor has already declared that is it mathematically impossible to repay their debt.

In the wake of an endless crisis, the solution for many Puerto Ricans has been to vote with their feet. As American citizens, Puerto Ricans are entitled to live anywhere in the United States, and they have been exercising that right for generations. Today, Puerto Rico’s crazy bad economy has ignited a new wave of migration, and they’re headed for Central Florida, one of the most coveted battlegrounds in presidential politics. An increasingly popular destination for these migrants are the Orlando and Tampa metro areas, which are often labeled swing areas of a swing state. As Puerto Ricans flee an island that’s coming apart at the seams, they’re inadvertently tilting this critical swing area toward the Democratic party.

In the modern world, it’s difficult to detach business from politics, and Puerto Rico is a prime example of the direct link between economic outcomes and decisions made by our elected lawmakers. While government mismanagement on the island certainty contributed to the crisis, Puerto Rico’s elixir of economic doom was brewed in the halls of the United States Congress with well-intentioned tax breaks.

Puerto Rico enjoyed tax breaks that brought widespread prosperity to the island, but when those completely expired in 2006, the economy fell into a recession and people started bolting for the mainland. In the face of a declining economy and a shrinking population, the territory’s government financed the ever-growing deficit with debt fueled by another congressional tax break. Investing in Puerto Rico’s debt, because of its “triple tax-free status,” was attractive to investors. This gave the government a convenient way to kick the can down the road, and not address severe fiscal problems. Today, the era of spending like drunken sailors has come to grinding halt. It’s been forced to hike taxes to raise revenue, which is freaking out big businesses like Wal-Mart.  

As Puerto Rico teeters on default, the government is pleading with Congress to help them address their mountain of debt.  While the Obama Administration and many Democrats have called for action, our Republican-controlled Congress has yet to pass any legislation to deal with the crisis. Meanwhile, Puerto Rico’s government is actively pursuing legal avenues that have made their way up to the Supreme Court, the see if it’s possible to restructure their debt.

Realistically, some sort of bailout, restructuring or bankruptcy is almost certain for the ailing island. As Puerto Rico’s death-spiral rolls on, more and more Puerto Ricans will leave for brighter prospects in the United States, only further skewing demographics in favor of the Democratic Party in what is perhaps the most important swing area in American politics. While Congressional Republicans are now floating proposals to help facilitate some sort of financial help, it would be prudent for them to act fast. If they don’t find a solution, they’ll be shooting their 2016 Presidential nominee in the foot, as Puerto Rican migration continues to paint Central Florida bright Democratic blue.

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