Sixties Fan
Diamond Member
- Mar 6, 2017
- 56,783
- 10,796
- 2,140
- An exodus of large businesses and a lack of tax revenue forced the Puerto Rican government to borrow money and sell bonds to Wall Street.
- The federal government has made things worse through laws that make it harder for Puerto Rico to take control of its finances and economy.
- Puerto Rico has little say in how it is governed from Washington, and its citizens have almost no voice in federal policies that affect them.
When America's eyes turned to Puerto Rico after the island was devastated by Hurricane Maria last month, President Donald Trump was quick to condemn the "massive debt" the island was dealing with, even while the US territory was still in the throes of the storm's aftermath.
He went on to remind Puerto Ricans that this debt needed to be paid back to Wall Street, and blamed local officials for the poor response to the island's humanitarian crisis.
Looking at the long-term history of Puerto Rico's debt and what caused it reveals that the federal government in fact shoulders much of the blame for the crisis.
While Puerto Rican politicians took actions that exacerbated the island's debt, they were operating within very small parameters set for them by Washington, having had little say on federal policies that have affected them ever since Puerto Rico became a US territory in 1898.
The tax breaks Puerto Rico's economy depended on are gone
After World War II, as the rest of the US was going through the post-war economic boom, the federal government sought to modernize Puerto Rico's largely agricultural colonial economy and bring industry and manufacturing to the island though various tax breaks.A 1976 tax break basically created a tax loophole by which US manufacturers could get away with paying almost no income taxes on the island. This led to a massive influx of businesses, particularly in the pharmaceutical industry, to relocate to Puerto Rico and jumpstart its industrial economy.
The effort paid off, and Puerto Rico's economy flourished. But it also contributed the federal government's tax deficit in the 1980s and '90s, leading Congress to repeal the 1976 tax break in 1996. By the time the law was totally phased out by 2006, nearly all the American businesses that flocked to the island had gone, and Puerto Rico's economy had gone into freefall — 2005 was the last year the island experienced economic growth. And that was before the Great Recession, which decimated the economy further.
Because the 1976 tax plan was designed by the federal government to benefit large corporations, Puerto Rico's economy became dependent on them, and once they left there was little indigenous entrepreneurship to replace these giants. To make matters worse, the industry Puerto Rico had initially excelled in, agriculture, is now also in tatters — Puerto Rico has to import 85% of its produce.
(full article online)
Here's how Puerto Rico got into so much debt
Trump has rebuked Puerto Rico for its growing debt in the aftermath of Hurricane Maria, but a long history of neglect by Washington is what's really to blame.
www.businessinsider.com
[ For people who do not give a damn about some people and only think the worse ]
