Congress's Work With Puerto Rico Isn't Done Yet
Still in need of repair
The good news is that Congress has finally passed a bipartisan bill to help Puerto Rico dig out from its $70 billion in debt. The bad news is that the island is still a long way from economic recovery.
The federally appointed control board created by the law will enable the restructuring of Puerto Rico’s unsustainable debt and oversee its fiscal plans and economic policies. The law’s provisions are strict: In addition to approving all fiscal plans and budgets, the board can overturn noncompliant laws and accelerate the development of critical infrastructure projects. Puerto Rico must develop approved budgets for at least four consecutive years, with annual revenue in excess of expenses, before the board can be terminated.
If Congress wants to put the island’s economy on a more sustainable path, however, it will have to do more to help Puerto Rico help itself.
It might start by exempting Puerto Rico from the Jones Act, an onerous 1920 law requiring cargo shipped between points in the U.S. to be carried by ships that are built, owned and crewed by U.S. companies. Not only does that make gas, food and other "imports" from the mainland more expensive, but it also reduces Puerto Rico’s potential as a maritime hub.
Meanwhile, a provision in the just-passed bill to fast-track newer power plants may lower energy costs, but it has also riled environmentalists. Congress could make amends by supporting the island’s transition to natural gas and renewables, and pushing for the development of a cleaner Caribbean power grid -- something that would also help undermine Venezuela’s noxious petro-diplomacy.
One of Puerto Rico’s biggest challenges is tapping and shrinking its informal economy, which may amount for as much as one-quarter of its gross national product. Extending the Earned Income Tax Credit to Puerto Rico would both bring workers into the fold and fight poverty. So would granting Puerto Rico the flexibility to provide earning supplements and job training to welfare recipients willing to take jobs in the formal sector.
After the battle royale between the new law’s supporters and those who wrongly called it a “bailout,” Puerto Rico may be the last place to which Congress wants to return. But there is little doubt that its economy requires sustained attention: It has contracted every year but one since 2006. Unemployment is more than twice the national average, and nearly half the population is below the federal poverty line. Faced with dwindling opportunity, Puerto Ricans are moving to the mainland in growing numbers.
Puerto Rico needs to learn to better manage its own affairs, of course. But as long as Puerto Rico is a territory, Congress also has a big role to play. Encouraging economic growth, after all, is good for both creditors and debtors.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.