Because so many of the territory's residents receive government assistance to pay for health care, providers struggle perpetually, and their workers are underpaid compared to their peers on the mainland. Nelson Denis, author of 'War Against All Puerto Ricans,' details how the commonwealth's 119-year-long association with the ⦠Over the past two weeks, the American island territory of Puerto Rico has become embroiled in a massive debt crisis threatening the ⦠High employee costs and regulations are not the only problems confronting employers. Puerto Rico will not emerge from its economic or fiscal woes without the proper foundations for growth, such as a robust labor market, an attractive business climate, a non-stifling regulatory regime, and less cronyism and corruption. "Puerto Rico: Factors Contributing to the Debt Crisis and Potential Federal Actions to Address Them," Page 2. "Quick Facts: Puerto Rico." These tax advantages, however, were not permanent. S&P Dow Jones Indices. Recent headlines about Puerto Rico have focused on Puerto Ricoâs debt and its related financial crisis. In 2017, Hurricane Maria devastated the island after flattening neighborhoods and taking down power grids. "Puerto Rico: Factors Contributing to the Debt Crisis and Potential Federal Actions to Address Them," Page 34. Puerto Rico was a Spanish colony for centuries until the US invaded it during the Spanish-American War in 1898. This failed to cause major problems for many decades. A relatively high minimum wage and strict labor laws contribute to the underground economy by driving up the costs of formal employment. Puerto Rico is hoping to reduce $123 billion in debt and pension obligations. [12] (See Chart 5.) Puerto Rico’s problems are much larger than its $72 billion of debt. The Jones Act is a federal law that regulates maritime commerce in the United States. Rather than raising taxes, Puerto Rico should seek to boost economic growth, which in turn would drive up tax revenues. The next year, Spain ceded Puerto Rico (and Guam) to the US. The new measures come as Puerto Rico struggles to recover from hurricanes, earthquakes and an economic and financial crisis that began more than a decade ago. For a while, Puerto Rico had something else to drive its economy. The island’s population has declined by more than 250,000 (7 percent) over the past decade. Research Fellow in Economics, Budget and Entitlements, An Economic Crisis Is the Heart of Puerto Rico’s Financial Crisis, FinCEN Should Not Lower Money Transmission Thresholds, Financial Firms Do Not Need Consolidated Federal Supervision, The Results Are in: Reopening Fuels Record Economic Expansion, http://dailysignal.com/2015/07/01/progressive-paradise-lost/, http://dailysignal.com/2015/07/08/allowing-puerto-rico-to-declare-bankruptcy-is-giving-it-a-bailout/, http://www.gdb-pur.com/economy/statistical-appendix.html, http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=1&isuri=1, http://data.worldbank.org/indicator/SL.TLF.ACTI.ZS?page=1, http://www.lawforchange.org/images/lfc/PuertoRicoEmployment.pdf, http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB15-Chapters/DB15-Report-Overview.pdf, http://www.heritage.org/research/reports/2014/05/sink-the-jones-act-restoring-americas-competitive-advantage-in-maritime-related-industries, http://www.nbcnews.com/news/latino/puerto-rico-legislators-approve-much-debated-sales-tax-increase-n365256, http://www.latinpost.com/articles/57488/20150604/puerto-rico-economy-2015-gov-alejandro-garcia-padilla-signs-11.htm. Puerto Ricoâs problems are symptomatic of irresponsible budgeting & overspending. Puerto Rico cannot afford the $70 billion debt that it amassed during a decade-long recessionâlet alone basic government services. Puerto Rico is supposed to be America's paradise island. Joint Committee on Taxation. U.S. Government Accountability Office. Puerto Rico scored low on trading across borders (84th) thanks to numerous bureaucratic requirements, and its trade is also limited by the federal Jones Act of 1920. Over the past few decades, declining tax revenues and mounting debt in other areas have forced Puerto Rico to borrow money to keep its Medicaid program solvent. Rachel Greszler [9] And the business climate in Puerto Rico has been growing worse, not better. Accessed July 7, 2020. An aging population, mounting costs of social programs, and a declining population have exacerbated debt problems as well. How Puerto Rico's Debt Created A Perfect Storm Before The Storm For years, the nation's largest banks made millions off Puerto Rican debt as the island approached financial ruin. View Spanish version of Highlights (PDF, 1 page).. What GAO Found. As the situation in Greece has shown, economic growth is necessary for fiscal sustainability. [7] Heritage Foundation calculations based on data from U.S. Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics, http://www.bls.gov/oes/ (accessed July 23, 2015). Financial Crisis What is the the Jones-Shafroth Act? Puerto Rico's fiscal crisis is entering a dangerous new phas as Gov. Supreme Court takes case on Puerto Rico financial crisis June 20, 2019 / 2:10 PM / AP This image shows the U.S. Supreme Court in Washington, D.C., on January 31, 2017. For many workers, “off-the-books” jobs are either the only or the preferable option. 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