By Franklin D. López
Journalist, Writer, Entrepreneur and Political Prisoner
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“It is always the right time to do the right thing”- Dr. Martin Luther King
In his book “A People’s History of the United States” professor Howard Zinn ( You may read it for free at: http://www.historyisaweapon.com/zinnapeopleshistory.html ) clearly makes the case to conclude that the United States government historical pattern of government policies behavior, in dealing with domestic and foreign crisis, has been based on reactions and not in preventing them. Some one once said that “the best strategy to deal with a serious crisis is to prevent it.”
On December 11,1973, Nobel Laureate in economy, James Tobin released The Tobin Report, a comprehensive study on Puerto Rico’s economic development, fiscal and budget policies. The report expressed that “The trends of government spending, the deficits of the government agencies, public debt and the production cost cannot be sustained even if the external economic conditions are favorable.” The report strongly recommended a serious austerity program and a long list of substantive measures cutting governmental operations and costs. The Tobin Report predicted in December 1973, forty three years ago, that Puerto Rico would face serious financials and economic consequences if no measures to cut cost and implement an austerity programs were implemented. All of this was ignored after the report was made public by the Hernández Colón administration, that instead chose the path of borrowing and spending. Subsequent colonial governments followed the same policy.
It was a report to reckon with but was shelved in a forgotten governmental archive and the pressures of the re-election aspirations of the Rafael Hernández Colón administration prompted policies of borrowing and governmental agencies expansion and spending.
The Tobin Report reviewed the administrations of Governors Luis Muñoz Marin (1948-64) (PDP); Roberto Sánchez Vilella (1965-68) (PDP) and Luis A. Ferré (1969-1972) (NPP). See the full Tobin Report at http://www.historyisaweapon.com/zinnapeopleshistory.html Subsequent gubernatorial administrations continue creating more regulatory agencies and departments, borrowing and spending without any oversight and “protected” by the “fiscal autonomy disguise” of the Island commonwealth status “in the nature of a compact between Washington and Puerto Rico.”
After assuming the Speaker position of the U.S. House of Representatives, Paul Ryan (R-Wis), instructed the Chairman of the Natural Resources and Energy Committee Chair Rep. Rob Bishop (R-Utah) to draft legislation to deal with Puerto Rico’s debt crisis and to have it ready by the end of March 2016. On March 25, 2016, a Good Friday, The New York Times obtained access to the draft of the bill and surprising everyone in the Puerto Rican Government, including the sole Congressional Representative of Puerto Rico, Pedro Pierluisi, published details of the bill’s content. An immediate ‘hurricane in a glass of water’ was formed within a sea of statements by all colonial political party opposing the powers given by Congress, under Article Four of the United States Constitution to a Federal Fiscal Board to supervise the possession’s government. Speaker Ryan kept his word. But the Federal Fiscal Board is only one component of many that needs to be addressed by Congress, the U.S. Senate and the White House. But Congress must understand that the Constitutional powers given also come with responsibilities and accountability especially when those residing in the territory are American citizens by birth and more than 275,000 of them defended democracy and liberty in global conflicts, the same ideals that denied to them in the present segregationist colonial regime.
The soon to be Federal Fiscal Board, with it’s ample and vast powers, must address the following landscape matters of the territory if it wants to succeed in resolving the crisis:
- The massive population exodus and it’s structural impact on the government ability to pay the public debt in an environment of shrinking tax revenues. According to the U.S. Census in the last five years 251,607 have moved to the United States and the majority of them educated middle class that is the classic foundation of a consumer oriented economy. This number represents a loss of $4.830 billions less floating in the territory’s economy. The government of Puerto Rico tax revenues projections are mostly ‘flying pregnant birds in the sky’ because they ignore the negative effects on tax revenues of the population exodus. The shift of population to Florida, Texas, North Carolina, Virginia and Ohio cost much more to service by Federal, State, County and municipal governments than in the territory
- The massive new taxes (around 92 new taxes) imposed by the present colonial administration when the economy is in a serious depression. It is a fact that taxes, including the cost of water and electricity, have a serious damaging recessionary effect on any economy.
- The mega increases in utilities costs adding fuel to deepen the economic depression and promoting further the exodus of population. It is a great challenge to attract investors to set up shops in Puerto Rico with the highest cost of living and one of the highest energy cost in the Nation.
- The loss of confidence by the People of Puerto Rico in its government and the political party system caused by the massive corruption and government waste needs to be addressed in the same manner as paying the debt. This absence of trust is fueled by the impunity of justice, the prosecution of small fish while sharks continue stealing with impunity. The U.S. Justice Department needs a strong allocation of funds to fight the epidemic of corruption in the territorial and municipal governments.
- The absence of financial statements of the finances of Puerto Rico during the last two years and the criminal negligence of the government’s economic team to move the process at the speed of molasses .
- The shrinking governmental revenues stream caused by a reduction of the consumer base due to the massive population exodus.
- The highest cost of living with a consumer tax of 11.5%; an income tax of 33% and a caravan of tariffs, taxes and high utilities rates making the territory the U.S.A. jurisdiction with the highest cost of living.
- The lowest paid private and public employees of any state of the Union together with the highest cost of living makes the perfect ingredients for the grave present economic depression.Cutting the Federal minimum wage is to promote a policy of poverty and slavery in the territory because of the high cost of living. Congress must not punish the people of Puerto Rico! It must punish those responsible of the present debt crisis.
- The deflation of the values of the real estate market and the extinction of the construction industry with a box score of 312,000 housing units empty of the 1.2 millions housing units on the Island
- The high percentage of non performing loans of mortgages, autos, credit cards and commercial loans crippling the ability of the banking platform to promote the economy by lending.
- The high number of personal and commercial bankruptcies. Last month they increase at the rate of 27%.
- The failure of a corrupt and wasteland of the Department of Education with the highest desertion in the United States.
- The loss of hundreds of millions of Federal funds caused by the population exodus.
- An inefficient and massive governmental structure of 132 agencies with hundreds of thousands of unskilled employees (the State of Florida with 19.7 millions citizens has 41) that is the largest impediment for any economic recovery plan
- An absence of an economic policy of promoting local investments and manufacturing to strengthen our local economy.
- A massive poverty population of more than 50% dependent of Federal and colonial welfare.
- The absence of a culture of transparent and committed public service
- The construction of a metro train project when PuertoRicans are more attached to their cars than to their spouses creating a yearly deficit of more than $100 millions and with a daily passenger deficit of more than 101,000.
- A bankrupt Public Employee Pension Fund with an structural deficit estimated at $ 47 billions fueled by territorial government administration using their assets to cover budget holes during the past 40 years.
We need strong oversight of the territory’s public funds. It is estimated that $ 27 billions were lost in corruption and government waste in the last 43 years. We need a strong Federal Fiscal Board. But, if the U.S. Congress believes it can resolve the public debt and finances of the territory by only eliminating governmental waste, reducing the number of public agencies and municipalities, firing tens of thousands of unnecessary government employees and cutting government spending, it will fail from the get go.
Congress must address with legislation that contains a multi phase plan that includes economic development programs like the Federal Enterprise Zone, a law promoted by then Congressmen Jack Kemp (R-NY) and Roberto Garcia (D-NY),cutting government waste, reducing the juggernaut of a gigantic government, reduce the number of municipalities to eigth, eliminate unnecessary government employees and refer for prosecution those responsible for the greatest heist of public funds in our history . Congress must not follow a policy of patches to deal with the complexities of Puerto Rico’s crisis. It must address resolving the political status and making it a top priority. Neglecting this will create a major issue to the United States in the International community because of the colonial nature and violation of human rights of the present territorial governmental structure. Congress and The White House needs to address the fundamental and principal problem that is the base of the present situation: the solution of it’s status.
The one and only solution to the Island’s problem is the road to political equality. The Federal Fiscal Board must have a transition plan towards making Puerto Rico a state of the Union. By adopting such a policy in its legislation it will send a strong message to investors and to the 5.3 million American citizens in the Union from Puerto Rico that the U.S. Congress, the Senate and the White House have a solid commitment with its 3.5 millions American citizens. The only way that Puerto Rico will attract investments and promote Puerto Ricans from the mainland to return to the Island is if Puerto Rico is part of the Union. The Hawaiian model of statehood worked. It should be reviewed.
If Congress decides to ignore the status issue the Island will continue with its massive escape valve sending tens of thousands to the mainland. Many polls my Gallup and local newspapers have shown that 92% of the population will move to the states of the Union if Puerto Rico becomes a republic or a free associated republic. Simply put, Puerto Rico will have a catastrophic collapse, socially, politically and economically at a cost of tens of billions to American tax payers. This is the reality of the landscape Congress is facing of today’s Puerto Rico. Think about it. Congress must prevent a major catastrophic and humanitaria crisis. “It is always the right time to do the right thing”. The time for political equality for American citizens in the territory is now!