Anybody Got 70 Billion Out There?

I know that I was reading it at 3:45, because that’s when I sent it off to myself in an email. Bloggers do that, since a large part of my day now is spent wondering what, if anything, there might be to write about. The problem? Much of what seems perfectly splendid in the middle of the night looks a bit different in the colder light of day.

And you don’t really want to know, do you, that Puerto Rico is on the brink of financial doom? Why? Because for decades, every governor of either party has followed essentially the same strategy: hire as many people as you can, pay them marginally, allow them to do as little as possible, and borrow money to pay for it all. So what happened?

Well, the chicken came home to roost, and the Washington Post reported yesterday we’re 70 billion bucks in debt. Cancel that—I just checked the headline, and it’s not even “70 billion,” it’s “at least 70 billion.” That makes us number three in the nation—behind California and New York. We do, however, easily trump little Detroit, who went bankrupt at a mere 18 billion. Pikers, obviously.

Nor is that the only problem for today—everybody is leaving the island; in the years from 2006 to now, we’ve lost 138,000 people, most of them to the mainland, and most of them professionals. And why not? Salaries are low, crime is high, and the quality of life? Well, the Post also reported that our murder rate is six times higher than the national average.

Right—so what’s the solution? Well, here’s what we can’t do—go bankrupt, since apparently cities can but states cannot. Nor can we simply say “screw you” to the investors that have bought all our bonds, since the constitution stipulates that investors get paid before retirees and public employees. So what to do? Here’s the Post on the subject:

The situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

How bad are things on the island? Worse, apparently, than I thought. Here’s Caribbean Business:

The GDB-EAI (Government Development Bank—Economic Activity Index) had returned to growth in December 2011 for the first time since Puerto Rico’s recession began in 2006. It showed small but consistent year-over-year gains for nearly a year before beginning to retreat again last October. Since then, it has been on a steadily steepening decline: falling 0.7 percent in November, 2012, 1.3 percent in December, 2012, 1.8 percent in January, 3.1 percent in February, 3.1 percent in March, 3.5 percent in April and 3.4 percent in May, 4.5 percent in June, 5 percent in July, and 5.4 percent in August.

So our projection for the local economy in 2014? Instead of the minute growth projected originally, it’s now predicted that we will shrink by .8% next year. And if that’s not gloomy enough, consider the statement made by somebody at Moody’s—one of the three credit rating firms that has us one step from junk status:

“Further weakening of economic growth could result from the additional corporate and sales taxes, as well as increased tax compliance and enforcement measures,” Moody’s said. “Despite the increase in much-needed recurring revenue for the commonwealth, weaker economic conditions would also increase negative pressure on the rating.”

A friend who was the press secretary to two governors told me a story, once, about the governor who charged his cabinet to go home, think long and hard about the situation on the island, and come back the next day with a plan of action. So they all did, and returned with in-depth analyses and ideas. At the end, only one man was left who hadn’t spoken.

“Governor,” he said, “I thought about it a lot, and I came to one conclusion….”

“And that is?” asked the governor.

“Estamos jodidos,” the advisor replied.

We’re screwed.

And that was in the good old days!