The good news?
I did not wake
up this morning with a hangover.
The bad news?
The island did.
Whatever you
think of the current governor,
nobody can dispute that, on at least one point in the news conference
yesterday, he was right: both
the major parties that rule Puerto Rico got us into this mess. And that is?
Yesterday, after years of waving red flags, Standard & Poor’s degraded
our credit rating to junk status.
Terrible golpe al país shouts
the The New Day’s headline in a special 15-page extra to today’s regular
printed edition. Conscientious blogger that I am, I read all 15 pages, which
told me basically what I knew, as well as some things I didn’t.
The gist of it
is that for forty years, the public has allowed our political leaders to engage
in politicking, instead of providing services, making fiscally responsible
decisions, and running efficient governments. And how did they do that? By
doing on a collective basis what many of us do on a personal level: living on
credit.
There’s nothing
too sexy about economics—nothing as sexy as building a great whacking (thanks,
Franny!) stadium or investing a billion dollars in “special communities,” which
today remain just as special as they were when the program
began. (The program identified poor communities and tried to invest funds for
improvements to infrastructure and social services…)
OK—so how bad is
it? Some facts lifted from the special edition of today, as well as a New York Times article
on the topic:
- Our debt is almost 70 billion dollars
- Each person—man woman and child—would have to pay $10, 635 dollars up front to clear this debt. That’s ten times the average per state
- As a result of this decision, we’re going to have to pay about 940 million bucks, since we promised we would if our rating was sunk to junk status
- We had been planning to go ask the market to buy bonds that would give us an additional 1 to 2 billion next month
- Puerto Rico is the third largest issuer of municipal bonds, after California and New York
- Many of these bonds are collected in mutual funds, which are attractive: you don’t have to pay taxes on the interest you collect on them. Therefore, a lot of mutual funds in the US hold Puerto Rico bonds. However, a lot of the bonds are held by the Puerto Rican middle and upper classes, especially retirees; some 1.5 billion dollars of Puerto Rico debt is held on the island
Now, how’s the economy doing?
- Largest employer in Puerto Rico is…the government of Puerto Rico: 27.8% of the work force works for the government. Estimates for the average state public sector range from 10% to 15%
- Manufacturing accounts for only 9% of the non-farming Gross National Product
- 25% of the commonwealth budget comes in federal funds
- The population of Puerto Rico is 3.67 million: in 2013, the government estimated that 1.3 million people were working. That means that one in three Puerto Ricans is working
OK—so what was
the response on the island? Well, the editorial in The New Day called for…unity. Now is not the time, it said, for
finger pointing. The governor, as well, said
that now is the time for all Puerto Ricans to come together and figure out what
to do with this mess.
Though there
were some who couldn’t resist, of course. The governor himself couldn’t resist suggesting
that his government, though young, had acted like adults, but that it was time
for the local Supreme Court to “put on the toga of adulthood.” Why the jab?
Because the Supreme Court had put the reform of the teacher retirement system
on hold until the lawsuit brought by the unions had been resolved.
And the
President of the Senate came out and said
that the current government had been firm and financially responsible; nowhere
else in the states had a government acted as Puerto Rico had to correct their
problems. Puerto Rico didn’t deserve this betrayal.
The teachers,
too, pointed
out that since we got degraded to junk status, it was clearly proof that a
reform of the retirement system wasn’t needed in the first place.
Yes, you say,
but beyond calls for unity—however successfully heeded—what does the government
propose to do?
It would be
premature, said the governor—donning the mantle of a serious and wise leader—to
discuss any specific measure until they had been carefully and thoroughly
scrutinized and examined in order to assure that the measures taken will have
the maximal impact on the economy while minimizing any adverse effects on the
private lives of the people of Puerto Rico, who working together, hand in hand,
making ties that extend beyond petty politicking, can go forward confidently
towards a better future.
All right—I made
that up. That’s what I would have said. The governor doesn’t know what
he’s gonna do—so he fell back on rhetoric.
Nor does the
average person know what this means: according to The New Day, even business people didn’t really understand what all
this meant. The reality is that almost 90% of the students I have taught over
the last 20 years have tuned out politics. And now that the crisis is here?
Many people are confused.
And the worst of
it? However bad the hangover, it
was never a very good party anyway….
