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Op-ed Placement

How to Turn Puerto Rico into Hong Kong

BY Stephen Moore and Art Laffer
05/01/2016
Originally Published in The Washington Times by Stephen Moore and Art Laffer on 5/1/16.

Later this week or next, Congress will take up legislation to rescue the commonwealth of Puerto Rico from its financial crisis that is getting worse by the day.

Puerto Rico faces more than $70 billion of debt and the government is already in technical default on many of its bonds. Billions more come due in the weeks ahead and the government says they are out of money to repay.

These debts don’t even include an additional $43.2 billion of unfunded pension liabilities. Add it all together and the debt reaches at least 150 percent of GDP. That’s a lot of weight on the shoulders of the Puerto Rican people. All the government has done is raise taxes, with the sales tax recently hiked from 7.5 to 11 percent. Tragically, Puerto Rico has become the Detroit of the Caribbean.

By law Puerto Rico can’t declare bankruptcy but the territory is in de facto chapter 9 already.

Republicans in the House have drafted a rescue plan that would allow the island to restructure its debt and delay payments as it attempts to rebuild its shattered economy. The statistics are heartbreakingly bleak: almost half the residents are in poverty (and more than half of all children), only about 40 percent of adults are even in the workforce, half of families collect welfare benefits, and more than 10 percent of the island’s residents have left for Florida, Texas, New York, or other safe havens.

Puerto Ricans are American citizens whose lives have been turned upside down. The U.S. government has a moral, if not legal, obligation to help. But as a territory Puerto Rico needs to agree to help itself.