Tuesday, February 18, 2014

Puerto Rico's debt crisis could be what finally makes it America's 51st state.

Puerto Rico is more broke than Detroit
By Meena Thiruvengadam, Digital First Media
POSTED: 02/18/2014
San Jse Mercury News
Puerto Rico may be an island paradise, but it's having Detroit-style financial problems. 

Here's what's going on:

People enjoy a sunny day at the Isla Verde Beach, in Carolina, Puerto Rico. (Ricardo Arduengo/AP)
Puerto Rico's debt has been downgraded to junk status by all three major credit ratings agencies, and the timing couldn't be worse. The recession never ended for Puerto Rico — whose residents have U.S. citizenship — and it's looking to borrow more money to stay afloat. But lenders are getting harder to find, and investors are betting Puerto Rico has a pretty good chance of defaulting on the debt it already owes.
Puerto Rico has been in a recession for eight years and has an unemployment rate of 15.4 percent — more than twice the national average and higher than any U.S. state. Nearly half of Puerto Rico's residents are living in poverty and almost one-third collect food stamps. 
Puerto Rico hasn't been able to make ends meet for more than a decade and owes about $70 billion. That's nearly four times as much as Detroit, which has one-fifth the population of Puerto Rico and last year became the largest U.S. city to file for bankruptcy
Unlike Detroit, Puerto Rico isn't eligible to file for bankruptcy. The White House, which declined to bail out Detroit, said it won't bail out Puerto Rico either.

Here's why you should care: 

Puerto Rico's debt crisis could be what finally makes it America's 51st state.

As it stands, Puerto Rico is an overseas territory of the United States. The United States took control of Puerto Rico after the Spanish-American War in 1898 and granted U.S. citizenship to Puerto Rico's residents in 1917. People on the island can't vote for president or Congress, but they also don't pay federal income taxes, either. The interest earned from Puerto Rican bonds also isn't taxed, making it a particularly attractive investment option

Everyone was happy with the arrangement for years, and Puerto Ricans voted to remain a commonwealth of the U.S. in 1967 and 1993. But by 2012, there was increasing talk of Puerto Rico becoming a full-fledged U.S. state. By becoming a state, Puerto Rican residents would gain greater access to federal benefits programs. The United States would gain an island of taxpayers.

U.S. Sen. Martin Heinrich, left, tours the Sapphire Energy Research and Development Facility in Las Cruces, N.M. (Courtesy)
Congress would have to sign off on the idea and hasn't added a star to the American flag since Hawaii in 1959. But at least one U.S. senator already is on board. Sen. Martin Heinrich, D-N.M., has introduced legislation to make Puerto Rico the country's 51st state

Similar legislation has been introduced in the House of Representatives by Pedro Pierluisi, Puerto Rico's non-voting member of the House. "Puerto Rico is confronting the worst economic and fiscal crisis in its history," he said. "This crisis is structural in nature, rooted in the unequal and undemocratic treatment that Puerto Rico receives because it is a territory."