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Why Puerto Rico Won't become a State (for a long time)

Why Puerto Rico Won’t become a State (for a long time, if ever…)

In case you haven’t heard, there was a recent referendum in Puerto Rico where voters decided that Puerto Rico should become the 51st state. Well, as a registered voter in Puerto Rico, I’m here to tell you that it won’t happen. Puerto Rico won’t become a state. At least not yet…. if ever.

Oh, I can hear you now, “But Tim, 97% of the voters said they should.

True. But, only 23% of the eligible voters came out to vote. Why is that? Well, because there were political interests who encouraged their members to boycott the election because, they claimed, the election was rigged. Now, those interests can claim it wasn’t representative of the will of the people due to the low turnout.

But, was it rigged? No, not really. The people opposing the referendum simply didn’t like that “keeping it a commonwealth” (i.e. the way things are now) wasn’t on the original ballot. To be fair, the ballot was changed to accommodate them, but they still had their members boycott.

Puerto Rico Won’t become a State: Why Keep It A Commonwealth?

If you’ve been paying attention to the situation in Puerto Rico, you’ll know that it is grim. If you haven’t, here’s a quick run-down:

  • Unemployment is over 12% and in some areas much higher than that.
  • As much as 1/3 of the population receives food stamps.
  • There’s a $70+ Billion debt they can’t pay back.
  • Schools and hospitals are being closed.
  • Government workers (including cops and firemen) are being laid off.
  • Doctors are leaving the island at a rate of 1 per day.

And those are just the highlights. So, with all that in mind, why the hell, shouldn’t everyone vote for statehood? If anything, just to try something new as opposed to keeping things as messed up as they are now? Especially since it looks like it’s going to get far worse before there’s any chance of it getting better.

Well, as is too often the case, it comes down to a few powerful political interests. In this case, I believe there are three major interests who really don’t want things to change, because they’re either too profitable, or they might lose money and/or power.

They are The Investors, Puerto Rican Government, and finally, the US Government. Let’s look at these one at a time along with their (in my humble opinion) motivations to keep Puerto Rico a commonwealth.


Why Puerto Rico Won't become a State (for a long time)

Puerto Rico Won’t Become a State: The Investors

These are the companies and people to whom Puerto Rico owes over $70 billion in debt. If Puerto Rico becomes a state, they may never get their money back (or at least not as much back) since a state might have more leverage for restructuring the payments. There’s even some talk about states getting the right to file bankruptcy. Those people who bet on Puerto Rico “not being allowed to fail” don’t want to lose their money.

They don’t care that these US citizens might not have police protection, hospitals, or schools. It’s just not their problem. They want their money. After all, this wasn’t really supposed to be an investment that might carry a risk (and hence justify the charging of interest), this was just supposed to be easy money.

For all of the good aspects of capitalism, this is a pretty ugly downside.


Why Puerto Rico Won't become a State (for a long time)

Puerto Rico Won’t Become a State: The Puerto Rican Government

If you talk to Puerto Ricans, you’ll soon learn that they love to talk about politics. Usually, their opinions of Puerto Rican politicians are as unfavorable as anywhere else in the US. However, unlike in the US, they also complain about the open corruption that exists. Ask just about anyone who’s lived on the island (not just visited) for any amount of time and you’ll hear stories about corruption big and small.

I’ve heard stories about dubious contract awards and cousins getting hired in to be the “director of broadcast management” (i.e drawing a $60k/year paycheck to sit at home watching TV) all the way up to an ex-governor who, somehow, ended up with a multi-million dollar mansion filled with expensive artwork in Virginia after his term was up. If these stories are true, the government officials in a position to profit off of the public money, surely don’t want things to change.

Rumors of rampant corruption aside (and how much of the current debt can be blamed on it), there’s another reason becoming a state would be a problem for the Puerto Rican government – less money coming in.

You’ve probably heard that people on the island don’t pay federal income tax. That’s true, although they still have to pay all of the other federal taxes such as Social Security, so, it’s not as big of break as it sounds. In addition, the island taxes citizens at a rate as high as a 33% (though 14%-25% is more realistic for most taxpayers with a job). Compare that to most states where income tax is usually less than 10%.

Starting to get the picture? If they become a state, there’s no way that they could leave the tax rate on the island that high. Less taxes, less money. Puerto Rico might get some extra federal funding as a state but it won’t make up for the shortfall.

End result is less money. If they can’t pay the bills now, how would they do it with even less? Also, if you believe the corruption rumors, less money to steal.

What about the Federal Oversight Board?

Oh yes, the Financial Oversight Board for Puerto Rico? Surely, they’ll fix the economy and get the island on track, right?

Sure, if you believe extreme austerity measures such as raising taxes, laying off thousands of workers, and closing hospitals and schools will fix the economy. Especially since those same measures failed very recently in Greece and Portugal.

To paraphrase Santayana: “Those who ignore history are doomed to repeat it.”


Puerto Rico Won't become a State

Puerto Rico Won’t Become a State: The US Government

There are two very simple reasons the US Congress doesn’t want Puerto Rico as a state.

First, in a republican majority Senate and House, why would they want to bring in a pair of (presumed) democratic senators and who knows how many representatives? Worse yet, they would even give them the right to vote, unlike the current (non-voting) Puerto Rican representative in the House.

In addition to screwing with the balance of ineffectiveness (as I like to call it) in Congress, there’s also the matter of the debt. Why would the US Government want to take on that $70 Billion in extra expense? Especially when it’s very likely that those investors (who could lose money if things change) are likely contributing to their re-election campaigns.

Frankly, even if every single Puerto Rican on the island said they wanted to be a state, there’s no way the US Congress would sign off on it.

Puerto Rico Won’t Become a State: All this Adds Up To No Statehood.

So, with the motivations of the various interests in mind, it gets pretty easy to see why Puerto Rico won’t become a US state. Assuming, of course, that my read on these various groups are even somewhat accurate. In addition, there are other factors that I didn’t get into. Things like the fact that older voters on the island seem resistant to change in general (even when there’s a clear win), younger people very willing to abandon the island for greener pastures on the mainland instead of staying to fix it, and apathy by most mainland US voters about the fate of the island.

These all play a part in the economic woes of the island, and by extension, the affect the statehood of Puerto Rico.

Maybe it’ll happen in the future, just not for a while…. if ever.

So, what do you think? Am I full of sh1t or did I hit the mark?

Tim

About Tim

is a professional geek. He is a founding partner of JTR Tech and enjoys all things technology. He and his wife Joanna started AbroadDreams.com to help them plan and solidify their dream of moving abroad. After two years in Puerto Rico and Europe, Tim and Joanna are now back in the USA and exploring the American Southwest.

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2 comments

  1. I think its interesting, I arrived to start living here in Puerto Rico and currently in Luquillo and there was a few speeches on Saturday, no marching in the city streets in protest for anything. On Sunday during the voting I joined many Puerto Ricans at the beach. My take is different I think the “Non vote protest” is no protest. How do you know what people really want if they do not vote. This apathy is the real problem. The vote for statehood has so far always been troublesome. I really do not know what will happen myself. As far as the Debt there are at least 3 other states in same trouble as Puerto Rico, Illinois for one is about to default on over 100 billion in municipal bonds so the US has bigger problems. Puerto Ricans are US citizens, something people fight to be I doubt they will give up that status. So I think we are left with Apathy, bankruptcy and taxes, corruption is as old as society itself. Puerto Rico will remain a US Territory for a few more years and may still need another vote for statehood unless Congress wakes up and inducts Puerto Rico finally.