Puerto Rico Faces Financial Crisis
Home to over 3.5 million Americans, Puerto Rico is currently dealing with a financial crisis with $72 billion of debt, according to Mary William Walsh and Liz Moyer in The New York Times article “How Puerto Rico Debt Is Grappling With a Debt Crisis.”
For decades, Puerto Rico issued triple tax exempt bonds to compensate for fiscal shortcomings as reported by The Week staff in their article, “Everything You Need to Know About the Puerto Rico Debt Crisis.” These bonds were purchased at rapid rates, as buyers would not have to pay federal, state or local taxes on the bonds.
Then in 1996, Congress, which gave U.S. manufacturers hefty tax breaks in an attempt to bring more manufacturing jobs to Puerto Rico, lifted these tax breaks causing many plants to shut down, while Wall Street made millions.
When these jobs left, with them, left their workers. Thousands of unemployed and a poverty rate of 45 percent, pushed many into fleeing the territory in search of a steady job, as stated by Walsh and Moyer. Already desperately in need of government money, this massive reduction in tax revenue only furthered the problem.
Usually, when faced with such a mountain of debt, municipalities and their utilities in the United States will simply file for bankruptcy. This luxury, however, is not granted to Puerto Rico, as it is a territory rather than a state, consequently requiring it to follow a separate set of guidelines, according to the Associated Press in their article, “Here’s What Congress Can Do About Puerto Rico’s Debt.” In this article, it is stated that in Washington, the only solutions that have been proposed are a federal bailout or debt restructuring, both of which have been met with great opposition by Congress.