Save Puerto Ricans from disastrous shipping statute
Puerto Rico was an economic wreck even before Hurricane Maria flattened the island.
Its 3.4 million U.S. citizens suffered years of economic decline from vanishing business investment, thanks in part to the end of corporate tax incentives. The territory is burdened by tens of billions of dollars in bond debt and unfunded pension obligations. Making matters worse is an antiquated law, known as the Jones Act, that artificially hikes the cost of living on the island.
The cruel result is an island where the cost of living is 13% higher than the continental United States despite the fact that the median annual household income is about $19,000, and more than 40% live below the national poverty line. People pay 60 cents more for a gallon of milk than on the mainland, 55 cents more for a head of lettuce and $1.58 more for a box of Corn Flakes.
The Jones Act was created to promote American shipping in the years after German submarines demonstrated their prowess during World War I. Formally known as the Merchant Marine Act of 1920, it requires that goods and passengers transported from one U.S. port to another be carried in an American-made vessel owned and crewed by Americans. The impact on extended areas of America such as Alaska and Hawaii means higher shipping costs because Jones-compliant ships are more expensive to operate. Hawaiian ranchers have even taken to shipping cattle by air to save money.
The result has been brutal for Puerto Rico, leaving it disadvantaged as a tourist draw compared with other Caribbean destinations. Higher costs passed along to island consumers cost Puerto Rico $17 billion over 20 years.
This law will remain an economic albatross around Puerto Rico’s neck even after it begins recovering from the Sept. 20 hurricane. The storm’s destruction was so crippling and pervasive that two weeks later, the Trump administration still struggles to reach those in need, and the death toll has risen from 16 to at least 36; 95% of islanders are still without power and half without clean water. Meanwhile, a health crisis is looming.
A law signed by President Obama last year might allow the territory to reorganize its massive debt in bankruptcy-like fashion. And President Trump has made comments about somehow wiping out the island’s red ink.
Puerto Rico’s $74 billion debt should not be forgiven. But in a process similar to a city bankruptcy, the debt could be negotiated down to a level that is manageable for an island with numerous challenges and is fair to the various stakeholders.
As for the Jones Act, the president waived it for Puerto Rico for just 10 days as part of hurricane relief. But the clock was to run out on that respite at midnight Sunday. It’s long overdue that Puerto Rico, like the neighboring U.S. Virgin Islands, be permanently exempted from the law. Abolishing the Jones Act altogether would spread the benefits to other territories as well as Alaska and Hawaii.
Facing months without power while struggling to reassemble storm-shredded lives, the last thing Puerto Ricans need is to pay inflated costs for basic necessities just to appease the nation’s domestic shipping industry.