Unleash Puerto Rico’s potential as an equal
The U.S. House Committee on Natural Resources is developing legislation to help Puerto Rico overcome its debt crisis. In treating the crisis as a balance-sheet problem, the discussion draft bill released this week failed to address the need for growth and disregarded the root cause of the island’s underperforming economy: a political status that deprives Puerto Ricans of the opportunity to capture the promise of our nation’s founding.
According to Supreme Court decisions, Puerto Rico is an unincorporated territory — a possession, rather than a part, of the United States. When Congress granted American citizenship to Puerto Ricans, it was widely understood that the island was incorporated into the Union.
However, the Supreme Court legislated from the bench to determine otherwise. Simply put, Puerto Rico is an unincorporated territory today because in 1922 a segregationist Supreme Court could not conceive of a relatively faraway island not inhabited by Anglo-Saxons to be part of the United States, even if the residents had become American citizens in 1917.
Enabling Puerto Rico to capture the promise of America would involve being provided with the same legal framework every state has to grow its economy in order to meet its needs and contribute to the federal system. It would also involve the political empowerment of full participation in our government.
Our Founders believed that economic freedom is essential to America’s growth and prosperity. Accordingly, helping Puerto Rico to break out of economic stagnation would require applying free-market solutions. Economic freedom in a national common market entails that the same rules apply to all participants without the government picking winners and losers through legislation and regulations. However, as an unincorporated territory, Puerto Rico is subject to a patch- work legal framework in which the island is treated as a state in some aspects and as a separate entity in others.
Consider, for instance, the absurdity of having to file Electronic Export Information when Puerto Rico is the only insular possession within the U.S. customs territory. The confusion and uncertainty resulting from this and other instances of disparate treatment place barriers to commerce; dissuade investment; and further crony capitalism — all of which severely limit Puerto Rico’s growth potential.
In addition, territorial unincorporation has provided a fertile ground for Big Government, which, in an attempt to make up for an underperforming economy, has furthered a strong dependence on federal assistance and suffocated local entrepreneurs under a heavy tax burden.
Congress would do well in assisting Puerto Rico to carry out the structural reforms that are necessary for a fiscally responsible state government. These include measures to strengthen budget processes, control spending and improve tax administration. However, that would be only the beginning of the path to long-term prosperity.
Together with ensuring fiscal discipline, Congress should fully integrate Puerto Rico into the federal legal framework that regulates and affects commerce, industry and private investment so as to achieve the complete convergence of the island’s economy into the U.S. national economy.
What Puerto Rico needs is not more special treatment, which has grossly failed to promote sustained growth, but having the same set of rules under which the 50 states have prospered. Exempting Puerto Rico from the federal minimumwage provisions of the Fair Labor Standards Act would only add to the incoherent legal framework that has hindered growth by separating Puerto Rico from the U.S. economy.
Full economic convergence requires total political integration. Therefore, in order to unleash Puerto Rico’s economic potential, it is necessary to put an end to Puerto Rico’s territorial unincorporation.
Moreover, ending Puerto Rico’s unincorporation would eliminate a root contributor to the island’s debt debacle. The government of Puerto Rico was encouraged to incur aggressive deficit spending because triple tax-exemption, possible only under territorial unincorporation, fueled a high demand for Puerto Rico bonds despite irresponsible fiscal policies.
Congress should also put an end to Puerto Rico’s territorial unincorporation in order to remedy the indignity and injustice inherent in a political status that offends the principles and values of our nation’s founding. Placing fiscal and budgetary decisions under virtual federal control pursuant to the Constitution’s Territory Clause would only underscore the quasi-colonial nature of the island’s political status and the need to resolve it.
Ultimately, Puerto Ricans should be afforded the opportunity to become full and equal participants in our federal system as Americans, or pursue their destiny separately from the United States as citizens of their own country. Enabling Puerto Rico to capture the promise of America allows no other choices.