Monday, July 16, 2018

[Editorial] Will She Remember … The Way We Were

By on June 28, 2018

Editor’s note: This editorial was originally published in the June 28 – July 4 issue of Caribbean Business

The age-old axiom, “What Congress Giveth, Congress Taketh Away,” colored the tone of yet another panel discussion on Puerto Rico’s debt crisis hosted by the Heritage Foundation in Washington, D.C., on the Summer solstice. More than another “dog and pony” show by policy wonks, the panel—former International Monetary Fund Deputy Director Anne Krueger; Financial Oversight & Management Board (FOMB) Chairman José Carrión III; fellow FOMB member Andrew Biggs; FixPuertoRico.Org Executive Director Javier Ortiz; America Action Forum President Douglas Holtz-Eakin; and Resident Commissioner Jenniffer González—shed light on the contentious issues underpinning Puerto Rico’s road to economic recovery. To provide an informed perspective against the backdrop of the Puerto Rico Oversight, Management & Economic Stability Act (Promesa)—looking less like a law and more like a pig smeared with lipstick these days—is never simple.

Nevertheless, the panel contributed important truths coming from diverging perspectives. Carrión, who has the thankless job of helping steer Puerto Rico’s democratically elected government to structural balance—something akin to breaking a diabetic’s addiction to Krispy Kreme doughnuts—did not waste the opportunity to stress the importance of fiscal discipline and the need for labor reform as a necessary first step on the climb to sustainable growth.

Krueger, who ran point in drafting “Puerto Rico: A Way Forward,” a playbook to Puerto Rico’s economic recovery, followed suit. The Iron Maiden stressed the importance of labor market reforms as a key element to Puerto Rico’s path to growth. True to form, she hailed labor reform as a panacea for sustainable development—she derided eight-hour shift limits during 24-hour periods as a hindrance to the island’s competitiveness with other jurisdictions that thrive in the tourism industry. How does Puerto Rico remain competitive on the jobs front while mandating the grab bag of bennies—some might call them rights—of employees working in the private sector. Krueger pointed out that workers in Puerto Rico make the federal minimum wage while Mexicans make $7 a day—working in manufacturing.

Former International Monetary Fund Deputy Director Anne Krueger

Thankfully, Javier Ortiz, who runs point on FixPuertoRico.org, an initiative that aims to educate public and private stakeholders on Puerto Rico’s socioeconomic issues, was quick to point out that Puerto Ricans are [U.S.] American citizens under Article II of the U.S. Constitution. Lowering wages for Puerto Rico’s workers cannot be part of a solution. Instead, Ortiz suggested it will take an act of Congress to help Puerto Rico kickstart its economy.

He knows Puerto Rico is under the plenary powers of U.S. Congress. As such, he suggests Congress must provide the tools for Puerto Rico to create jobs.

In a conversation that took place after the panel discussion, Ortiz pointed to quick fixes on the congressional front. He made a key case in point pertaining to Medicare (healthcare funding for elderly people), which is so disparate and insufficient that it has forced 75 percent of those eligible for the program in Puerto Rico to rely on Medicare Advantage. In fact, Puerto Rico is the No. 1 MA jurisdiction under the U.S. flag, “yet there is still very little understanding in Congress about how Medicare reimbursement rates [43 percent of the national average] have been drafted,” Ortiz added.

It is a disadvantage for Puerto Ricans driven by geographic location—U.S. citizens who live on the island have far less funding available, although they pay their share of the taxes that fund that system. As Ortiz put it: A dollar earned in Puerto Rico pays exactly the same amount of taxes to the healthcare system as a dollar earned anywhere else.

The education on that front is a work in progress. It is, as Ortiz pointed out, a moving target, as well, because there is turnover in U.S. Congress—the representatives and their staffers change all the time. There is no end to the need for education pertaining to Puerto Rico’s issues on the congressional front.

But we can’t depend on U.S. Congress. How can we forget that it was precisely an act of U.S. Congress that started Puerto Rico on a death spiral with the demise of Section 936 of the Internal Revenue Code. It is not a coincidence that the year of the tax break’s demise—2006—marks the epicenter of economic contraction of more than $16 billion and the exodus of 680,000 people, many of them professionals who have left Puerto Rico’s shores.

Puerto Rico cannot wait for Congress to act but must rely on private-sector initiatives. During an interview that took place in the hours after the Heritage Foundation event, Ortiz let on that he would be attending an event on the island hosted by Forward 787, an initiative spearheaded by Puerto Rican Ric Elías. Forward 787’s mission is to use a $100 million fund for recruiting and training our talented professionals to compete on a global level.

If the program leads to job creation and gives Puerto Rico a fighting chance on the world stage, it will be a good first step in the right direction. We must never again depend on U.S. Congress.

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