Greece the skids for Puerto Rico?

            While young Americans are going gaga for Bernie and Democrats in general are openly and heartily embracing socialism, more victims of this misguided economic philosophy are rapidly deteriorating into critical states.

            Cuba has been the poster child for socialism in the West for over half a century, but for all their strident propaganda they can’t hide the utter shambles of the Cuban economy, except from Michael Moore and Barack Obama.  Oil rich Venezuela put on quite a show for about a decade as the flamboyant dictator Hugo Chavez spent all their oil wealth to prop up his socialist utopia.

            Chavez mercifully died before he ran out of other people’s money.  His successor, Maduro, has had to endure the well running dry.  Once the most prosperous country in South America, Venezuela is a basket case.  There are acute shortages of everything and people standing in lines for hours often for nothing just like the good old days in the Soviet Union.

            Don’t even get started on the oppression and persecution of an entrenched old guard pushing the bloated bureaucracy into every breach to block reform.  The effects of socialism are devastating, but the causes are not easily purged.  They infect everything and spread everywhere.  Socialist government apparatchiks are almost impossible to remove without a complete overhaul.

            There is another western hemisphere basket case quietly unraveling and its part of the United States; Puerto Rico is on the brink of bankruptcy.  Mired in deep recession, Puerto Rico’s economy has contracted every year save one since 2006; that’s really more of a depression.  Unemployment is over 12% and rising.

            While Puerto Ricans are generally socially conservative, the island republic has been run by leftists and with the overbearing aid of the federal government they have bred a bloated government, spent imprudently to rack up excessive debt, and constrained their economy with myriad obstacles.  In short, spending more money than you have, but Uncle Sugar is always happy to lead a state down that path of destruction.

            Puerto Rico is often compared to the impending economic collapse of Greece.  There are some similarities, but Greece is much worse off.  Greek national debt is 175% of GDP and Puerto Rico’s debt is 70% of GDP, actually better than almost 100% for the nation.  Greek per capita share of GDP is almost 25% less than Puerto Rico.

            Congress is poised to continue another gravely misguided similarity.  The European Union is struggling to keep the Euro afloat, so nations like Germany continually throw good money after Greece’s bad monetary policies.  Progressives are screaming the federal government must also bail out Puerto Rico; this will only Greece the skids for a similar collapse.

            Puerto Rico can be saved without shoving it over the spending cliff.  With a million less people than Alabama, they spend over $4 Billion more each year, so there is plenty of room for cuts.  They are facing the same inevitable doom of all socialist models; as workers decline in number and beneficiaries continue to rise, eventually there are not enough people pulling all the people in the wagon.  And, Puerto Rico is also loosing overall population.

            There is one big difference in the Hispanic island situation.  Their precipitous slide coincided with Congress phasing out several tax breaks for doing business in Puerto Rico in 2006.  So what happened?  Businesses stopped coming and started leaving.

            This is where Congress must make the right choice.  Don’t throw money at this problem pursuing the same foolish policies; it always fails – watch Greece.  Digging deeper never gets you out of a hole.  Give Puerto Rico more autonomy and restore those tax incentives, so they can grow their economy out of this hole. 

            “The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth.”  Psalms 37:21


No Comments