Puerto Rico's governor recently claimed that the island could not pay all its debts. In the media, comparisons to Greece abound. But if Puerto Rico were a patient, then most commentators would have been misdiagnosing its illness and recommending improper treatment. A dose of reality is in order.
Puerto Rico is a United States territory, home to the 3.5 million people I represent in Congress. Residents have been American citizens since 1917 and have served in the United States military since World War I. There are also five million individuals of Puerto Rican heritage living in the States, and as conditions in Puerto Rico deteriorate, my constituents are now leaving for the mainland at a rate of 50,000 a year.
The analogy to Greece is inapt. Puerto Rico is not a sovereign country in a monetary union with the United States. From a constitutional perspective, Puerto Rico belongs to the United States. The federal government has almost absolute power over Puerto Rico, but has delegated to Puerto Rico about the same authority over local matters that the states possess.
Perhaps in an effort to be polite, certain commentators refer to Puerto Rico as a “commonwealth,” implying that Puerto Rico has a special status. But this word has no practical meaning, as demonstrated by the fact that several states call themselves “commonwealths.”
Puerto Rico’s illness is a chronic condition. The unemployment rate, poverty rate and median household income have always been far worse than any state’s. The main cause is inequality. Residents cannot vote for president or senators, and have one nonvoting delegate in the House. It is disheartening to see many self-styled progressives, who otherwise speak eloquently about the importance of voting rights, go silent on this subject when it comes to Puerto Rico.
Congress routinely treats Puerto Rico and the other territories worse than it does the states. Consider Medicaid, which provides health insurance for the poor. Federal funding for a state Medicaid program is open-ended, but capped for Puerto Rico. The $1 billion in annual Medicaid funding that Puerto Rico receives from Washington is about 20 percent of the $5 billion received by similar-size Oregon. Puerto Rico is also treated unequally under Medicare, even though my constituents pay the same federal payroll taxes that fund much of this program. The Affordable Care Act — Obamacare — has been the subject of partisan debate, but the law’s rarely mentioned defect is that the territories are barred from most of its new programs and protections.
The list goes on. Puerto Rico is excluded from the Supplemental Security Income program that aids the most vulnerable Americans. It does not participate in the federal nutrition program, instead receiving a block grant that shortchanges it by $450 million a year. Puerto Rico is partly excluded from the child tax credit and fully from the earned-income tax credit, which encourages low-income individuals to seek employment. Unlike a state, Puerto Rico cannot authorize its public enterprises to seek relief under Chapter 9 of the federal bankruptcy code, which impedes its recovery.
The argument that such treatment is justified because Congress does not require Puerto Rico residents to pay federal income taxes on local earnings is weak. Nearly half of all stateside households do not earn enough to owe income taxes, but are still treated equally. Moreover, because of federal tax credits, a working-class family of four in the States is likely to have greater take-home pay than an identical family in Puerto Rico.
It is little wonder, then, that Puerto Rico is in recession, has excessive debt and is bleeding population. Unequal treatment at the federal level, combined with mismanagement at the local level, has a debilitating effect on the island’s economy. To compensate for the lack of federal support, the Puerto Rico government has borrowed heavily. And when my constituents move to the States, they are entitled to vote for their national leaders and to equal treatment under federal law. So naturally they leave.
Having misdiagnosed Puerto Rico’s illness, many commentators prescribe the wrong cure, like exempting Puerto Rico from the federal minimum wage. A far wiser proposal would be to grant Puerto Rico more equitable treatment under federal spending and tax credit programs. The goal should be to close the gap with the states, not widen it.
In the near term, Puerto Rico can manage its crisis with smarter policy making, but the only enduring solution is statehood. At a recent congressional hearing, I told my colleagues: If you give us the same rights and responsibilities as our fellow American citizens, and let us rise or fall on our merits, we will rise. But if you continue to treat us like second-class citizens, don’t claim to be surprised when we fall.
In 2012, Puerto Rico voters rejected territorial status and expressed a preference for statehood. Congress responded by authorizing a federally sponsored referendum. I expect this vote will be held in 2017. If voters affirm their desire for admission, Congress must place Puerto Rico on the path to statehood. For Puerto Rico to prosper, it should be treated equally. And to be treated equally, it must become a state.
Pedro R. Pierluisi, a Democrat, is Puerto Rico’s nonvoting delegate in the United States House of Representatives.