Magazine | September 7, 2015, Issue


Is Puerto Rico Back from the Brink?

Writing in the Week (July 20), National Review’s editors incorrectly characterize Puerto Rico governor Alejandro Garcia Padilla. Their unfair portrayal of his efforts to revitalize Puerto Rico’s economy is a disservice to the seriousness with which his administration has addressed Puerto Rico’s fiscal crisis. National Review should instead recognize the governor as a job creator and fiscal reformer.

In the past few weeks, the U.S. Department of the Treasury and the Congressional Research Service hailed the governor’s willingness to undertake necessary cost-cutting measures in a difficult environment. These actions, and the comments of support, speak to Governor Garcia Padilla’s true record.

The facts show that Puerto Rico’s economy is moving in the right direction. Governor Garcia Padilla has enacted tough spending cuts and achieved impressive results. The general-fund budget deficit, which stood at $2.2 billion in 2012, has been cut to $550 million. Governor Garcia Padilla signed the Fiscal Sustainability Act in 2014, generating nearly $1.4 billion in savings. Additionally, he fought for comprehensive pension-reform legislation, which has also been passed. All of this has led to the first balanced budget in more than a decade.

Juan E. Hernandez

Director, Puerto Rico Federal Affairs Administration

The Editors respond: Under Governor Garcia Padilla’s leadership, Puerto Rico continued, and continues, to add to its debt rather than reduce it. Yes, a $550 million deficit is preferable to a $2.2 billion deficit, but, in Puerto Rico’s situation, that’s like saying that a gunshot wound to the abdomen is preferable to a head shot. The governor has flinched on necessary budget cuts, restoring some $166 million in University of Puerto Rico funding after student protests. Yes, pension-reform legislation was passed — and the governor promptly sabotaged it, shorting it by nearly $100 million to make up for the fact that tax collections are weak even as rates rise. And that trend continues: The island’s sales tax just rose from 7 percent to 11.5 percent. Governor Garcia Padilla’s big idea was — no surprise — a 16 percent VAT, which lawmakers have thus far had the good sense to decline enacting. Increasing the tariff on oil imports, from $9.25 a barrel to $15.50, is madness, as was the governor’s pursuit of an unserious debt-restructuring program that, in attempting to preempt federal bankruptcy law, was patently unconstitutional, as has been twice confirmed now by federal courts. Governor Garcia Padilla’s response to all this suggests very strongly that he does not understand that Puerto Rico’s fiscal crisis is only incidental; its real problem is an economic crisis. Puerto Rico has the lowest work-force-participation rate in the Americas and a tax-and-regulatory burden that has stifled almost all economic growth for 20 years. The governor has not lifted a pinky to address that fundamental problem and in fact opposes measures such as exempting Puerto Rico from the minimum wage, which National Bureau of Economic Research and Harvard scholars estimate has added 8 to 10 percent to its unemployment. There is no world in which that adds up to “impressive results.”

Members of the National Review editorial and operational teams are included under the umbrella “NR Staff.”

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