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Megan McArdle writes on problems in Puerto Rico.
“They owe a lot of money to your friends on Wall Street,” Donald Trump told Geraldo Rivera. “We’re going to have to wipe that out. That’s going to have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”
Bond markets didn’t appreciate the verbal wave. The territory’s bonds, already weak from the pounding of Hurricane Maria, fell another 31 percent. White House budget director Mick Mulvaney hastened to say the president didn’t mean what he said. “I wouldn’t take it word for word with that,” he said demurely. Nor should you; as debt expert Cate Long told CNN Money, “Trump does not have the ability to wave a magic wand and wipe out the debt.”
Yet the fact remains that Puerto Rico is not going to be able to pay all of its debts. Prior to the hurricane, the territory had $73 billion in outstanding debt, and a population of 3.4 million people. That’s approximately $21,500 for every man, woman and child on the island – just about enough to buy each of them a brand new Mini Cooper, provided that they don’t insist on the sport package or the heated seats.
Puerto Rico couldn’t afford to buy 3.4 million Mini Coopers before; they certainly can’t now that Maria has washed out so many roads. Even before the hurricane, Puerto Rico’s GDP was around $100 billion, meaning that repaying its debt would consume nearly nine months of everything the island earned. And while there will probably be a brief bump in economic activity as disaster relief funds pour in and the destruction is cleared away, over the long term the hurricane represents a huge setback: businesses destroyed, people killed or injured, funds that could be generating economic growth instead diverted to simply replacing what has been lost.
So whatever President Trump does, or does not do, investors in Puerto Rican bonds are going to have to take a substantial haircut. …
McArdle has more on the unintended consequences of DC stupidity.
… But you can’t entirely blame the Puerto Rican government for the state of the underlying economy, which is what had plunged the island into a bankruptcy crisis even before the hurricane. For that you have to look to the federal government, which eliminated a tax break that had given companies incentives to locate in Puerto Rico, and then oversaw a financial crisis that sent them into an even deeper spiral. We also made sure that a relatively poor island was forced to adopt the federal minimum wage, which was too high for the local labor market. That has contributed to the 11.5 percent unemployment rate. And Puerto Rico uses the U.S. dollar, leaving it unable to adjust monetary policy to overcome economic stagnation. …
Instapundit linked to McArdle and provided this thought.
So I’m guessing that if Steve Bannon were still around, he’d be encouraging Trump to do things that would make Puerto Rico so attractive that not only would people want to stay there, but expat Puerto Ricans would want to return, since most of them vote Democrat, and Puerto Rico doesn’t have any electoral votes. Which would be good for Puerto Rico, and also for Trump. In Bannon’s absence, I’m not sure there’s anyone in the White House who thinks that way.
Roger Simon says the island has entered the “great American victim derby.”
Seems like everyone’s a victim in the USA these days, from college “snowflakes” who can’t abide someone with views unlike theirs within miles of their campuses to allegedly assaulted women wearing sexually explicit hats to multi-millionaire football players who are sure there’s something wrong but can’t always remember what it is (other than Donald Trump). The latest of the many entries in this “Great American Victim Derby” is Puerto Rico — or at least a significant part of the island’s leadership.
Who will win this derby?
It’s anybody’s guess, but the thing about playing the victim game is that even — perhaps especially — when you do win, you’re even more likely to continue to be a victim and play some more. Victimhood is self-perpetuating — a spiritual, emotional, political, and economic rerun out of the movie “Groundhog Day.” Every year it’s the same thing and nothing changes. Something bad happens and there you go again, drinking from the trough until you pass out like a fraternity boy being hazed for the thousandth time.
Why not try something different for a change — like taking responsibility? …
More from the Economist.
AS THE mayor of Aguadilla, on Puerto Rico’s north-west coast, Carlos Méndez is proud of his town. He likes to take visitors onto the balcony of the town hall and challenge them to spot a scrap of paper in the plaza. There are none; but here, and all around the centre of town, there are no busy people either. The shops and offices are shabby, with little going on in them. The buildings along the beautiful beachfront look run-down. A few men sit in the shade, and have apparently been planted there as long as the tree has.
Puerto Rico has been a United States territory for more than a century, and its people have been citizens since 1917. They do not vote in national elections or pay federal income taxes, but those are not the biggest differences between Puerto Rican residents and their fellow American citizens. The island is distinguished by its poverty and joblessness, which are far worse than in any of the 50 states. The territory’s economy, moreover, has fallen further behind the national one over the past three decades. Bad government—not just locally, but also federally—is largely to blame. Yet most Americans are oblivious to the Caribbean island’s problems.
The place did earn a rare and brief mention in some mainland newspapers earlier this month. Its government had hit a borrowing limit and partly shut down for a couple of weeks, putting 95,000 civil servants out of work. Then leaders in San Juan—the commonwealth’s capital—agreed on a budget deal that let the government borrow more and resume paying people. The drama ended, and life there reverted to its depressing former state. …
Not much humor in this so we’ll celebrate Weinstein Week and other things.