Wednesday, January 29, 2014
Tuesday, January 28, 2014
Saturday, January 25, 2014
Frank Worley-Lopez: Puerto Rico’s Problems Are About More Than Money
Puerto Rico’s Problems Are About More Than Money
My mother always used to say “money doesn’t buy happiness.” My response was as sharp as my bad attitude: “I’d rather be rich and unhappy, than poor and unhappy.” Well, I didn’t get rich, and I’m still working on the happiness bit.
In many ways that conversation with my mother reminds me a lot of Puerto Rico. The island receives more than US$20 billion a year in federal funds, with the largest portion of that going toward payments and services for individuals like Nutritional Assistance, Social Security, and housing. The island has a Gross Domestic Product of about $100 billion a year. Not to mention the great scenery, warm Caribbean waters, and great weather — except when the occasional hurricane strikes.
So why then, with all of that money, is it in such a mess?
The Commonwealth of Puerto Rico has $70 billion in debt outstanding (with nearly $30 billion more in underfunded pensions); half the population is on public assistance; it has a 14 percent unemployment rate; and roughly 900 murders occur every year. They face the very real possibility of their credit rating being downgraded to junk status, and the debt load per citizen is estimated to be 10 times that of any other state and thousands of residents (mostly professionals) are leaving the island each year for greener pastures in the good old U.S. of A.
What happened?
The answer is complicated, but I’ll try to simplify it for this article.
Money for Nothing
It’s said that nothing in life is free, but in Puerto Rico’s case the residents pay no federal income tax on earnings in Puerto Rico. The “help” that came from the federal government made it easier for many to live off of government assistance than to work.
While a student in seventh grade in a small school in Naguabo, located on the island’s eastern tip, I spoke with classmates about my plans for the future: college, career, and service to the country.
One of my classmates angrily responded, “Why would you go through all of that? The government pays for everything.” Some of my other classmates looked at me with disdain while shaking their collective heads.
“So you plan to just live on welfare when you grow up?” I asked incredulously.
“Of course! It’s so much easier than all of those things you talked about.”
The conversation, which occurred around 1980, never left my memory. Checking back as a young man in the late 1980s and early 1990s, I found that in fact many of the people I had gone to school with had followed their aspiration and were living on government assistance programs. Not all of them, however, chose to follow that path.
Some went on to college; some worked; others simply died.
One of my classmates, “Alfred,” became a heavy drug user. Eventually he quit drugs and found religion (maybe not in that order), and only a short time after becoming clean was hit by a car and killed while walking home from church. The word on the street was that he had been hit on purpose by some of his former drug buddies who didn’t like that he had tried to change his life for the better.
In the back of my head I keep a list — list that Alfred is on — along with another half a dozen people who I have known who have been killed because of drugs or related activities. One friend was gunned down by mistake. A mob hit man confused him with his target, kidnapped him, took him to the top of a building, shot him in the back of the head, and dropped his body over the side. Upon realizing his mistake, the hit man found his original target and did the same to him.
Another was gunned down in his driveway, in front of his children — another at a toll booth.
Drugs, the Drug War, and Dirty Cops
More than 1,100 murders on an island of 3.6 million people that is a 100 miles long and 30 miles wide: that is the drug war in a nutshell. From cocaine to crack to crystal meth, the island has it all. Anything you could want to destroy yourself with, while having a really, really, good time. An estimated $3 billion in illegal drugs are sold each year on the island. That amount of money drives an enormous organized crime movement and leads to corruption at all levels of government, especially at the local police level.
Local drug dealers, taking a page from Al Capone’s book, offer services to housing project residents in exchange for their loyalty — or at least non-interference. Crossing the local dealer, or his boss, is a death sentence, and it is enforced mercilessly. Puerto Rico does not have a death sentence, so criminals and residents fear other criminals and kingpins more than they do the police.
Corrupt police and local officials are the norm. The law only seems to matter when police need to raise revenue, and it usually only matters for motorists. In fairness, if you’ve ever driven in Puerto Rico, a lot of people deserve those tickets. Petty theft is beyond epidemic, so high in fact that many (including myself) stop reporting crimes after the first few go unresolved. A recent visitor to Vieques Island, off of Puerto Rico’s east coast, told me his car rental company had told him to leave the vehicle unlocked since “the thieves were going to get in anyway,” and they don’t like having to replace windows.
Really Bad Politics and Politicians
If you’ve ever been to Louisiana, and some other locations, you know that there are corrupt politicians. Politicians in Puerto Rico, however, make Louisiana politicians look like amateurs. From somehow mismanaging a $100 billion economy and $20 billion in federal funds into a $70 billion debt, to allegations of taking money from drug dealers, to allegations of prior knowledge of the daring escape of a drug lord from a maximum security prison, Puerto Rico politicians have earned their bad reputation. The senator allegedly involved in the escape case was removed over allegations of tax evasion, but he was never convicted of anything and denied any wrongdoing. A report from that year shows he wasn’t the only one who was in trouble.
Corruption allegations against politicians and officials have continued to the present day, and Puerto Rico leads the entire United States for public corruption cases. Not everyone is corrupt, and not everyone is on the public dole, but the corrupt politicians and police represent an important moral crisis in Puerto Rico. Further, all of this occurs with a backdrop of perpetual status politics and the question of whether the island should remain a commonwealth, become independent, or become the 51st state.
There are of course solutions to all of these problems, few of which will be found in government itself. Perhaps instead of offering a solution this time, I’ll ask you the reader to offer your own in the comment box below. What would you do? How would you fix this?
Frank Worley-Lopez
In many ways that conversation with my mother reminds me a lot of Puerto Rico. The island receives more than US$20 billion a year in federal funds, with the largest portion of that going toward payments and services for individuals like Nutritional Assistance, Social Security, and housing. The island has a Gross Domestic Product of about $100 billion a year. Not to mention the great scenery, warm Caribbean waters, and great weather — except when the occasional hurricane strikes.
The Puerto Rican flag flies at a rally in Old San Juan Source: akim-puertorico.
The Commonwealth of Puerto Rico has $70 billion in debt outstanding (with nearly $30 billion more in underfunded pensions); half the population is on public assistance; it has a 14 percent unemployment rate; and roughly 900 murders occur every year. They face the very real possibility of their credit rating being downgraded to junk status, and the debt load per citizen is estimated to be 10 times that of any other state and thousands of residents (mostly professionals) are leaving the island each year for greener pastures in the good old U.S. of A.
What happened?
The answer is complicated, but I’ll try to simplify it for this article.
Money for Nothing
It’s said that nothing in life is free, but in Puerto Rico’s case the residents pay no federal income tax on earnings in Puerto Rico. The “help” that came from the federal government made it easier for many to live off of government assistance than to work.
While a student in seventh grade in a small school in Naguabo, located on the island’s eastern tip, I spoke with classmates about my plans for the future: college, career, and service to the country.
One of my classmates angrily responded, “Why would you go through all of that? The government pays for everything.” Some of my other classmates looked at me with disdain while shaking their collective heads.
“So you plan to just live on welfare when you grow up?” I asked incredulously.
“Of course! It’s so much easier than all of those things you talked about.”
The conversation, which occurred around 1980, never left my memory. Checking back as a young man in the late 1980s and early 1990s, I found that in fact many of the people I had gone to school with had followed their aspiration and were living on government assistance programs. Not all of them, however, chose to follow that path.
Some went on to college; some worked; others simply died.
One of my classmates, “Alfred,” became a heavy drug user. Eventually he quit drugs and found religion (maybe not in that order), and only a short time after becoming clean was hit by a car and killed while walking home from church. The word on the street was that he had been hit on purpose by some of his former drug buddies who didn’t like that he had tried to change his life for the better.
In the back of my head I keep a list — list that Alfred is on — along with another half a dozen people who I have known who have been killed because of drugs or related activities. One friend was gunned down by mistake. A mob hit man confused him with his target, kidnapped him, took him to the top of a building, shot him in the back of the head, and dropped his body over the side. Upon realizing his mistake, the hit man found his original target and did the same to him.
Another was gunned down in his driveway, in front of his children — another at a toll booth.
Drugs, the Drug War, and Dirty Cops
More than 1,100 murders on an island of 3.6 million people that is a 100 miles long and 30 miles wide: that is the drug war in a nutshell. From cocaine to crack to crystal meth, the island has it all. Anything you could want to destroy yourself with, while having a really, really, good time. An estimated $3 billion in illegal drugs are sold each year on the island. That amount of money drives an enormous organized crime movement and leads to corruption at all levels of government, especially at the local police level.
Local drug dealers, taking a page from Al Capone’s book, offer services to housing project residents in exchange for their loyalty — or at least non-interference. Crossing the local dealer, or his boss, is a death sentence, and it is enforced mercilessly. Puerto Rico does not have a death sentence, so criminals and residents fear other criminals and kingpins more than they do the police.
Source: Huffington Post.
Really Bad Politics and Politicians
If you’ve ever been to Louisiana, and some other locations, you know that there are corrupt politicians. Politicians in Puerto Rico, however, make Louisiana politicians look like amateurs. From somehow mismanaging a $100 billion economy and $20 billion in federal funds into a $70 billion debt, to allegations of taking money from drug dealers, to allegations of prior knowledge of the daring escape of a drug lord from a maximum security prison, Puerto Rico politicians have earned their bad reputation. The senator allegedly involved in the escape case was removed over allegations of tax evasion, but he was never convicted of anything and denied any wrongdoing. A report from that year shows he wasn’t the only one who was in trouble.
Corruption allegations against politicians and officials have continued to the present day, and Puerto Rico leads the entire United States for public corruption cases. Not everyone is corrupt, and not everyone is on the public dole, but the corrupt politicians and police represent an important moral crisis in Puerto Rico. Further, all of this occurs with a backdrop of perpetual status politics and the question of whether the island should remain a commonwealth, become independent, or become the 51st state.
There are of course solutions to all of these problems, few of which will be found in government itself. Perhaps instead of offering a solution this time, I’ll ask you the reader to offer your own in the comment box below. What would you do? How would you fix this?
Frank Worley-Lopez
Worley-Lopez is one of the two founders of the original Libertarian Party of Puerto Rico and its first state chairman. He is the author of A Puerto Rican Manifesto (Un Manifiesto Puertorriqueño) and a former Radio and TV host and Puerto Rican Senate aide. Follow him @FrankWorleyPR.
History Notes: "THERE was something a bit grudging about America’s conquest of Puerto Rico in 1898... America is a country founded on a unique set of ideas, and most of them do not come from imperial Spain. Hispanics will play an ever-larger role in shaping America. Centuries of proximity and shared history are bound to strengthen this. But modern America does not belong to any one race or culture: that is its genius."
Friday, January 24, 2014
Wednesday, January 22, 2014
Thursday, January 16, 2014
Puerto Rico Supreme Court halts pension reform, angering governor SAN JUAN Wed Jan 15, 2014 11:41am EST
(Reuters) - In what Governor Alejandro Garcia Padilla called a "dangerous decision," the Puerto Rico Supreme Court late Tuesday halted implementation of a teachers pension system reform as it agreed to hear a lawsuit seeking to have the reform overturned as unconstitutional.
The reform, enacted December 24, is one of a series of steps the Puerto Rico government has taken in a bid to retain its investment-grade credit rating, which stands just a single notch above junk-bond status by all three Wall Street credit rating agencies. In halting the reform, the Supreme Court said the plaintiffs could suffer material harm from its implementation.
The court appointed a special commissioner to collect evidence, hold a hearing and submit a report on its findings by February 7.
"The resolution emitted by the Supreme Court is particularly dangerous in this historic moment in which we live because our will to save the teachers pension system is being evaluated in relation to the country's credit rating," the governor said in a prepared statement.
"The times call for intellectual generosity and historic responsibility from the judicial branch," he added.
The ruling was handed down in the midst of a two-day strike that kept public school classrooms empty to protest the pension system changes.
The lawsuit, filed by the Teachers Association and a number of other plaintiffs, argues that due process was not followed and says the commonwealth government could have taken less onerous measures to shore up the pension system.
The Teachers Pension Fund has a deficit of $10 billion and is slated to run out of cash by 2020 without the reform, officials have said. There are 41,973 participants and 37,996 retired beneficiaries, with the fund receiving just 17 cents for each $1 it needs each year to pay for benefits and operations.
The reform honors existing accumulated defined benefits but closes down the system for all, switching over to a defined contribution plan.
The reform increases employee contributions to 10 percent from 9 percent and pushes up the retirement age, currently as low as 50, to 62 for new employees, and to 55 or 60 for existing employees, depending on years of service. The reform enacted a minimum $1,625 monthly pension, which is above the current average monthly benefit of $1,371.
Meanwhile, the government's contribution increases between 1 percent and 1.5 percent annually for the next several years, pushing up its current 9.5 percent contribution to 20.52 percent in 2022.
The government is planning a return to the municipal bond market by the end of February, as part of efforts to retain its investment grade rating. Officials say the exact timing and size of the deal are still pending. They have said in the past that they would try to raise between $500 million and $1.2 billion through bonds backed by the sales and use tax and sold through the Sales Tax Financing Corporation, known as Cofina.
Both Moody's Investors Service and Fitch Ratings, which have warned of a potential downgrade of Puerto Rico general obligation and related credit to junk, have cited market access, as well as budget and economic performance as critical factors in retaining an investment grade rating.
The Puerto Rico legislature is also considering several measures aimed at bolstering the government's fiscal position, including a bill that would order government entities to transfer about $2.8 billion in deposit with island banks to the Government Development Bank.
The Supreme Court will also hold a hearing on a lawsuit challenging the constitutionality of a separate reform of Puerto Rico's pension fund for the judicial branch filed by the Puerto Rican Judiciary Association. The suit argues that the legislature overstepped its bounds in enacting the reform, which increased the judges' contribution to the pension plan to 10 percent from 8 percent and lowered pensions to 60 percent of salary from 75 percent.
(Reporting by Reuters in San Juan; Editing by David Adams and Leslie Adler)
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