“Few Democratic leaders will choose the austerity recommended by Mr. Hanson before every other policy door has been slammed shut. The first and least painful option to sustain deficit spending is currency debasement that facilitates repayment of debt. Greece’s tie to the euro and Puerto Rico’s tie to the U.S. dollar eliminated the luxury of printing devalued money to pay debts…

…Demanding debt relief from creditors (with investors receiving, say, 65 cents on the dollar for their holdings) comes closest to currency debasement in terms of milder fiscal pain for debtors. Bankruptcy also can be preferable to austerity, although Puerto Rico’s debt was issued under a legal framework that excluded it from default. Politicians in democracies generally will reduce the salaries and benefits of government workers or eliminate public-sector jobs only under extreme duress, and only after taxpayers and creditors have been pushed to the wall. An antiausterity rationale is supplied by economists who make the case that government payrolls, benefits, investments and income-transfer programs are extraordinary economic stimulants, an argument that helped the Obama administration ratchet up federal spending and debt. When the spending “stimulus” inevitably blows holes in budgets, and payment obligations to greedy capitalist creditors grow to unaffordable levels, greedy investors always are second in line for shakedowns, just behind greedy taxpayers.” Alex Brooks, Bethesda, Md., Wall Street Journal: Letters to the Editor, June 9, 2015

Opinion Letters

Profligate Puerto Rico’s Problems So Possible to Predict

What sets Greece and Puerto Rico apart from other profligate peers is their inability to debase their currencies.

Regarding Daniel Hanson’s “Profligate Puerto Rico on the Brink” (op-ed, June 30): Overspending is the natural instinct of every democratically elected regime, and a periodic fiscal crisis is the norm, not the exception. What sets Greece and Puerto Rico apart from other profligate peers is their inability to debase their currencies. Few Democratic leaders will choose the austerity recommended by Mr. Hanson before every other policy door has been slammed shut. The first and least painful option to sustain deficit spending is currency debasement that facilitates repayment of debt. Greece’s tie to the euro and Puerto Rico’s tie to the U.S. dollar eliminated the luxury of printing devalued money to pay debts. Demanding debt relief from creditors (with investors receiving, say, 65 cents on the dollar for their holdings) comes closest to currency debasement in terms of milder fiscal pain for debtors. Bankruptcy also can be preferable to austerity, although Puerto Rico’s debt was issued under a legal framework that excluded it from default.

Politicians in democracies generally will reduce the salaries and benefits of government workers or eliminate public-sector jobs only under extreme duress, and only after taxpayers and creditors have been pushed to the wall. An antiausterity rationale is supplied by economists who make the case that government payrolls, benefits, investments and income-transfer programs are extraordinary economic stimulants, an argument that helped the Obama administration ratchet up federal spending and debt. When the spending “stimulus” inevitably blows holes in budgets, and payment obligations to greedy capitalist creditors grow to unaffordable levels, greedy investors always are second in line for shakedowns, just behind greedy taxpayers.

Alex Brooks

Bethesda, Md.

As a percentage of gross domestic product, combined commonwealth and local spending for 2011 (the most recent year with full data) was approximately 11%. Using data from the same year, Puerto Rico would be the lowest spender among all 50 of the U.S. states.

Moreover, for those led to believe that government workers are generally overpaid, consider that the average salary for a public-school teacher in Puerto Rico is $32,000, also the lowest in the U.S. One arguable exception is the pay of Puerto Rico’s legislators, who generally make about $75,000, but this pay is exceeded by their counterparts in Pennsylvania and New York. Finally, over the last decade, Puerto Rico has drastically cut its government labor force such that it would rank 37th among the 50 states including the District of Columbia in per capita government employment.

The second issue concerns the tendency of those analyzing the island’s crisis to ignore a central cause: Puerto Rico’s failed economic-development strategy based on tax exemptions for uncompetitive activities.

To resolve Puerto Rico’s crisis, we will need more (not less) government investment to improve the quality and efficiency of public services and infrastructure. But more important, we must debunk the entrenched mindset that blocks us from realizing Puerto Rico’s enormous potential as a world-famous tourism, entertainment and professional sports venue.

David R. Martin

Atlanta

Posted on July 9, 2015, in Postings. Bookmark the permalink. Leave a comment.

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