Posted on 12/15/2015 9:34:46 AM PST by cll
MIAMI — With Puerto Rico’s debt-ridden economy still in crisis and his administration mired in scandal, Alejandro GarcÃa Padilla, the island’s embattled governor, announced on Monday that he would not seek re-election in 2016.
In a brief message tinged with anger toward his critics, including members of his own party, Mr. GarcÃa Padilla, 44, defended his record as governor and lashed out at his predecessors, who he said helped plunge Puerto Rico into runaway debt. The governor said he chose not to run for a second term so he could focus solely on the economy, jobs and trying to find a way to restructure the island’s $72 billion debt.
“What is incomprehensible,†Mr. GarcÃa Padilla said, “is that the same people who took and spent those loans and didn’t leave behind anything to pay them back now criticize those who didn’t take the loans and are now trying to pay them back.†The governor called on Puerto Ricans to accept the politically difficult decisions that require greater “loyalty to the future than to the past.†Those decisions are likely to include layoffs, higher taxes, more cuts in pensions and the possibility that a federal control board may take over the island’s finances. “Big causes require big sacrifices,†Mr. GarcÃa Padilla said.
(Excerpt) Read more at nytimes.com ...
Its not incomprehensible, Mr. Garcia. Its the American way. Spend like there's no tomorrow. When the Welfare State Ponzi Scheme finally collapses because there are no suckers left to borrow from, the prior generations who ran up the debt will be dead so why should they care?
I did a little research, Puerto Rico now has had four straight single term Governors. Is there a systemic issue with the Governor now?
PR, in my opinion is the canary in the coal mine, California and Illinois are on the same path, but they are simply bigger and the inevitable collapse of the welfare/big govt state is just taking longer.
Somehow (I’m not sure exactly how) I believe some of PRs problems stem from kicking out the US Navy in the early 2000s. No telling how many billions in revenue were lost ‘cause of that, but they had to have they’re island of Vieques back.
The problem is not who’s governor. The problem is the IMMENSE political machinery behind any governor, of any party. Sometimes the current opposition party leans conservative, but seldom can they handle the entrenched political hacks, even those of their own party.
That has a lot to do with it. The Navy used to be the largest employer on the island. Now Wal-Mart is.
Well, actually according to wiki it’s STILL the Navy:
“Following the 2003 departure of the US Navy, efforts have been made to redevelop the island’s agricultural economy, to clean up contaminated areas of the former bombing ranges, and to develop Vieques as a tourist destination. The Navy clean-up is currently the largest employer on the island, and has contributed over 20 million dollars directly into the local economy over the last 5 years through salaries, housing, vehicles, taxes, and services. The Navy has provided specialized training to several local islanders, who may be able to parlay this training into a career after the clean-up is over.”
20 mil over 5 years ain’t that much nowadays though.
Maybe these cretins can get their 936 back. Clinton sure did a number on them.
http://taxfoundation.org/blog/tax-policy-helped-create-puerto-rico-s-fiscal-crisis
Tax Policy Helped Create Puerto Ricos Fiscal Crisis
June 30, 2015
By Scott Greenberg, Gavin Ekins
Yesterday, the governor of Puerto Rico announced that his governments $72 billion of debts are not payable, in advance of $1.92 billion in debt service payments due on Wednesday. This announcement follows over a year and a half of uncertainty about Puerto Ricos ability to meet its financial obligations, including a downgrade of its government bonds to junk status and discussions about the possibility of a partial government shutdown.
As waves of shock from the announcement ripple through bond markets and the news media, it is worth reflecting on the role that taxes played in creating the current crisis. The treatment of Puerto Rico in the United States federal tax code helped create the islands current fiscal situation, and the failure of Puerto Ricos government to reform its tax code exacerbated matters further.
I. Section 936 and Puerto Ricos Nine-Year Recession
Throughout the modern economic history of Puerto Rico, one of the central drivers of its economic growth has been the United States tax code. For over eighty years, the federal government granted various tax incentives to U.S. corporations operating in Puerto Rico, in order to spur the industrialization of the island.
Most recently, beginning in 1976, section 936 of the tax code granted U.S. corporations a tax exemption from income originating from U.S. territories.
In addition to section 936, the Puerto Rican corporate tax code gave significant incentives for U.S. corporations to locate subsidiaries on the island. Puerto Rican tax law allowed a subsidiary more the 80% owned by a foreign entity to deduct 100 percent of the dividends paid to its parent. As such, subsidiaries in Puerto Rico had no corporate income tax liability as long as their profits are distributed as dividends.
When section 936 was in effect, U.S. corporations benefited greatly from locating subsidiaries in Puerto Rico. Income generated by these subsidiaries could be paid to U.S. parents as dividends, which were not subject to U.S. corporate income tax under section 936, and were deductible from Puerto Ricos corporate income tax.
Because of these generous tax incentives for business, Puerto Rico grew rapidly throughout the 20th century and developed a substantial manufacturing sector, though it remained relatively poor compared to the U.S. mainland. However, because section 936 made foreign investment in Puerto Rico artificially attractive creating in effect an economic bubble it left the island vulnerable to a crash if the tax provisions were ever to be repealed.
As it happened, section 936 became increasingly unpopular throughout the early 1990s, as many saw it as a way for large corporations to avoid taxes. Ultimately, in 1996, President Clinton signed legislation that phased out section 936 over a ten year period, leaving it to be fully repealed at the beginning of 2006. Without section 936, Puerto Rican subsidiaries of U.S. businesses were subject to the same worldwide corporate income tax as other foreign subsidiary.
So in a sense, it is similar to the situation in Illinois and Chicago, the machine automatically constrains the options available to the most well intentioned executive.
Hard to fix a problem when real solutions are off the table.
It is, for an island the size of Vieques.
So “Agapito” has one more year to try to clean up the mess. Good luck with that.
And while the hacks continue carrying the day, more one-way airplane tickets from Puerto Rico to the mainland are sold.
“Agapito” may boast about reducing the government payroll without layoffs, but I don’t think those remaining public employees are too happy, especially if they don’t get their Christmas bonuses this year. And then you have people who filed their Commonwealth income-tax returns 8 months ago and still haven’t received their refunds.
Yes and no. They actually had a good governor (Fortuno) who was really paring things down and trying to get the place stabilized and not dependent on Federal money - and then the municipal unions intervened and got Padilla elected. He then proceeded to roll back all the reforms.
The election was pretty close. I happened to be there during the elections, and of course the municipal unions were staging their usually hysteria, but even so, almost all the people I knew (who were certainly not conservatives) were disappointed that the Dems had gotten back into power.
So Padilla really has nobody to blame but himself and his party.
The good news is Garcia-Padilla isn’t running for a second term. The bad news is that he’s going to be Hillary’s running mate.
Actually it’s bad news he’s not running, isn’t it? For surely he’d lose if renominated.
It doesn’t matter. You can’t stop the Trump Express.
Garcia-Padilla was a dead man walking, so his decision not to run gives the PDP hope of not getting crushed in the gubernatorial election. They’ll likely run another empty suit: former Secretary of State (and Olympic fencer) David Bernier, DDS.
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