I don’t understand. Puerto Rico increased the minimum wage, increased taxes, increased government spending to stimulate the economy… their liberal government did everything they say will make a state solvent. Why are they defaulting?
Puerto Rico’s governor on Sunday declared a moratorium on a $422 million debt payment due Monday by the island’s Government Development Bank, the most significant default yet for the U.S. territory facing a massive economic crisis.
Governor Alejandro Garcia Padilla said in a televised speech that he signed the moratorium on Saturday in what he characterized as a “painful decision” based on inaction from the U.S. Congress, which continues to debate a legislative fix for Puerto Rico’s $70 billion debt load.
Garcia Padilla, addressing Puerto Rico’s 3.5 million people in Spanish, said the island’s American citizens had sacrificed much for the nation throughout history and asked Congress on many occasions for tools to restructure its financial liabilities.
Here is some background why Puerto Rico has fallen into the fiscal situation they have. As usual, there’s more to the story.
Wall Street smoothed the island’s path to fiscal debacle, reaping more than $900 million in fees to manage Puerto Rico’s $126.6 billion of bond sales since 2000. After the U.S. territory adopted a sales tax in 2006, investment banks worked with officials in San Juan to create new bonds backed by a portion of the proceeds. These helped the government, which employs more than a quarter of the workforce, put off cuts. Puerto Rico, ceded to the U.S. in 1898 after a war with Spain, has a special tax status that dates to 1917 and the passage by the U.S. Congress of the Jones-Shafroth Act. It has relied on tax breaks to drive economic development, attracting pharmaceutical, textile and electronics companies. The U.S. phased out the incentives from the mid-1990s to 2006, contributing to the loss of 80,000 jobs. Since 2006, the island’s economy has contracted every year except one and its poverty rate is now almost double that of Mississippi, the poorest state. The population, now about 3.5 million, is shrinking and forecast to reach a 100-year low by 2050.
http://www.bloombergview.com/quicktake/puerto-ricos-slide
John Oliver explains Puerto Rico’s problems.
https://www.youtube.com/watch?v=Tt-mpuR_QHQ
So, it’s not quite as simplistic as Owen says.
If you don’t like “simple and wrong” you should find another web site.