Short(ish) Takes: A Transition Plan for Puerto Rican Independence
Some back-of-the-envelope math that might satisfy both Puerto Ricans and Americans.
“Short(ish) Takes” are my too-short-for-an-article, too-long-for-a-Tweet musings. They’re in-progress thoughts and arguments that are subject to change; I welcome your comments here or on Twitter @AlbertoMedinaPR.
I don’t write a lot about the economics of the Puerto Rico status debate, for two reasons. First and foremost, it’s far from my area of expertise. Second, many who demand “economic plans” for an independent Puerto Rico do so in bad faith; they are determined to remain unconvinced even in the face of well-thought-out analyses and projections.
Still, it’s not unreasonable to wonder what the economic transition to independence would look like. The U.S. does pump a lot of money into the Puerto Rican economy, and to eliminate it suddenly and entirely would be a shock to the system. Of course, no serious person wants that to happen or believes it would. Just as they would have to negotiate myriad issues in the transfer of power to a sovereign Puerto Rico, the U.S. and PR would surely negotiate an economic transition plan. And it’s not hard to imagine one that could be attractive to both parties.
A pro-statehood economist and occasional Twitter sparring partner recently told me that the U.S. injects $30+ billion a year into the Puerto Rican economy. That number deserves an asterisk; much depends on what you count and how, and in any case the amount has only been that high in recent years with the surge of Hurricane María recovery money and COVID-19 relief money. Before that, it was closer to $20 billion; but let’s use the $30 billion figure.
Now: imagine a 30-year transition period in which, each year, the U.S. reduces its contribution to Puerto Rico’s coffers by $1 billion. Meaning, if PR became sovereign today, it would receive $29 billion in 2023, $28 billion in 2024, and so on — until reaching $0 in 2052. In this scenario, Puerto Rico would receive a total of $465 billion from the United States over three decades, providing ample time for Puerto Rico’s economy to adjust and, hopefully, thrive. For the first decade, the year-to-year decrease in funding would be less than 5%—a gradual enough reduction that economic growth and new sources of revenue can realistically compensate for it.
You might ask why the U.S. would be so magnanimous. Simply put: because most Puerto Ricans will not accept independence without a generous transition plan, and every other status alternative costs the United States even more. $30 billion a year is nearly a trillion dollars over the next three decades — in perpetuity if the status quo remains. And if Puerto Rico were granted statehood, significantly more federal funding would flow to the island. In the scenario I outlined above, the United States would save $435 billion; that’s music to the ears of many Republicans and not a few Democrats. A decades-long, multibillion-dollar transition to independence would actually be a rare win-win in U.S. politics: liberals get to celebrate that they’re being generous to “people of color,” while conservatives can highlight they’re cutting spending.
You can argue and play with the numbers; there’s a reason I called it back-of-the-envelope. And, of course, there are countless other economic issues in the Puerto Rico status debate that deserve and require serious consideration. But the point remains: there are plenty of economic transition scenarios in which the U.S. would feel compelled to put a sovereign Puerto Rico on the path to prosperity — not out of a sense of moral duty (though they should feel that too), but out of pure economic self-interest. And Puerto Ricans who are gun-shy about independence because they believe it would lead to economic ruin might reconsider if they knew that it came with more than $450 billion from the U.S.
So, who wants to call Joe Manchin?