While listening to National Public Radio's Planet Money, which recently did a podcast titled "How Much Debt is Too Much?" and analyzed the debt to GDP ratio (the amount of money you owe divided by your annual income) of countries such as Greece, Italy and the U.S, I couldn't help but look up Puerto Rico's figure. As mentioned in the podcast, when a country takes on too much debt, it can stifle economic growth. This would subsequently make the country borrow even more money, and lead to a potentially dire future if no budget changes are implemented in the long run. Turns out that the island's debt to GDP ratio in 2010 was 56.7% (an estimated $14,289 worth of debt per resident in Puerto Rico). In comparison, California, for all its budget problems, the ratio is currently a little over 19% (or roughly $10,009 per resident in the Golden State). As for the U.S, the ratio is almost at 100%. Greece, which has of course made worldwide headlines for its huge economic woes, has a ratio of a whopping 150%.
Historically, according to Harvard economist Ken Rogoff, countries start running into trouble when the debt to GDP ratio goes above 90%. Puerto Rico is certainly not considered to be a Greek tragedy but, if it were a state, the island would have the worst per capita debt in the U.S. In an effort to reign in spending and decrease its debt (as well as improve its standing with credit rating agencies such as Moody's and Standard & Poor's) thousands of government workers have been laid off and certain governmental agencies have even ceased to exist, as they have merged with other departments. In the latest attempt to decrease government debt, and beef-up its coffers, Gov. Fortuño decided to cede the operations of one of the most heavily transited highways on the island to a Goldman Sachs-led consortium. This group had reportedly placed a $1.08 billion bid for this venture. The government is now also hoping to privatize the island's largest airport and is looking for takers. Puerto Rico also has a severly underfunded public pension system, which Moody says is worse than what most states in the U.S mainland are confronting.