Los Fondos Federales! (The Federal Funds)

President Obama's decision to freeze spending on some domestic programs, in order to trim the burgeoning U.S budget deficit, does not bode well for Puerto Rico. Although the island is not a state, as a U.S territory, it does receive a considerable amount of federal money (including nearly $6 billion in stimulus funds in 2009). Much of these funds are used in areas such as health care, infrastructure and education. The local economy and government see federal funds as a panacea. The standard of living in Puerto Rico would certainly be much lower without it. Some local economists have been warning on the dangers of depending too heavily on money coming from DC though. Instead of relying on federal funds, Puerto Rico should restructure and create a more dynamic economy.

Nevertheless, one of the key figures in making sure that the island gets a piece of the pie is the Resident Commissioner, who serves as a non-voting member in the U.S House of Representatives, Pedro Pierluisi. The inclusion of Puerto Rico in the healthcare reform bill is something which Mr. Pierluisi has been actively seeking. Yesterday, I came across the following article in the El Nuevo Día: "Freno en las asignaciones federales discrecionales" (translation: "Brakes on Federal Discretional Assignations"). The article lists a number of federal programs, such as the $2 billion Nutritional Assistance Program, which are unlikely to receive an increase in funds. At a time when the U.S is facing a national debt in the trillions, the Puerto Rican government needs to be more savvy in terms of stimulating its economy and stop looking to Washington as its life raft.

The Other Cables

Most of you may have heard of Wikileaks, the Website which has published troves of classified U.S State Department diplomatic cables. It has released documents dealing with countries (and U.S territories) from around the world, including Puerto Rico. The local papers didn't really cover much of what was said about the island, perhaps because it wasn't newsworthy. What was published mostly dealt with the status issue. According to the documents leaked by Wikileaks however, there was also talk of having U.S territories that receive U.S federal funding pay federal income taxes. If this were to become reality, it would certainly provoke massive demonstrations and mayhem. Given the crisis already taking place at the University of Puerto Rico, and the island's weak economy (it has been in recession for the past five years and 2011 GDP growth forecasts look bleak), it would lead to an explosive situation.

What Wikileaks published about the island was nothing scandalous, and nothing surprising. I can't help but wonder what (if any) those other classified documents would contain. So, I'll just put in my own two cents about what these possible cables might say. After all, for such a tiny island, Puerto Rico does generate quite a bit of news (mostly ignored by the U.S mainstream media though). Let me begin with corruption. This past Monday, Hector Martínez, a senate politician, was found guilty of taking bribes from a businessman and was indicted by a U.S federal court. Mr. Martinez joins a long list of cronies, from small town mayors to a former Department of Education secretary who was accused of stealing millions in federal funds. Corruption is a serious issue on the island and the most effective weapon to fight against it has been the presence of federal law enforcement agencies such as the FBI.

On the topic of corruption, let's now move on to the local criminal justice system. It has been exactly a year since the mysterious death of Lorenzo González, who was 8 years old when he was murdered. No charges have been filed. However, the local Justice Department has stated that the mother, Ana Cacho, is the principal suspect. As with most crimes perpetrated on the island, it looks as though local law enforcement officials will once again let this case fall through the cracks. One of the most egregious examples is the so called "masacre de Pájaros," where 12 individuals were accused of murdering three people. Although some were indicted by a jury on conspiracy charges, the judge decided to absolve all of the accused. In a strange turn of events, one of the defendants' lawyers was allegedly seen celebrating with the judge at a nearby restaurant afterwards. In the end, some of the accused were arrested by DEA agents and are now sitting in a federal prison.

Corruption and the criminal justice system on the island are not the only areas in which the U.S federal government is closely monitoring. The U.S Department of Education has also been keeping close tabs on the island's public schools, as a majority of them (86% to be exact) have not met the testing requirements set forth by the "No Child Left Behind" policy. In terms of higher level education, it has been nearly a year since the student strikes at the University of Puerto Rico began and there is no end in sight. In fact, the strike has taken a turn for the worse. The chancellor of the Rio Piedras campus was violently attacked this week while emerging from a meeting at the university.

Violence is a matter of utmost concern in Puerto Rico. Most murders are drug-related but robberies and other types of crimes are on the rise, especially since the economy continues to stagnate. According to the latest findings in the 2010 census, there was a 2.2% population decline on the island in the past 10 years. This is mainly attributed to the migration of Puerto Ricans to the mainland in search for jobs, and not a decreasing birth rate, especially for some of the most well-educated. If the economic and social conditions continue as they are, and as the U.S economy improves, there will be a further contraction of the island's population. In the political front, the two main parties seem to be mired in perpetual bickering, both internal as well as against one another. These are tough times for Puerto Rico, and the future looks grim, but without the presence, aid and oversight of the U.S federal government, things would be in much dire shape.

In conclusion, it's unlikely that the island truly wants to become a sovereign nation, given the significant amount of federal funding it receives. The chances of Puerto Rico becoming the 51st state don't look very promising either, given both the resistance to this idea on the island and in Washington DC. The majority on the island seem complacent with the commonwealth status though. However, there's another possibility which should be taken into consideration. Given the increasing national debt and its decreasing stature as a world economic superpower, perhaps the time has come for the U.S to free itself of Puerto Rico.

After the Midterm Elections

With the newly elected Republican majority now in control of the U.S House of Representatives, a cloud of uncertainty looms over Washington and the direction in which the U.S will be heading. Should the Republicans fulfill their campaign promises of decreasing government spending and dismantling Obama's "monstrosity" health insurance plan, Puerto Rico will find itself in quite a precarious situation. As I've mentioned before in an earlier blog post, the island is hugely dependent on federal funding to build roads, maintain its schools and create jobs. Puerto Rico received $6.5 billion in federal stimulus money from Obama's $787 billion American Recovery and Reinvestment Act (ARRA), and $6 billion in Medicaid funding for the next decade.

Despite the role of significance in which federal funds play in the Puerto Rican economy, not much attention has been given to the U.S midterm elections. In fact, there was more talk about Ricky Martin's appearance on Oprah, the first since declaring himself to be a gay man. It was Ricky who actually made the front cover news in two out of the three main newspapers on the island, Primera Hora and El Vocero. That just goes to show where people's priorities lie. Most boricuas were appreciative to receive, and some are still anxiously waiting, the so-called "el cheque de Obama" (translation: Obama's check), in reference to the stimulus check in which taxpayers received. The saving grace was the headline on the island's main newspaper, El Nuevo Día, which had a photo of the U.S President and the following headline: "Revés para Obama" (translation: "A Setback for Obama."). It could also easily have read: "Revés para la isla." Time will tell. Some may say less federal funding is a good thing for Puerto Rico, in order for the island to develop its own economic wherewithal. Nevertheless, this viewpoint is not shared by the majority of Puerto Ricans living on the island.

(Image by Minh Uong of the New York Times)

Uncle Sam's Catch-22

As perplexing as this may sound, keep in mind that Puerto Rico's unemployment rate is over 16%, the local government is contemplating a guest-worker program to bring in people from nearby Haiti and the Dominican Republican to harvest coffee. Picking coffee beans isn't rocket science, but it seems like very few people want to roll up their sleeves and labor under the sun. Many attribute this kind of mentality to the culture in which Uncle Sam has helped create, one in which people would rather live on government assistance (on the island, it's colloquially known as "cupones") than earn a paycheck. An estimated six out of ten families are beneficiaries of the Nutrition Assistance for Puerto Rico (PAN) program, and less than half of the people on the island work. Officially, the labor participation rate hovers at around 40%. However, for those of you who live on the island, you're probably aware of the existence of a sizeable underground economy.

Nevertheless, in some of the most impoverished towns on the island, such as Comerío, the unemployment rate is at a whopping 22.8% and 60% of the residents are recipients of PAN. While some criticize such entitlement programs in creating more harm than good, others believe it has helped improved the lives of many low-income families. According to the 2006 U.S Census, 45.6% of the island's population lived below the poverty level. This statistic is quite mind-boggling, especially while taking a stroll at Plaza Las Américas and seeing all those luxury cars on the street.

While the 2011 federal budget calls for cuts in some programs designed to help the neediest, it will not affect PAN, which Puerto Rico expects to receive $2 billion this year. The Times Magazine columnist Fareed Zakaria, who is also host of CNN's Global Public Square, was invited to the island by the Center for the New Economy to talk about his perspective on the island's economy. During his speech, he spoke for Puerto Rico's desperate need to abandon the "politics of dependence" on federal funds. The island must begin the process of transformation and focus on creating wealth, and stop looking towards the U.S federal government as a "money machine," said Zakaria. Furthermore, Puerto Ricans must not wait for politicians to begin this transformation. Indeed, nobody could have said it better.