Origins of the Puerto Rico Fiscal Crisis

35 Pages Posted: 12 Jul 2018

See all articles by Marc D. Joffe

Marc D. Joffe

Public Sector Credit Solutions

Jesse Martinez

Indiana University

Date Written: 04/12/2016

Abstract

Puerto Rico’s heavy public-sector debt burden is the unintended consequence of a series of policy decisions extending back to the US takeover of the island in 1898. Rather than placing Puerto Rico on a path to statehood, Congress imposed a series of unique governing structures on the island. Today, the Commonwealth of Puerto Rico stands in stark contrast to most American states because it has no meaningful constitutional limits on central government deficits and debt accumulation, while at the same time it operates a number of public corporations that have unsustainable debt loads. Relative to American states, Puerto Rico’s government has poor fiscal transparency, low levels of public employee pension funding, and excess government staffing. To address these longstanding problems, Puerto Rico will require a federal control board, debt adjustment, constitutional reform, and privatization of state enterprises.

Suggested Citation

Joffe, Marc D. and Martinez, Jesse, Origins of the Puerto Rico Fiscal Crisis (04/12/2016). MERCATUS RESEARCH, Available at SSRN: https://ssrn.com/abstract=3211660 or http://dx.doi.org/10.2139/ssrn.3211660

Marc D. Joffe (Contact Author)

Public Sector Credit Solutions ( email )

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HOME PAGE: http://www.publicsectorcredit.org

Jesse Martinez

Indiana University

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Bloomington, IN 47405
United States

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