With GAO report, momentum builds for Puerto Rican statehood

Last week, the Government Accountability Office (GAO) released a report about the fiscal impact of Puerto Rico statehood on the federal government.  The report strongly supports the conclusion that statehood would economically benefit both Puerto Rico and the nation as a whole.

A word of background.  Puerto Rico has been a U.S. territory since 1898.  Although Puerto Rico is home to 3.6 million American citizens—more than 21 states—island residents cannot vote for their president, have no representation in the Senate, and send a single non-voting delegate to the House.  The federal government is constitutionally licensed to treat Puerto Rico worse than the states under federal programs, and the federal government uses that license in numerous instances.  Puerto Rico’s status is impossible to reconcile with the principles of democracy and equality our nation strives to uphold at home and promotes abroad. 

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The GAO report is timely.  Since GAO commenced work in 2011, two historic events have occurred.  In a 2012 referendum sponsored by the local government, a majority of voters in Puerto Rico said they do not want Puerto Rico to remain a territory, and more voters expressed a desire for statehood than for any other status option.  And in January, as a result of my initiative, Congress enacted a $2.5 million appropriation to enable Puerto Rico to conduct the first federally-sponsored referendum in its history.  The law states that the purpose of the referendum is to “resolve” the territory’s ultimate status.

Meanwhile, over the past year, Puerto Rico’s economic problems, which are longstanding and structural, have devolved into a crisis.  The three major credit rating agencies have downgraded the territory’s bonds to non-investment grade.  Puerto Rico’s unemployment rate is 15.0 percent, compared to a U.S. national average of 6.7 percent.  Every week, about 1,000 of my constituents move to the states in search of economic opportunity and political equality.  Thus, GAO has released its report at a moment when territory status has driven Puerto Rico into a deep downward spiral and island residents are voting for statehood—at the ballot box and with their feet—in unprecedented numbers.

Having reviewed the context of the report, I turn to its contents.  The methodology GAO uses to estimate the effect of Puerto Rico statehood on federal spending and revenues is straightforward.  GAO observes how much funding Puerto Rico actually received under a specific federal program—or how much Puerto Rico actually paid in federal individual or corporate taxes—in a particular fiscal year, and then estimates how much Puerto Rico would have received—or paid—in that fiscal year if it had been a state.  As GAO acknowledges, this methodology is static rather than dynamic, so it cannot account for the full range of mutual benefits that statehood would provide to Puerto Rico and the nation over time. 

It is important to emphasize that the report examines statehood through a purely economic lens.  However, for every statehood advocate I know, this is a civil rights issue as much as it is an economics issue.  Statehood would deliver to Puerto Rico what the current status denies us:  equality, democracy, justice, an end to second-class citizenship, a dignified status for a proud people.  These principles are priceless and cannot be captured by an economic analysis. 

That said, the GAO report reinforces the widely-held view that statehood would improve economic conditions and enhance quality of life in Puerto Rico.  Indeed, the only people I have ever heard argue that statehood would not strengthen Puerto Rico’s economy are those who have a political or personal interest in opposing statehood.  Such arguments are particularly easy to dismiss when made by Members of Congress who represent states and would never accept territory status for their own constituents.

The report notes that Puerto Rico is treated unequally under key federal programs, and that it would receive equal treatment as a state. Based on GAO’s analysis of Medicaid, Medicare, Supplemental Security Income, nutrition assistance, and highway funding—and taking into account programs GAO did not examine, like long-term care under Medicaid and federal subsidies under the health insurance exchange created by the Affordable Care Act—it can be calculated that statehood would inject an additional $9 to $10 billion into Puerto Rico’s economy each year.  This figure, which underscores the scope and the severity of the discrimination Puerto Rico confronts as a territory, is consistent with other federal reporting.  The Census Bureau reported that Oregon, a relatively well-to-do state that has a population size similar to Puerto Rico, received over $29 billion from the federal government in 2010, whereas Puerto Rico received $19 billion—a $10 billion difference.  

At the same time, the report debunks the argument that statehood would have an adverse fiscal impact on the U.S. treasury, since new federal outlays to Puerto Rico will be significantly counterbalanced by new federal revenues generated from the island, which could amount to $7 billion a year.  As Puerto Rico prospers, collections will increase further.  The report thus reinforces that statehood, which is so plainly in Puerto Rico’s interest, is also in the national interest.  This nation will benefit when Puerto Rico’s economy is strong, its residents are not compelled to move to the states to achieve their dreams or vote for their national leaders, individuals and businesses on the island flourish, and the tax base expands.

The reaction to the report from politicans in Puerto Rico who favor the status quo has been dishonest.  Their description of the report bears almost no resemblance to the report itself.  Their strategy is clear: if you cannot convince the public, try to confuse the public.  For example, they claim the report concludes that hard-working island residents would have a large federal tax liability under statehood.  The report says no such thing, and the assertion is false.  A typical household in Puerto Rico will pay the same or less in total taxes under statehood than it pays now, due to the application of federal tax credits—which GAO estimates will total $718 million annually—and the ability of the Puerto Rico government to reduce its high local rates once it no longer needs to finance a disproportionate share of public services.

Over 80 days have passed since enactment of the law authorizing Puerto Rico to hold a federally-sponsored referendum and allocating funds for that purpose.  Yet, the government of Puerto Rico—which is controlled by supporters of the status quo—has taken no action.  I have proposed using the federal appropriation to hold a straightforward vote on Puerto Rico’s admission as a state.  This was the format of the votes that led to Hawaii and Alaska becoming states.  It is eminently fair, since those who support statehood can vote “Yes” and those who oppose it can vote “No.”  Indeed, 132 Members of the U.S. House and Senate have cosponsored my legislation endorsing this process.

As the GAO report makes abundantly clear, Puerto Rico’s current status deprives my constituents of the quality of life they deserve as American citizens.  The government of Puerto Rico should set aside its narrow political interests and schedule a vote on the territory’s admission as a state without delay. 

Pierluisi is Puerto Rico’s representative in the U.S. Congress.

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