By John F. Di Leo -
On Friday, September 30, the United States government began its takeover of much of the financial operation of the US Territory of Puerto Rico. The island is bankrupt, so the feds moved in.
This is only somewhat unprecedented… while it’s true that it hasn’t happened before in Puerto Rico, there are states that have moved in to take control of bankrupt cities in the past. States have taken over local school districts, local utilities, even whole cities, when the financial straits were so dire that locals gave up any hope of recovery on their own. Detroit, Atlantic City, Flint… the list is longer than one might expect. If people elect incompetents at the federal level, we shouldn’t really expect the same voters to do much better at the much less rigorously vetted levels of city councils and school districts.
So the United States government has begun its conquest of the little island first conquered by Columbus, 500 years ago.
The feds are beginning by taking federal control of Puerto Rico’s largest public university, many utilities, the central territorial government itself, and the territory’s terribly underfunded public pension programs.
And that may be just an opening gambit, with more to come, as Puerto Rico’s downward spiral continues.
The Problems
It wasn’t too long ago that Puerto Rico’s finances were looking up. Good Republican government had the island’s finances in decent shape, and their governor, Luis Fortuno, was even considered as a possible national Republican ticket running mate in 2012.
But in 2012, Luis Fortuno was unseated by Alejandro Garcia Padilla, a typical modern socialist Democrat who immediately undid Governor Fortuno’s good government programs, and began raising taxes and spending – despite being in the midst of a recession that could not possibly sustain such changes.
The island flipped almost immediately from the “getting better” column to the “getting worse” column, and their problems multiplied by the month.
Two years ago – true to the mindless soul of the modern liberal – Puerto Rico emulated the socialist policies of the European Union, China, and Mexico, by instituting a Value Added Tax (VAT) for the first time.
Unlike the national sales tax idea we sometimes consider on the mainland – known as the FAIR tax – a VAT is a labor-intensive business-to-business system of taxes and credits, taxes and credits, as products move through the production process. It is applied to both imports and domestic products, and imposes a huge, onerous management burden on every business touched by it.
In addition to the obvious pain of any tax increase during a flat and suffering economy, the imposition of the VAT added a whole new management obligation to anyone who wanted to do business in Puerto Rico.
Businesses had to hire I.T. experts to retool their computer systems, accounting consultants to redesign their financial systems, teach their purchasing and customer service staffs how to manage this new process on their purchase orders and sales orders, and make the difficult strategic sales decision of how much of this new burden to pass on to customers, and how much to find some way to absorb.
Governor Padilla, of course, didn’t know or care about any of that; he just thought of new revenue, and went for it, utterly upending the way that business is done on the island, and making an already difficult situation far worse.
The imposition of the VAT was not the only problem… Puerto Rico is dependent on the mainland’s economy, and on the global economy too, and with both flat, Puerto Rico was going to have a difficult time, as we all are. But the unsustainable left-wing tax-and-spend policies, and particularly, the new VAT, combined to take a difficult but manageable situation and turn it into bankruptcy.
The Problem-Solvers?
And so who moved in to save the day?
Well, in a painful incarnation of what have long been known to be the ten most destructive words in the English language, the Feds voted to say “I’m from the federal government, and I’m here to help.”
Unfortunately, the prognosis of such a takeover is entirely dependent on who appoints the new managers. Just what kind of people are taking over the utilities, taking over the university, taking over the territorial government, and assuming management of the pension system?
This is the same federal administration – appointed by Barack Obama – that "saved" the auto manufacturers by selling off one automaker to Italy, bankrupting and defrauding half the automakers’ vendors, paying people to destroy perfectly fine used cars with “Cash for Clunkers,” and shuttering half their car dealerships.
It is also the same federal administration – appointed by Barack Obama – that tried to "save" us from a nonexistent energy problem by fighting oil drilling, forbidding further oil exploration, blocking pipeline developments, and terminating the coal industry everywhere they could… and then blowing billions of tax dollars on unsustainable green energy companies, and subsidizing idiotic windmill imports from China.
It is also the same federal administration – appointed by Barack Obama – that addresses the very real worsening crisis of black-on-black violence in our cities by undermining police, cheering on the rioters, and working to set convicted criminals free to rob, rape, maul and murder again.
It is also the same federal administration – appointed by Barack Obama – that addresses the nightmarish problem of islamofascist violence in the middle east and jihadist terror worldwide by siding with terrorists (the Muslim Brotherhood, Hamas, the Iranian mullahs, Erdogan in Turkey) while opposing every courageous effort to fight the terrorists (the Green Revolution in Iran, the el-Sisi Administration in Egypt).
For eight long and painful years, Obama policies – and Obama appointees – have been utterly destructive across the United States and across the world.
And with his protégé and partner, Hillary Clinton, as his likely successor, all these problems can be expected to get worse in January. She and her runningmate, Tim Kaine, have promised to continue the Obama policy prescription in virtually every way (just check her campaign website; it’s all there in black and white).
With this administration's track record of solving problems, I weep for Puerto Rico.
Copyright 2016 John F. Di Leo
John F. Di Leo is a Chicagoland-based Customs broker and international trade compliance trainer, writer, actor, and father of three. His columns are regularly found in Illinois Review.
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