The Economic Case for Freeing Puerto Rico

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By Javier A. Hernández and Alberto Medina

The debate over Puerto Rico’s status remains where it has been for decades—stuck in the mud. Few people expect that either of the two bills in Congress addressing the issue—the Puerto Rico Statehood Admission Act and the Puerto Rico Self-Determination Act—will pass the House, much less the Senate.

The U.S. government seems content to ignore the slim majority of voters—though a minority of the electorate—who chose statehood in a 2020 referendum. Meanwhile, American politicians on both sides of the aisle either offer lip service to statehood, even as they know it’s politically impossible, or steer clear from the issue entirely, thereby upholding the status quo through their inaction.

That cannot continue.

Puerto Rico’s colonial condition is unjust and harmful to Puerto Ricans and a stain on America’s democratic values. It’s time for both Republicans and Democrats to talk seriously about independence, which is not only a moral imperative that respects Puerto Rico’s nationhood, but can also be a bipartisan win-win in U.S. politics. 

The old line is that Puerto Ricans don’t want independence, but that’s changing fast. In the 2020 elections, the gubernatorial candidate from the Puerto Rican Independence Party received historic support, and various other pro-sovereignty candidates across different parties were elected to Puerto Rico’s legislature.

In a 2021 Data for Progress poll, more than one-in-five Puerto Rico residents chose independence or sovereignty with a compact of free association, and in a ranked-choice vote scenario, support for free association rose to 33 percent. In a 2020 poll of Puerto Ricans in the U.S. by the Center for American Progress, 28 percent chose independence or free association, compared to 30 percent who chose statehood.

This base of support for sovereignty will only grow if the United States does what it has so far refused to do during its 124-year rule of Puerto Rico: put a serious plan for economic transition to independence on the table. Such a plan would allay the fears of Puerto Ricans who imagine sovereignty might lead to economic collapse, while benefitting both Democrats and Republicans now and in the long term. 

There’s precedent. In 1989, Senator J. Bennett Johnston of Louisiana introduced a bill, S.712, which would have forced the federal government to declare “its intention to guarantee all necessary conditions for a rational and mutually advantageous transition before and after independence.” Such a process would ensure the U.S. has a strong ally in the Caribbean and Latin America—instead of a shameful colony—and even the most generous transition would save the U.S. billions in the coming decades. 

Take a hypothetical 30-year economic transition plan. According to the 2019 Economic Report of the Puerto Rico Planning Board, federal spending and transfers to Puerto Rico (which include federal aid grants, accrued federal transfers, and other federal expenditures) total approximately $33 billion a year. Let’s round down to $30 billion to make the math easier. Over three decades, that’s nearly $1 trillion from American taxpayers. 

A 30-year transition plan in which, each year, the U.S. reduces its expenditures to Puerto Rico’s coffers (given through block grants) by $1 billion per year would be attractive to both Puerto Ricans and Americans. Puerto Rico would receive more than $450 billion from the United States over three decades, providing ample time for the new sources of national revenue available to a sovereign Puerto Rico to drive economic growth and development. 

At the same time, the United States would save more than $400 billion compared to the status quo. The savings would be even greater compared to statehood, which would cost the U.S. Treasury billions more—that alone would be incentive enough for many U.S. politicians. But there are other reasons for both Democrats and Republicans to favor such an approach.

Liberals and progressives could rightfully celebrate that they’re liberating a nation from colonial rule and generously setting people of color on a path to future prosperity. Conservatives would cheer the spending cuts and welcome Puerto Rico statehood being permanently off the table, which most believe would threaten their electoral prospects. It’s a win-win for both parties and both nations.

Courtesy of Javier A. Hernández

Neither Americans nor Puerto Ricans should want permanent dependence on the United States. But Puerto Rico deserves a head start to compensate for 124 years of colonial rule and wealth extraction while we leave behind a failed colonial economic model and begin to generate national revenues, access global markets, and establish a strong production and export-based national economy. 

According to estimates and economic projections in Puerto Rico: The Economic Case for Sovereignty, an independent Puerto Rico with only a robust customs system at all ports of entry and a competitive 15 percent tax on multinational corporations—a tax rate defended by the United States overseas—would be able to generate $17.6 billion in revenues, which is almost double Puerto Rico’s current operating budget of $9 billion. The detailed economic development plan in this book shows how an independent Puerto Rico could potentially generate between 55 and 63 billion dollars in annual revenues.

Outside of the colonial model, the opportunities for real economic growth and development for Puerto Rico are there. 

It’s time to reframe the discussion about Puerto Rico’s status on both the island and the United States—and to add some-needed dollars and cents to the conversation. The U.S. cannot continue to have colonies in the 21st century. Instead, it must partner with Puerto Ricans in a meaningful process of deliberation and negotiation toward a transition to the political condition that Americans themselves fought and died for: freedom from colonialism and national sovereignty. 

***

Javier A. Hernández is a Puerto Rican entrepreneur, writer, author, linguist, and pro-sovereignty advocate based in New Jersey and Puerto Rico. He is the author of “PREXIT: Forging Puerto Rico’s Path to Sovereignty”; and “Puerto Rico: The Economic Case for Sovereignty”. He is the founder of Taller Acción Patriótica and a member of VAMOS and Boricuas Unidos en la Diáspora. Twitter: @PRexitBook 

Alberto Medina is a writer, editor, and communications specialist, and advocate for Puerto Rican independence based in Denver, CO. He is a member of Boricuas Unidos en la Diáspora. Twitter: @AlbertoMedinaPR

 

Featured image: A view of Puerto Rico from the International Space Station (NASA’s Marshall Space Flight Center/CC BY-NC 2.0)

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