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Puerto Ricans Can Feed Themselves without US Gravy

By: Frank Worley-Lopez - Jul 8, 2015, 8:41 am
Independence in Puerto Rico must come with an end to the welfare state.
Independence in Puerto Rico must come with an end to the welfare state. (Sofos)

Español“Anyone who talks of independence for Puerto Rico is crazy.” That’s the impression you’d get reading many of the comments I’ve received over the last few days in response to an article asking a simple question: “When will Puerto Rico celebrate its independence day?”

For most people in Puerto Rico, independence means the Dominican Republic, Haiti, Venezuela, or Cuba. It’s understandable, given that the Puerto Rico Independence Party (PIP) endorses the economic policies of Cuba and Venezuela.

Who wants to endure that? I certainly do not.

One of the major concerns expressed in the comments I received was the question of food and hunger. How would people on the island feed themselves with the loss of US$22 billion in federal aid? The unfortunate reality is that there are about a million people in Puerto Rico who in fact live day to day on federal and local subsidies.

Free housing, food, electricity, schools, and medical insurance coverage are just a few of the benefits they receive. Just like on the US mainland, the welfare state has killed initiative and created an entire class of “professionally” poor.

So, how do you do it? How does the island survive while cutting off the pipeline of funds, especially in light of the fact that those $22 billion per year did not keep the island from nearly going into default with more than $70 billion in debt and more than a $100 billion if you include unfunded liabilities.

The answer is to fundamentally change the way government operates. It means eliminating public-sector unions, cutting spending and regulation, and freeing up the market. However, that is only part of the answer. How do you replace all of that money?

To replace these payments, Puerto Rico must focus on new wealth creation. That is to say, instead of running government based on a “tax and spend” ideology, government should refocus to save and create wealth. It must also transition all of those who are able to work back into the workforce and off the public dole.

That is part of why I developed the concept of “Distributive Capitalism,” which is detailed here, here, and here. In a nutshell, DC starts with free-market capitalism and limited government, and then adds a savings and investment board called a National Trust. The NT saves and invests money on a regular basis to grow a national savings account from which people would receive part of their retirement and other needs.

I say “part” because this system places responsibility for individual well-being where it should be — with the individual. Savings and retirement accounts, which also cover insurance needs like health, life, disability, and unemployment, will keep the money in the hands of the individual.

That way, regardless of which political force comes to power, the government remains constitutionally prohibited from taking your money. No policy change will affect your savings account, which is also constitutionally protected from taxation.

Today, reliance on government programs and pension funds have left many teetering on the edge of economic collapse. Greece, Detroit, and yes, Puerto Rico face a mountain of debt with a significant portion of it coming from responsibilities to public-employee pensions.

In other words, independence means exactly what you make it. If we leave Puerto Rico in the incapable hands of the current ruling political class, then yes, it will be a disaster. If we strike out on our own and decide to do something different, with a focus on long-term financial growth and stability, then Puerto Rico will set the standard for all other small nations to follow.