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Puerto Rico: Statehood Would Boost Federal Spending on Public Aid

By: Contributor - Apr 2, 2014, 10:50 am
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A new GAO report shows spending on federal programs would increase by around US$5 billions, if Puerto Rico were the 51st state. Source: Florida Watchdog.

A new report from the Government Accountability Office has confirmed what fiscally conservative critics had assumed: ff Puerto Rico becomes a US state, federal spending will soar on public aid like Medicaid, Medicare, and the Supplemental Nutrition Assistance Program.

Federal spending would likely increase by at least US$5 billion.

Resident Commissioner Pedro Pierluisi says he’s not surprised by the findings.

“Statehood will provide the American citizens in Puerto Rico with full equality and democracy. We do not need a report to reinforce that fact,” he said in a public statement. “The GAO report confirms that statehood will be mutually beneficial for Puerto Rico and the United States as a whole.”

He said equal treatment will improve the quality of life for the people of Puerto Rico and “strengthen our economy” while the federal government benefits from that growth.

But not everyone agrees.

dream-nation“The report is very complicated (to analyze). The numbers are speculative,” said Maria Acosta Cruz, an associate professor at Clark University and author of Dream Nation: Puerto Rican Culture and the Fictions of Independence.

While Cruz agrees that federal assistance payouts would increase, so would corporate taxes, she said. As a result, some businesses would flee the island and “impact the local economy tremendously.”

Nor, Cruz pointed said, does the report take into account Puerto Rico’s public debt.

According to Forbes, that number hovers around $53 billion. Add intergovernmental debt, a grossly underfunded pension and health care obligations, and the figure quickly soars to $160 billion.

To put this into perspective, compare the island’s per-capita income of only $16,560 (in 2010) with Mississippi, one of the United States’ poorest states, with a per-capita income of $31,186 and public debt of $15.4 billion (this year’s number according to USAspending.com.) That makes Puerto Rico seem like an economic rabbit hole.

What Is in the Report 

The GAO report analyzed 29 federal programs, representing 86 percent of federal spending.

Examining 201o figures, the office projected that Medicare spending was $4.5 billion, but adding Puerto Rico to the union could push that number closer to $6 billion. Medicaid spending figures from 2011, likely would have gone from $685 million to upwards of $2 billion. SNAP spending from 2011, which was at around $1.9 billion, also would have climbed to a number closer to $2.6 billion.

The biggest jump would be seen in the Supplemental Security Income program. Spending in a similar program in 2011 was around $24 billion, but had Puerto Rico been another star on the US flag, that number could have reached up to $1.8 billion.

The report also indicates that all sources of federal revenue would also be affected by the change in status. For example, under statehood Puerto Ricans would have to pay federal tax on all their income, and not just that earned outside of Puerto Rico. Even retirement income would change for the islanders, who would likely end up paying more federal income tax on that too.

This article first appeared on FloridaWatchdog.org