Officials Negative on Calderon’s "Commonwealth" National Powers Plan

April 26, 2002
Copyright © 2002 THE PUERTO RICO HERALD. All Rights Reserved.

. .. Officials Negative on Calderon’s "Commonwealth" National Powers Plan

The recent statements by Governor Sila Calderon (‘Commonwealth’ party/No national party) regarding her plan to try to establish national government powers for Puerto Rico were not well received by federal officials.

Calderon made the statements in speeches in New Jersey April 11, and in a subsequent interview with a Puerto Rico print newspaper. In the statements, Calderon said that she would name a commission by July 25th to develop proposals to revise the governing arrangement for the territory. The arrangement is popularly known by the name of the local government: "Commonwealth." July 25th is the 50th anniversary of the local government’s constitution.

The statements clarified that the purpose of the "Unity and Consensus Commission" is to gain unprecedented powers for the Commonwealth rather than to determine Puerto Rico’s future political status among options that include U.S. statehood and nationhood. Statehood and nationhood are advocated by the political parties that together win a majority of the vote in Puerto Rico.

Calderon also reiterated that her primary goal is to benefit business activity. She said she would seek powers to enable the Commonwealth to help determine the application of federal laws to Puerto Rico, and to enter into agreements with foreign countries and international organizations. She also said that the federal laws that she would have Puerto Rico exempted from would include immigration laws and the laws requiring that ocean freight shipping between United States ports be on ships that are U.S. built, owned, and crewed.

Although federal officials did not welcome Calderon’s statements, they reacted with various degrees of concern and disbelief. A top aide to the chairman of the House of Representatives committee with lead jurisdiction over territorial matters was the most outspoken. Bill Johnson, Legislative Director to Resources Committee Chairman James Hansen, said the proposals have no chance of passage. Other key congressional aides reacted with sarcasm. On the other hand, federal agency officials were more concerned and alerted superiors to the objectionable proposals. A White House spokeswoman noted that Calderon had not contacted the White House regarding the plan. The spokeswoman also said that the White House would work with "all legitimate authorities" to solve Puerto Rico’s status issue and enable Puerto Rico to obtain "a permanent, decolonizing option."

Calderon’s proposed national lawmaking and international agreements powers for the Commonwealth are incompatible with one another and would require, alternatively, U.S. statehood or a nationhood status.

There is substantial precedent, however, for Calderon’s proposed federal laws exemptions. Two other U.S. territories -- American Samoa and the Commonwealth of the Northern Mariana Islands -- are exempt from federal immigration and ocean shipping laws. And Puerto Rico’s neighbor territory of the U.S. Virgin Islands is exempt from the shipping laws.

However, previous attempts by officials of Calderon’s Commonwealth party and its allies to exempt Puerto Rico from immigration and shipping laws have been rejected by federal officials. Further, the U.S. Senate has passed, and House Democrats have supported, legislation to extend federal immigration laws to the Northern Mariana Islands. Additionally, leaders of the national largest labor union, the AFL-CIO, have advocated extension of the shipping laws to the Virgin Islands.

Calderon was elected by a slight plurality on a platform that called for Puerto Rico to be recognized as a nation but in a permanent union with the U.S. In her platform, Puerto Rico would determine the application of federal laws and entrance into international agreements, while the U.S would grant citizenship and provide both aid to individuals, as at present, as well as funding in the form of a new block grant. Allies of Calderon have suggested that Puerto Rico should be exempt from national minimum wage and environmental laws in addition to immigration and ocean freight laws. Calderon, however, appears to have dropped the idea of a minimum wage law exemption.

In her recent statements, Calderon recognized that the federal government has not approved similar ‘Commonwealth’ proposals in the past, but she said that the powers that she seeks are a question of federal "will" and not just the U.S. Constitution and federal laws. She also suggested that Puerto Rico’s current governing arrangement was a democratic innovation for a Caribbean territory 50 years ago, but it now it lags in terms of democratic rights behind the statuses of other areas in the region.

Acevedo Vila Proposes Pro "Commonwealth" Resolution, Hits Roadblock

Puerto Rico’s sole and non-voting representative to Congress, Resident Commissioner Anibal Acevedo Vila (‘Commonwealth’ party/Democrat), recently tried to engineer congressional approval of a resolution that would have supported his party’s claims regarding the islands’ "Commonwealth" governing arrangement. House Resources Committee Chairman Hansen blocked the bid, however.

Acevedo sought support for the draft resolution contending that it was an appropriate way to commemorate the 50th anniversary of Puerto Rico’s local constitution this coming July 25th. Hansen rejected Acevedo’s proposed language that supported the ‘Commonwealth’ party’s claims regarding the islands’ governing arrangement, but he was willing to have the Resources Committee pass language that would simply commemorate the anniversary of the constitution. Acevedo Vila has not indicated whether he wants such a resolution.

Calderon Proposes Further ‘Concession’ to try to Save 956 Amendment

Representatives of the Calderon Administration have proposed a second concession in an effort to reduce the federal cost of -- and win key congressional support for -- the Governor’s proposal to obtain permanent federal tax reductions for almost all of the profits that companies based in the States ‘repatriate’ from subsidiaries in Puerto Rico. The proposal would amend Section 956 and other provisions of the federal Internal Revenue Code.

The concession came in meetings with the staff of Congress’ Joint Committee on Taxation. The Committee recently estimated that the proposal would cost $32.1 billion over 10-plus years, many times more than the $1.3 billion that Calderon and her lobbyists had been telling Members of Congress it would cost. The findings were a major blow to the proposal’s chances of approval.

The Calderon Administration’s representatives, who have included aides to Committee Members Phil Crane (R-IN) and Charles Rangel (D-NY) and a former top Committee staffer, initially tried to pressure Committee staff to lower the cost estimate. They then tried to convince the Committee to lower it. When those tactics failed, the Calderon representatives offered to eliminate a provision of the proposal that would have enabled the companies to transfer valuable patents and trademarks to the subsidiaries tax-free. The Committee estimated the provision to cost $20.8 billion of the $32.1 billion.

Now, the representatives have offered to phase-in one of the proposal’s two forms of tax breaks. By delaying the full effectiveness of this tax cut, they would delay its cost from the next few years to later years and reduce the cost in the 10-year period of the Joint Tax Committee estimate. (It is important to note that the time that a cost is expected to arise is sometimes a more important consideration to Congress than the total cost itself. Higher costs soon create more of a problem for the federal budget than the same costs later on, when the costs can be planned for or would arise so far in the distance time-wise that the costs are beyond budget planning.)

However, the Calderon representatives’ second concession was made in the tax break that federal officials expect that few companies would use. This provision would enable companies to deduct 85% of the profits from their taxable income. The other tax break would exempt 90% of the profits from taxation — a significantly greater tax break.

Joint Tax Committee staff were said not to be overly impressed with the concession.

Congress Expected to Extend Food Aid for Needy Puerto Ricans

House and Senate negotiators are expected to agree today, April 26, on a bill that would extend the special Nutrition Assistance Program grant that Puerto Rico gets in lieu of the Food Stamps program that provides the needy elsewhere in the nation with a subsidy for food. The Farm Bill would extend both food aid programs and other agriculture programs beginning with federal fiscal year 2003, which begins October 1.

Puerto Rico was taken out of the Food Stamps program and the special grant was created almost two decades ago to lower costs. The Puerto Rico grant, now over $1.3 billion a year and increased annually for inflation, provides only about two-thirds of the assistance amount that Food Stamps would. The cut only applied to Puerto Rico because it did not have votes in Congress to block a proposal of the Reagan Administration that would have created new block grants for the rest of the nation as well.

The new bill will extend the Puerto Rico grant as well as increase the Food Stamps program. Most provisions will remain in effect for six years, although Senate Agriculture Committee Chairman Tom Harkin (D-IA) said he hoped that some would continue for as long as ten years.

Harkin, for over a decade an advocate of phasing Puerto Rico back into the Food Stamps program, led the Senate in including a provision that would have the General Accounting Office study whether the Puerto Rico grant provides adequate aid and would authorize a $50 million increase in the grant if it does not. A similar provision was not included in the House bill.

Resident Commissioner Acevedo Vila has been working for a definite and much greater increase in the Puerto Rico grant. The ‘Commonwealth’ party has long had the goal of increasing the amount of the Puerto Rico grant to be equal to what the Food Stamps program would provide while retaining the greater local flexibility on rules that the Puerto Rico grant provides.

Acevedo Vila Seeks More Welfare Money for the "Americans" of Puerto Rico

Resident Commissioner Acevedo Vila has proposed more welfare funds for the "Americans" of Puerto Rico. The Delegates to the U.S. House of Representatives from the U.S. Virgin Islands and Guam joined him in proposing legislation to increase welfare spending in all three territories. The legislation would exempt aspects of the main federal welfare program, Temporary Assistance for Needy Families (TANF), from the limits (or "caps") on funding in the territories.

Acevedo titled the legislation "A bill to provide access to welfare tools to help Americans get back to work." The title is ironic since Governor Calderon, who handpicked Acevedo for the job, takes pains to say that citizens of the Commonwealth are "Puerto Ricans who are U.S. citizens" and not "Americans."

The funding caps limit program spending in the territories to a fraction of state-like funding, which provides whatever funds are necessary to cover the number of welfare recipients in a state. The cap on Puerto Rico funding limits federal contributions to $107 million a year. It was raised from $79 million by the Clinton Administration’s Welfare Reform. In 1996, the General Accounting Office estimated that the cap provided $100 million less than State-like funding.

The legislation seeks to avoid the caps by exempting specific aspects of the program from the caps rather than to increase the caps. It would exclude the following program elements from the caps: the TANF Supplemental Grant for Population Increases; the TANF Contingency Fund; Child Care Entitlement Funds; Foster Care Payments; and Medicaid Transitional Medical Assistance. Acevedo says that exclusion could mean an additional $61 million a year.

The territorial representatives introduced the bill in the wake of President Bush’s proposal to tighten TANF’s work requirements.

Acevedo’s sponsorship of the legislation is ironic since Governor Calderon said when she was running for governor that she would not seek more welfare funds for Puerto Rico. She made the statement after the Clinton White House and Acevedo’s predecessor, Carlos Romero Barcelo (statehood party/Democrat), announced a proposal to increase the cap on Medicaid spending in Puerto Rico. The legislation introduced by Acevedo and the two other territorial representatives would increase spending for Medicaid for welfare recipients in Puerto Rico and the other territories. The three representatives and the Delegate from American Samoa have also introduced a bill to raise the Medicaid caps in all five territories (the Northern Mariana Islands as well as American Samoa, Guam, the U.S. Virgin Islands, and Puerto Rico).

Poll Buoys Democrats’ House Hopes

A USA TODAY/CNN Gallup poll has buoyed Democratic Party hopes of winning control of the U.S. House of Representatives in this November’s elections. The poll reported that 50% of those surveyed said that they would vote for a Democrat for the House and 43% said that they would vote for a Republican.

Republicans currently outnumber Democrats in the House 222 to 211, with two independents. A shift to a Democratic majority would have a major impact on Puerto Rico issues. Among the most important would be the probable election of reliable Puerto Rico supporter Charles Rangel (D-NY) to the chairmanship of the Ways and Means Committee, which has jurisdiction over tax and Medicare issues, among others. Rangel is a lead sponsor of Governor Calderon’s proposal to amend Section 956 of the federal tax code. He is also the lead sponsor of legislation first proposed by President Clinton that would close 50% of the gap between the rates for Medicare payments for in-patient hospital services in Puerto Rico and the rates for everywhere else.

A shift would also have important implications for the 2004 presidential election. If the Senate remains under Democratic leadership, the shift in the majority of the House would make it almost impossible for President Bush to win major legislative victories in Congress. It would also boost the presidential aspirations of House Minority Leader Richard Gephardt (D).

Republicans reacted to the poll by touting one that they liked better. The NBC/Wall Street Journal survey found that 34% of respondents said they would vote Democratic and 33% said that they would vote Republican -- a virtual tie.

The majority of the Senate -- currently 50 Democrats, 49 Republicans, and one independent -- is also a question in this election. The answer will also help determine President Bush’s legislative accomplishments, and it will affect the presidential candidacy of Majority Leader Tom Daschle and, possibly, other Democrats.

The "Washington Update" appears bi-weekly.

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