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Status and Economy

An address by Senator Kenneth D. McClintock


Americans for Puerto Rican Statehood

APRIL 4, 2003
Copyright © 2003
PUERTO RICO HERALD. All rights reserved. 

First of all, I would like to thank the organizers for inviting me to address you today. Having attended the initial social event that led to the creation of this association, I am pleased to see how it has grown over time and how many of you have recognized the need to remain abreast of the issues affecting Puerto Rico and the role you can play in the nation’s capital to address these issues.

For over six months, we’ve been commemorating the fiftieth anniversary of the Constitution of Puerto Rico, fifty years during which most Puerto Ricans have been led to believe that their political relationship changed and that we enjoy a unique political status conveniently called estado libre asociado in Spanish and an equally conveniently opaque commonwealth in English.

I believe, as most leaders supporting statehood or independence believe, that commonwealth status does not exist but in the minds of its alleged creators, and anyone who has any doubts about that can have me invited again to discuss that sole issue for a couple of hours.

I also believe that our current political status, however you may wish to call it, has denied Puerto Rico the levels of economic prosperity it would have otherwise enjoyed.

Under the present relationship, Puerto Rico had 50% the per capita income of the poorest state in 1952, as well as a third the national per capita income. Fifty years later, we remain dead in our tracks, with exactly the same per capita indices.

Under the present relationship, we’ve been led to believe that we enjoy fiscal autonomy and we’ve been led to build our economic policies in reliance of that alleged fiscal autonomy.

The truth is that we have no more fiscal autonomy than any state of the Union.

The Federal Relations Act states that "….That hereafter all taxes collected under the internal revenue laws of the United States on articles produced in Puerto Rico and transported to the United States, or consumed in the Island shall be covered into the Treasury of Puerto Rico.". Based on that language, the Federal government "covered over" to the Puerto Rico Treasury the net revenue arising from the federal tax on rum shipments. In 1982, however, when the rum tax was raised from $10.50 to $13.50, the Federal government only covered over $2.75 of the three dollar increase, in direct violation of the Federal Relations Act. If there truly were fiscal autonomy, if that Act truly were a bilateral pact, any Commonwealth government, especially the Hernandez Colon and Calderon administrations, could have sued the US Treasury for the over $100 million in rum taxes "illegally" retained. The fact that they’ve never dared file such a suit constitutes an implicit admission that they know that such a bilateral pact or fiscal autonomy does not truly exist.

Other examples of the absence of fiscal autonomy include the imposition of payroll tax increases, and the frequent changes in federal corporate tax policy applicable to Puerto Rico known as Sections 901, 931, 936, 956 and 30A of the federal Internal Revenue Code, without Puerto Rico’s consent.

However, the successful insistence by commonwealthers that fiscal autonomy does exist has skewered not only political debate but the formulation of economic policy in Puerto Rico, leading us to rely more on the economics of exclusion than on the creation of an economy of inclusion.

Because we’ve been led to believe that we are unique and different, we see ourselves competing with Singapore, Ireland, Costa Rica and the Dominican Republic, rather than with Alabama, Michigan or North Carolina. Because we feel unaccountable to anyone, we feel free to add red tape upon red tape to entagle any investor interested in taking a look at business opportunities in Puerto Rico. Because we have to defend our (quote-unquote) "national" patrimony against foreigners, a.k.a. fellow Americans, we insist on maintaining a highly centralized, semi socialistic, rigidly regulated society and economy. Because we feel the need to defend the fiscal autonomy we think we have, we talk more about all we could do if we had more authority to negotiate trade agreements, than we ever do to expand local businesses current capacity to export products off-island, to the mainland, to the Caribbean or to foreign markets.

During Governor Rossello’s first two terms, we were sucessful in jarring some of the people’s misconceptions and putting our economy on the right course, but only political status change will rid Puerto Rico of the exclusionary mindset that keeps it from discovering and exploiting fully the trade and economic capacities we now have and those that we could have under statehood.

The per capita gap that has existed for over 50 years between Puerto Rico and the poorest state, between Puerto Rico and the nation as a whole, will begin to close only when we can significantly increase our rate of growth beyond the national growth rate.

How will statehood make that happen?

First of all, after 44 years since the last admission, people seem to have forgotten the enormous impact that such an event has on the nation. Every Star-Spangled-Banner on every flagpost in front of every school, post office and public builnding in America must be replaced. The headlines that admission into the Union generates an unimaginable amount of free, positive publicity for the new member of the family. In 1984, for example, Gov. George Ariyoshi estimated that admission had generated over $1 billion in free publicity for Hawaii during the first 25 years of statehood. That’s the equivalent of all the blockbuster Super Bowl ads, several years in a row!

The arrival of that new child into the family generates an enormous curiosity to meet and know that new family member. In Hawaii, that meant an 800% increase in hotel rooms during the first 25 years of statehood, at a time when non-state Puerto Rico saw its hotel room inventory grow by only 60%.

During the years before and after its admission, all things Hawaiian became the object of national fascination, or do you think that the timing of hula hoops, ukuleles, Hawaiian music, Hawaiian shirts, leis, Annette Funicello and Elvis Presly films in Hawaii, and Hawaii Five-Oh were mere coincidences of the late ‘50’s and early ‘60’s?

Suddenly, as a territory is admitted, it ceases to be treated as "foreign". Major corporations begin to treat it as part of its domestic market and are willing to invest in it as if it finally were part of the United States.

Consumers, finally cognizant of the fact that they are full-fledged American citizens, start demanding the range of consumer goods that, sometimes, in Puerto Rico we only see on TV.

Rather than seek trade agreement negotiation authority, under statehood we could have two US Trade Representatives carrying out language in international trade agreements to boost local industry.

As citizens begin voting in Presidential and Congressional elections we would truly begin to flex our political muscle. It is said that in 1980, Governor Romero Barcelo didn’t endorse President Carter’s reelection bid until he signed into law the 10.35 mile maritime jurisdiction that four other Governors had failed to obtain---Munoz Marin, Sanchez Vilella, Ferre and Hernandez Colon, and all Jimmy Carter got in exchange was a handful of delegate votes.

With statehood, Presidential candidates would have to visit Puerto Rico, campaign among us, and make specific promises.

Upon election, they would have to visit Puerto Rico, something that essentially has not happened in 42 years, and fulfill their campaign commitments.

By electing two Senators and six Representatives, we could aspire to have our own Robert Byrd, or at least our own Jose Serrano, who just last week was being criticized for bringing the bacon home to his district.

Puerto Rico has been fasting on a bacon-free diet for over 104 years and Puerto Rico’s economy has suffered accordingly.

But way beyond what Puerto Rico can get is what Puerto Rico could give.

Full Medicare reimbursements and full Medicaid funding would turn Puerto Rico into the Medical Center of the Caribbean, attracting tens of thousand of Latin American patients seeking US-quality healthcare in their own language.

The additional Federal funding that Puerto Rico’s institutions of higher learning, especially UPR, would receive, would attract thousands of well-to-do Latin American college students interested in a truly bilingual, bicultural, US-accredited college education. As these graduates return to assume prominent roles in the public and private sectors of their countries, Puerto Rico’s influence as a bridge between United States businesses and government with Latin America’s public and private sector would grow.

The increased perception that Puerto Rico is a permanent part of the US would certainly help local financial institutions capture a larger share of Latin business as economic ties between north and south grow under the free trade agreements.

These roles will not fully develop as long as Puerto Rico doesn’t shed its exclusionary mentality, as long as we don’t share in full, automatic, federal funding, as long as we don’t strive to exploit and build upon the benefits that being a part of the United States represents.

It is clear to me, and we have to work hard that it may someday be clear to all Puerto Ricans, that statehood is an indispensable requirement for Puerto Rico to truly grow ecnomically.

As well placed professionals, in and out of government, you have a role to play in our quest to trade in one Resident Commissioner for two Senators and six congressman, in our quest to guarantee Puerto Ricans a political status that doesn’t force them out of Puerto Rico for economic reasons.

Thank you.

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