This year the 3.8 million U.S. citizens of Puerto Rican and their mainland counterparts mark the centennial of the Spanish-American War in which the United States armed forces under the command of General Nelson A. Miles captured the island and eliminated the last vestige of European colonial power from the Western Hemisphere. To be sure, from the date of the landing, July 25, 1898, the subsequent cession of Puerto Rico to the United States under the Treaty of Paris and on through 100 years of American administration great changes have occurred to the island and to it inhabitants, not the least of which has been the granting of US citizenship.

Yet, to the island’s residents, along with over 2.5 million other Puerto Ricans who have migrated to the mainland, and the American people residing in the 50 states the centenary is viewed with decidedly mixed feelings: celebrated, tolerated, berated or denigrated depending upon which side of the status issue one stands or whether one holds the view that one colonial power was merely supplanted by another.

Few can argue with Puerto Rico’s economic and social progress under the U.S. flag or the implementation of democratic institutions, the adherence to the U.S. Constitution and the commitment of Puerto Rico’s youth, over 200,000 strong, who have defended American values abroad in every war and conflagration since WW I. No more loyal and selfless American citizens can be found under the Stars and Stripes.

Nonetheless, almost no one on the island is totally at peace with Puerto Rico’s current status in the American firmament. After all, the island exists in a state of limbo. After more than four centuries of Spanish rule, Puerto Rico traded one master for another, a more benevolent one to be sure.

Granted limited self-rule by Congress over its internal affairs in the early 1950’s, Puerto Rico remains a territorial appendage of the United States subject to the plenary powers of that same Congress under the Constitution’s Territorial Clause (Art. IV, Sec. 3, Cl. 2 "The Congress shall have power to dispose of and make all needful rules and regulations respecting the Territory or other property belonging to the United States.").

Its U.S. citizens have no voting representation in the national legislature that determines the rules that guide their daily lives, lack the participation in presidential elections that determines the commander-in-chief who sends them into battle and are not fully protected by the very constitution they have given their lives to defend.

Economically, the island’s growth under territorial commonwealth status has lagged the fifty states, failing to fulfill the promises upon which that status was urged.

While Puerto Rico is truly a model for prosperity as measured against the rest of the Caribbean and Latin America, serious observers dismiss such comparisons as inappropriate. Puerto Rico, they argue, as part of the United States must be measured by how well it stacks up against the fifty states. With less than half the per capita income of the poorest state, Mississippi, one-third the national average, and twice the mainland U.S. unemployment rate, the island’s prosperity pales in comparison to the American dream pursued stateside.

If American intentions are assumed to have been idealistic and the subsequent 100 year administration of the island benign or beneficial, how did Puerto Rico and its American citizens evolve to the present uneasy political status marked by incomplete and inchoate constitutional rights and economic stagnation?

From the outset, 1898 to be exact, Puerto Rico was not treated like other territories either annexed, conquered, bought or seized by the expanding United States following the doctrine of Manifest Destiny. Under the terms of the Treaty of Paris, December 10, 1898, "The civil rights and political status of the native inhabitants of the territories hereby ceded to the United States shall be determined by Congress." (Article IX, Para. 2), in which Puerto Rico, the Philippines and Guam were annexed by the United States, Congress retained the authority to determine which constitutional rights and duties would apply to the residents of these new possessions.

Subsequently, a series of Supreme Court decisions expanding on the Treaty’s implications, popularly known as the Insular Cases, further delineated the differences between these territorial war spoils and the preceding geographic acquisitions of the new republic.

The seminal case was Downes v. Bidwell, 182 US 244 (1901), in which the Supreme Court held that the Treaty of Paris did not provide for the incorporation of Puerto Rico into the U.S. An incorporated territory which is "to be treated in all respects as part of the United States" is different from an unincorporated territory which is not recognized "as an integral part of the United States," according to Justice White's concurring opinion which is still cited in territorial matters as the authority on the issue of the constitutional status of the territories.

In essence, the court decisions held that Puerto Rico (the Philippines and Guam, too, by extension) had not been incorporated into the United States upon its acquisition as had previous territorial expansions. Therefore, how it was to be treated was both different and novel. How different, how novel?

The significance of these decisions and the answers to these questions would have far reaching consequences that, to this day, still resonate loudly across the island and in the halls of Congress. For the Supreme Court decided that as an "unincorporated territory" Puerto Rico’s residents did not accede to U.S. citizenship upon annexation nor was the territory set on the path to eventual statehood by such action.

In essence, the U.S Constitution, as the Treaty of Paris proclaimed, applied to Puerto Rico’s residents as Congress so decided (except for certain basic fundamental rights later defined) and Congress reserved plenary or full powers over Puerto Rico under the Constitution’s Territorial Clause. This meant that Puerto Rico’s future status was in the hands of Congress, the rights of its residents determined by congressional indulgence and its economic development opportunities forever clouded by political and legal uncertainty.

These basic legal and juridical tenets continue to permeate and rule Puerto Rican life, politics and economics over the years even though the Jones Act granted Puerto Ricans statutory U.S. citizenship on March 2, 1917, a popularly elected governor was provided for in 1948 and an island constitution governing the terms of Puerto Rico domestic self-rule was approved by the U.S. Congress and affirmed by the residents of the island in 1952.

American citizenship means one thing in Puerto Rico and another on the mainland. Stateside, citizens of Puerto Rican descent can vote for Members of Congress and the president but not in Puerto Rico. Similarly, Americans moving to the island become disenfranchised vis--vis federal elections.

Federal courts upheld, unerringly, congressional, regulatory, executive and judicial actions that discriminated between U.S. citizens residing on the island an in the fifty states. Federal programs like Medicaid and food stamps can be capped at funding levels lower than in the states while others like Supplemental Security Income (SSI) simply are not extended to the island’s residents or to mainland citizens moving to Puerto Rico.

Proponents of the new commonwealth structure once hopeful of expanding that concept to encompass even greater self-rule felt the full force of the Insular Cases ramifications on their efforts. Time and time again Congress rebuffed attempts to expand, enhance, extend, perfect and fulfill the commonwealth status.

Simultaneously, as we have seen, Puerto Rico felt the brunt of unilateral federal actions that legally discriminated against the island and its U.S. citizens putting to rest the notion that a bi-lateral compact between the United States and Puerto Rico had created the commonwealth entity and that such an arrangement could be altered only by the mutual consent of both parties.

Obviously, and oblivious to such notions, Congress, the executive branch and the courts acted on their own and with complete disregard of any possible consequences to affect the lives of Puerto Ricans and the island’s affairs.

Meanwhile, on the economic front, Puerto Rico’s territorial status opened the door for Congress to provide tax incentives for American corporations that would have otherwise been unconstitutional in the fifty states under the Uniformity Clause. American corporations operating on the island could shield the earnings associated from such activities from federal income taxation. Using these tax incentives, labor intensive industries boosted the Puerto Rican economy creating thousands of new jobs.

However, capitol intensive industries, particularly pharmaceutical manufacturers, began in the 1970’s to leverage these tax incentives under new a Section 936 of the Internal Revenue Code. They transferred patents on proprietary drugs to island subsidiaries and constructed a multitude of manufacturing facilities to produce them.. While few incremental jobs were created, huge tax credits were generated shielding up to $4 billion a year from federal taxation, some $70 billion over the last 20 plus years. Most of these tax savings were repatriated to the mainland, little if any reinvested locally.

Equally ominous, Puerto Rico’s political status limbo did nothing to generate capital infusions from either the states (other than 936 tax related opportunities) or abroad. Unsure of the rules of the game, after all Congress could unilaterally affect Puerto Rico’s economy by changing tax and tax incentive laws and its political status, investors found little comfort or confidence in the unknown.

Making matters worse, local investors shared the skepticism of foreign and stateside counterparts. Puerto Rico experienced a net outflow of investment totaling $2.232 billion between 1981 and 1994.

If that was not enough, Puerto Rico’s governments did little to offer alternative economic development schemes independent of the tax gimmicks that lured 936 companies to the island. Section 936 became habit forming, stifling economic planning processes that might have otherwise provided growth opportunities in the absence of that which was not being delivered by this tax gimmick.

The result? After experiencing strong economic growth approaching that experienced by the states during the 1950’s and 1960’s Puerto Rico’s economy stagnated from the mid 1970’s on, actually falling behind the pace set nationally.

Because, and as a natural result, of the frustration experienced by commonwealth’s supporters to ‘build on’ the limited self-rule granted in 1952, the erosion of Puerto Rico’s funding parity with the states and economic stagnation caused by dependence on non-productive tax gimmicks, alternative status options, particularly statehood, began to draw larger and larger followings.

Commonwealth proponents who enjoyed a 76.5 percent vote majority in the 1952 referendum approving the new Puerto Rico constitution, saw their mandate dropping to 60 percent to 39 percent for statehood and 1 percent for independence in the 1967 status plebiscite. Finally, they lost their majority support in the last such plebiscite in 1993 when only a 2 percentage margin of 48.6 percent to 46.3 percent separated commonwealth from statehood with another 5.1 percent going for independence.

Even the 1993 plebiscite results may over state the case and support for the island’s territorial status quo. Each of the island’s three status based parties defined the options they espoused as they would appear on the ballot. Both the New Progressive Party ("PNP") and the Puerto Rico independence Party ("PIP") stuck pretty much with conventional definitions that followed either the United States state model or the acceptable international standards for an independent country.

However, the Popular Democratic Party ("PDP"), ignoring judicial, legal and regulatory actions and history to the contrary, reiterated its belief in the bi-lateral nature of the commonwealth law prohibiting changes in the U.S.-Puerto Rico relationship without mutual approval, defined its option as going beyond statutory U.S. citizenship to constitutionally guaranteeing its irrevocability, the full funding of all federal programs equal to the states and, finally, tariff protections for agricultural products. All without the obligation to pay federal taxes!

This "have it both ways" winning status formula "purporting to combine in one status the primary benefits of both separate sovereignty and statehood without the primary burdens of either" naturally met with hostility and derision in Congress where it was called politically, economically and constitutionally non-viable.

As a result, Puerto Rico’s status dilemma remains up in the air. Reduced to a thin, if dubiously attained plurality, commonwealth faces an uncertain future. On the heels of House passage of the Young Bill , the US-Puerto Rico Political Status Act ("H.R. 856") and the Senate’s companion legislation, S. 472, providing for Puerto Rico self-determination through a 1998 non-binding status plebiscite, both the statehood and independence option proponents see an opportunity to finally break the century old stalemate.

They believe that the game has changed and that commonwealth’s day are numbered. Unlike the 1993 plebiscite, Congress will, for the first time define the status options that will appear on a 1998 plebiscite if H.R. 856 (and S. 472) is enacted into law. And, the definitions have been crafted to be constitutionally and politically capable of implementation.

No ‘pie-in-the-sky’ commonwealth definition will appear on the ballot. Taking cues from the courts and the constitution, Congress has defined commonwealth to fit within the restrictions of the Treaty of Paris, the Insular Cases, the Territorial Clause, and the Constitution. In effect, voters will be offered the opportunity to retain the unincorporated territorial status quo, with statutory U.S. citizenship, at least for another ten years until a new plebiscite on the island’s status is called, if neither statehood nor independence receive a majority in 1998.

Statehood is again defined as that which is enjoyed by the citizens of the fifty states. Congressional representation, a vote for the president, constitutional parity with the citizens of the United States, the obligation to pay federal taxes and the use of English in Federal courts and agencies consistent with requirements among the states are representative components of the statehood definition.

Of paramount importance, the definition includes a guarantee of irrevocable U.S. citizenship. Since Puerto Ricans are statutory citizens (by law, not birth) only statehood can assure that U.S. citizenship can never be revoked.

As the guarantee of irrevocable, U.S. citizenship was a central plank in both the commonwealth and statehood definitions in the 1993 plebiscite, statehood advocates believe that it will again play a key role in the 1998 vote since commonwealth will no longer be able to boast such a promise given its constitutional vulnerability under the Territorial Clause. Since ninety-five percent of Puerto Rico’s voters in a recent poll consider U.S. citizenship very important and only the statehood ballot will offer assurances of its permanence statehood could gain a majority on this one issue alone.

Statehood advocates believe that economics will also play a major role in what they predict will be a clear cut majority win in 1998. Statehood, they contend, will provide the economic stimulus that will grow Puerto Rico’s economy and drive per capita income toward the richer states once Puerto Rico enters the Union.

Statehood would stimulate the Puerto Rico economy to grow 2.2 percent to 3.5 percent faster through full integration with the U.S. economy and political system. This conclusion, based on modern economic growth analysis (convergence theory of economic growth) indicates that less developed regions of an integrated economy catch up with more affluent regions over time.

Fuller integration has enabled states to expand more than 2 percent faster than territories over time. Economic growth in Hawaii, for example almost doubled in the 15 years after statehood and grew even faster than the vibrant U.S. economy.

Since 1940, for example, Mississippi has grown twice as fast as wealthier Northeastern states. It has rapidly narrowed the gap with the rest of the United States and now earns 50 percent as much per capita as the richest state, up from 22 percent in 1940.

To put this theory in perspective, had Puerto Rico become a state instead of a commonwealth, United States citizen’s living on the island would now be making $6,000 more per year simply through greater integration with the U.S. economy (over the full period they would today have been richer by $110,000 per person!). Alternatively, if Puerto Rico had become a state in 1994, real per capita income would grow $1,344 more by the year 2000 than it would under current commonwealth status conditions.

Full integration, or statehood if you will, implies that the political status of an economy affects its growth performance. In this instance, say statehood advocates, the growth predicted from entry into the Union emanates from the perfection of a stable legal system, complete access to the widest market in the world and the end of the uncertainty faced by an investor in the island with respect to the rules of the game.

On the other hand, independence proponent’s hopes rest entirely on a pro-statehood vote prevailing and Congress turning down the subsequent Puerto Rican statehood petition. As recent polls have indicated, widespread skepticism exists on the part of the island electorate with respect to congressional implementation of any of the options receiving a majority vote in the plebiscite. The PIP position is, in theory, not entirely unrealistic.

However, this time around the pollsters may be surprised, this plebiscite is unlike any other held previously on the island. And, although non-binding, the terms under which it is to be held and its auspices may well offer statehood advocates the means to rebut voter skepticism.

Congress, by defining the status options, is telling the people of Puerto Rico what is constitutionally acceptable, what is legally viable. Voters earlier had every reason to be skeptical of congressional implementation in previous ballots when the opposing status parties set the definitions seeking wins for their positions rather than what might be attainable from victory in Washington.

Further, the very failure of commonwealth over and over to expand on its original franchise theory after repeated promises has, assuredly, thickened Puerto Ricans skins preparing them for another inevitable turndown. But, since any enhanced or perfected version of commonwealth will not be before Congress proponents of statehood may well find voters less wary of being stopped at the door.

Finally, in the aftermath of budget cutting and budget balancing Congress and the American people may well be prepared to demand that Puerto Rico pay its own way. Step up to the plate and pay your dues, i.e., federal taxes, or go your own way.

Commonwealth today costs the federal treasury and U.S. taxpayers some $13 billion annually with no corresponding or offsetting federal tax revenues. How long will the American taxpayer put up with this?

Well, under either statehood or independence such a situation will come to a gradual halt if not a screeching end. The case for independence and self-reliance is clear, statehood is another matter.

Under statehood, it is estimated that increased tax revenues will more than offset the increased costs associated with entering the Union. Although federal programs will be fully funded and some newly applicable to Puerto Rico (SSI), about $3.52 billion to $4.12 billion annually in new revenues will accrue to the treasury from the end of the Section 936 tax incentives and the federal taxation in Puerto Rico of non-936 corporations and individuals.

Therefore, estimated reductions in taxpayer’s subsidies to Puerto Rico are in the range of $2.12 billion to $2.72 billion annually. And these numbers do not account for the growth of the Puerto Rican economy as a result of its full integration, economically and politically, into the United States. Such growth would increase federal tax collections eventually reducing, if not wiping out, the full costs of Puerto Rico to the U.S. Treasury.

For example, extending the convergence theory of economic growth to the micro level by measuring the expected impact on per capita income under statehood shows that between the years 2000 and 2025, per capita income will increase from $1,344 to $9,405 annually. Increased federal tax collections on the expanded Puerto Rico economy will be welcomed in Washington and by American taxpayers everywhere.

Meanwhile, the total tax burden of the average resident of a Puerto Rico state will probably remain the same as it is today under commonwealth. Commonwealth tax rates are among the highest in the U.S. mainly to offset the limited funding of federal programs in Puerto Rico as compared to the fifty states. With statehood, funding parity would be established thereby allowing local tax rates to be correspondingly reduced.

Notwithstanding that statehood or independence will or would be cheaper than commonwealth to the American taxpayer, that it is time for the world’s leading proponent of self-determination to provide a process for full self-government for 3.8 million of its disenfranchised citizens or that the economic salvation of Puerto Rico may well rest on changing its current transitory political status to a permanent and reliable investor friendly state or country, the deciding factors in determining whether independence or statehood will prevail may not rest solely with Congress or the voters in Puerto Rico but with the PDP.

Having launched a scorched earth policy demeaning Puerto Rico and raising specious moral, ethnic and economic questions about the island’s suitability for statehood, the PDP could return to such tactics to try and convince the American people that Puerto Rico should not be admitted to the Union if the 1998 plebiscite provides a majority for statehood and that road is undertaken.

Alternatively, last minute attempts to either scuttle or amend the Senate bill, as was unsuccessfully attempted with the Young Bill in the House, so that the Puerto Rican electorate is presented with a fatally flawed statehood or independence alternative may be undertaken to preserve the status quo regardless of its own obvious flaws.

Yet, such tactics are again bound to fail, now or in the long run, as a confluence of events is conspiring to finally resolve Puerto Rico’s identity crisis and provide a permanent solution to the century old question, "What will be the ultimate relationship between the U.S and Puerto Rico?" Having endured 500 years of external administration never or not quite the masters of their own house, Puerto Rico’s U.S. citizens are on the verge of declaring their political and economic self-determination.

America, having managed Puerto Rico’s affairs for 100 years, must now come to grips with its appetite to continue playing the colonial master at an increasing cost in dollars and world moral leadership. A role it can no longer explain away or afford indefinitely must give way to a process that will lead to a self-sufficient self-governing Puerto Rican sovereign nation or a Puerto Rican state as an equal partner in the American dream.

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