Quick comparison: why does Puerto Rico carry so much more public debt than non-U. S. Caribbean islands? $70 billion is a lot. It’s even more for an economy that is not doing so well. If you were to take $70 billion as a percentage of a state’s output, or calculate debt per capita, you would find both of those ratios well above the figures you find for other, non-U. S. Caribbean islands. I can say that confidently, without doing the calculations for Puerto Rico or any other island. That’s how high $70 billion is.
Except for the U. S. Virgin Islands, or USVI. Their per capita debt is even more than Puerto Rico. Why? All these territories have greater access to U. S. credit than non-territories. And they sit within the U. S. regulatory and tax environment. So why should the territories be different from states like Illinois, Massachusetts, New Jersey, or Maryland? If you can defer your obligations till later, why wouldn’t you do it?
Well, one reason you might not run up debts you cannot pay is that doing so is unethical. Why would you want someone else to pay for your own benefits? From the earliest age, we learn, ‘Pay your own way.’ ‘Save for the future.’ ‘A penny saved is a penny earned.’ ‘Neither a borrower nor a lender be.’
Yet when you participate in an economic system where no one cares about these ideas, you start to think you’re a sucker if you don’t go along. Do you think people who defrauded U. S. financial markets during the Great Recession’s run-up went to the office one day and said, “Time to become a criminal. You’ll see some truly illegal shit go down now.”? No, they thought, “Time to make some money on real estate, like everyone else.”
That’s how culture and institutions work. You can’t say the governor of Massachusetts is a crook because his state carries so much debt. In that way, comparisons to the Great Recession are not valid. Where they are valid is that no one is in a position to stop the growth of debt, and no one even wants to. ‘Something will happen, something will come along to save us.’ ‘Restructure’ is the magic word. ‘Write off’ is even better. Creditors can afford the loss.
Let’s see what happens when the United States wants to start another war, and no one wants to pay for it. Let’s see as well what happens when a hurricane destroys an island, and relief supplies pile up, undistributed, due to rules, lack of funds, bureaucratic inertia, and other factors that make working within the U. S. economic system so difficult.