Puerto Rico: What real reform looks like

As the Republican primary drags on, the candidates will face primaries in the U.S. island territories in the coming weeks. In Puerto Rico, 23 delegates are at stake. While Puerto Rico often doesn’t receive much coverage in U.S. news outlets, the case of government reform there provides a valuable case study that American governors seeking to reduce the size of state governments should note. Since taking office in 2009, Governor Luis Fortuño has led the territory in reducing the number of employees by nearly 16 percent.

Source: Bureau of Labor Statistics

While Puerto Rico has been hit hard by the economic recession and struggles with a current unemployment rate of 16 percent, Fortuño has made the difficult decisions necessary to preserve the territory’s ability to borrow money and to resume on-time payments to government suppliers and employees. In this Reason TV video, he explains that he had to borrow to meet payroll his first month in office, but succeeded in bringing its bond rating back from the brink of junk status.

In his work with government streamlining efforts in Puerto Rico, Mercatus’ Maurice McTigue stressed the importance of of shrinking the size of government relative to the economy. Any elected official can attest that the process of achieving these changing growth rates is painful, but Fortuño is in the process of leading just that sort of change:

Source: Government Development Bank of Puerto Rico

The lesson to draw from Puerto Rico is that an important reason to avoid unsustainable levels of government spending is to avoid the pain of cutbacks once a government gets to a point where spending cuts are no longer an option. In March, 2011, Standard & Poor’s raised Puerto Rico’s bond rating for the first time in 28 years, marking an objective change in confidence regarding the island’s economic prospects.

4 thoughts on “Puerto Rico: What real reform looks like

  1. Txscrappy56

    Hey Washington D.C. take a lesson here and start cutting the fat of and get us lean and mean again.  We have to get back in good financial shape and right now we are still sucking down junk food and being lazy.  I am so sure there are a few thousand government employees that can stand to lose their useless or redundant job.  As Larry the Cable Guy says, “Git ‘er Dun.”

  2. prado4587

    Why do the charts end in 2010? Commonwealth government employment increased in 2011. Commonwealth tax revenues increased last year due largely to a new excise tax on foreign manufacturing companies.

    1. Emily Washington

      Thanks for the comment. In this case the data series was limited by the GDP data that I was using that only went through 2010. On your note I will look into recent policies that may have reversed these trends.

  3. Pingback: Puerto Rico Secretary of State on Government Reform

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