Puerto Rico’s Recent Fiscal and Economic History, and The Road Ahead for Puerto Rico’s Hurricane Recovery and Financial Renewal


by James Spiotto


Puerto Rico has suffered the perfect storm of a financial crisis of epic proportions and the devastating effects of Hurricane Maria. This should be a story about the beginning of the financial and operational rebirth of Puerto Rico, and not its end. Puerto Rico has numerous claims as to the cause of its financial woes. In 1996, the Federal Government and U.S. Congress eliminated Section 936 tax credits under the Internal Revenue Code, signed into law by President Bill Clinton to be phased out over a ten-year period ending in 2006. These tax credits encouraged capital-intensive businesses to relocate and stay in Puerto Rico, providing new jobs and economic benefits. Puerto Rico claims it lost billions of dollars over the past decades, due to 50 years of unequal treatment under Medicare and Medicaid, 40 years of unequal treatment under Supplemental Security Income and the Earned Income Tax Credit, and nearly 20 years of unequal treatment under Child Tax Credits. There is, in addition, the constant refrain from Puerto Rico concerning the adverse effects of the Merchant Marine Act of 1920 (the ‘Jones Act’), which results in Puerto Rico imports costing more than double relative to neighboring countries. Further, the future of Puerto Rico will, in a significant part, be determined by the actions of the Federal Government and U.S. Congress to reinvest and rebuilt Puerto Rico.





The United States has a long and proud history of helping others in time of natural disasters to reduce human suffering. A list that is by no means comprehensive illustrates how relief efforts have been fairly standard U.S. practice literally since the beginning of the nation, including a diverse range of nations and conditions.

  • Earthquake in Venezuela during the War of 1812
  • Eruptions in Martinique and St. Vincent in 1902
  • Earthquakes in Sicily and Calabria in 1908
  • Floods in France in 1911
  • The Marshall Plan and rebuilding of Japan after World War II
  • Civil Strife in Cypress in 1964-65
  • Six-Day War in the Middle East in 1967
  • Jordanian conflict of 1970
  • Indian Ocean tsunami in 2004 (14 countries)
  • Earthquake in Haiti in 2010
  • Earthquake, tsunami, and nuclear disaster in Japan in 2011

In addition to these international efforts, relief aid for states over the decades after hurricanes and other natural disasters, as well as efforts to assist for Texas, Louisiana, and Florida after this year’s hurricanes, should add even more compelling motivation for the Federal Government to provide resources for the resurrection and rebuilding of Puerto Rico, a U.S. territory whose inhabitants are U.S. citizens.

The United States Congress has the mandate and power under the Constitution to dispose of and make needful rules and regulations respecting U.S. territories (Article IV, Section 3). Given this country’s history and the constitutional mandate for action, the following articles will explain how Puerto Rico has come to its current state of financial disaster, and the systemic causes and possible cures. Further examination of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), enacted by the U.S. Congress to deal with Puerto Rico’s financial crisis, should work versus how it is actually working, and what can and should the Federal Government do to address the needed relief and rebuilding of Puerto Rico in the aftermath of Hurricane Maria.






Coming Soon – Part I: The Gathering Storm of Puerto Rico’s Financial Distress