The Business Section of today's Sunday New York Times has a very long article on the situation in Puerto Rico, headlined "A Surreal Life On The Precipice In Puerto Rico." For those who haven't been following the situation, Puerto Rico has gotten itself into a situation of a way unsustainable debt load (over $70 billion for a population of only about 3.5 million with a per capital income only about half that of Mississippi). On June 30 the feds approved a quasi-bankruptcy law for Puerto Rico, by which it can restructure its debts under the supervision of a federally-appointed control board. The next day, July 1, Puerto Rico defaulted on a debt service payment of $2 billion, with lots more defaults to follow. The Times article reports on how things are going down there amidst the big debt crisis.
In something unusual for Pravda, the article reports more or less straight on the end game for a jurisdiction that has followed all the official prescriptions of Krugmanomics -- i.e., take on all the debt anyone will lend to you and use the money for blowout spending programs thought to "grow the economy" and help the poor. Here's the short version of what happened: the economy didn't grow, the poor are still poor, taxes went up beyond what the economy could support, and much economic activity was either driven off the island or underground. Oh, and the debt can't be repaid.
And here's the most remarkable part about this article: It reports more or less honestly on the pervasive culture of corruption and stealing that has been brought about by all the government (federal and local) handout programs in Puerto Rico. I say this is remarkable because back here in New York Pravda has what can only be an absolute rule that prohibits any mention of the pervasive corruption in the handout programs in its own home jurisdiction of Manhattan, where we are supposed to believe that close to 300,000 people live in "poverty" in the richest county in the country despite tens of billions of dollars of annual federal, state and local handouts supposedly designed to fix the problem. Anyway, contrast that to this reporting on Puerto Rico.
For example, we are introduced to Dalia Ramos, a local Spanish teacher who lives in a public housing project in Puerto Rico which she is "dying" to leave. Why? Because of "the crime and a culture of cheating." Tell us about the "culture of cheating" Dalia:
The projects were built to house the working poor, like [Ms. Ramos], but over time they have cultivated a beat-the-system culture, in which working off the books and lying about your income means getting more money from Washington. “I have all these people around me who don’t pay anything,” she says. “They just hang out.”
Ms. Ramos recounts to the Times reporter that many of her neighbors not only pay no rent at all to live in the project, but have what they call "negative rent" -- where the government actually pays the tenant to live in the apartment. How could that possibly happen? Easy! First, when asked, a tenant can simply say that his or her income is zero:
[P]eople lie about their incomes, seeing it as the only way to protect themselves. Federal Housing and Urban Development records say that 36 percent of the families in Puerto Rico’s housing projects have incomes of zero.
And, of course, the geniuses from HUD take the word of the tenants as to what their income is, and proceed to calculate the rent without the slightest hint of skepticism. Now, here's how your rent is calculated: You must pay 30% of your income, but you are entitled to a utility allowance of approximately $65 per month. You say your income is zero? Then you owe nothing, plus you are entitled to a $65 check! And finally, why bother to pay the $65 over to the electric company?
Some people pocket the money and stiff the Electric Power Authority, a government monopoly with a bad track record for bill collections.
Puerto Rico has just in the last month embarked on its program to restructure things and get a fresh start. Will they make a dent in the culture of pervasive corruption and cheating described in this article? That kind of culture is a very hard thing to break.
Meanwhile, back here on the mainland, we don't have any comparable pervasive corruption and cheating in our handout programs, do we? Well, not that anyone will report on as such. But what we do have is a situation of gradual changes in the food stamp program that seem to be leading to some ugly revelations, like when you turn over a rock and find some creepy bugs crawling around. As you may know, during the recent recession, the eligibility requirements for food stamps were loosened to remove the requirement that able-bodied adults without children needed to work to receive the benefit. But more recently, the work requirements for childless able-bodied adults have gradually been reinstated, at least in certain states. From the Daily Signal on August 1, here are the results in three states that reinstated work requirements:
Maine, one of the most proactive states in reinstating work requirements for food stamps, saw its caseload of able-bodied adults without dependents decrease by 80 percent within just a few months after re-establishing the work requirement. Kansas has experienced similar results, seeing its caseload decline by 75 percent. Accompanying the decline in caseload has been an increase in employment and earnings for able-bodied adults without dependents. . . . Indiana reinstated work requirements in July 2015. Six months after reinstating these requirements, the state’s caseload of able-bodied adults without dependents decreased by 68 percent.
Now, one way of looking at this is that people who were not previously required to work went out and got jobs for the first time. Sure. I'm sorry, but far more likely is that most of these people were working all along and just not reporting it. Once they were required to report the job in order to continue the benefit, they reported the job.
Meanwhile, one of the things that everybody seems to be worrying about these days is that the economy has gone into permanent slow-growth mode. The current recovery is the most sluggish since World War II, and "growth" in the most recent reported quarter was a paltry 1.2%. In considering the various factors that might have brought about such results -- from regulatory explosions, to suppression of fossil fuels, to high taxes, to Obamacare, and plenty more -- don't forget about the effect of handout programs in causing pervasive cheating on the reporting of income. How much effect does such cheating have on the numbers for things like size and growth of the overall economy? Nobody knows of course. Once cheating becomes pervasive, the government numbers become worthless.