Money Down a Hole

John Stossel
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Posted: May 04, 2016 12:01 AM
Money Down a Hole
The Republican and Democratic presidential nominees have been chosen. Ignore the deluded supporters of Bernie Sanders and Ted Cruz. It's over. The odds at ElectionBettingOdds.com make it clear: It will be Donald vs. Hillary.

A closer contest would be: Who will bankrupt America first, Trump or Clinton?

Trump's a contender because he promises a trade war. That's what gave us the Great Depression. Trump claims that China is "raping" America. No, Donald, rape is force. Your proposed tariffs are also force. Trade is voluntary and good. Big difference.

Clinton might bankrupt America first, however, because Democrats promise more regulation and handouts -- free college, free pre-K, higher minimum wage, etc. Similar activist government spending just destroyed Puerto Rico.

This week, Puerto Rico defaulted on $370 million worth of bonds.

The territory's "generous" government squandered the island's resources. Decades of leftist governors hired their friends. In Puerto Rico and Greece, about one in four workers works for government, compared to 14.6 percent in the mainland U.S.

Puerto Rico's current governor points out that Puerto Ricans enjoy 30 days of paid vacation every year, 18 sick days and 14 paid holidays. That's about two months paid leave every year. No wonder businesses wither.

The government gives "free" energy to government-owned enterprises. This encouraged "investments" like the government-owned ice rink. Yes, ice skating was what bureaucrats thought the tropical island needed. Maybe they saw that movie, "Cool Runnings," and thought winter sports in the tropics sounded fun.

Puerto Rico's long reliance on handouts and welfare created a culture of helplessness and entitlement. A U.S. inspector general found that some Puerto Ricans got Social Security disability payments because of their "inability to communicate in English." Really. They live on a Spanish-speaking island.

After years of decline, one Puerto Rican governor tried to do the right thing. Luis Fortuno, a free market guy who admired Ronald Reagan, froze government salaries, cut spending by 20 percent, eliminated some stupid regulations and fired 17,000 government workers. At the time, 250 policemen did nothing but approve liquor licenses.

Fortuno's policies might have helped the economy, but voters didn't like the cuts. Thousands of union protesters held demonstrations outside his house, calling him a Nazi. Fortuno was defeated in the 2012 election by a leftist, Garcia Padilla.

Padilla pledged to "create 50,000 jobs." But governments don't create real jobs. Padilla destroyed jobs by doing things like raising corporate taxes. As the island went broke, he promised to "cut down on tax evasion," "create two working groups to find ways to boost liquidity," and so on.

Give me a break.

This week, former governor Fortuno emailed me, "The territory's government increased expenses by almost 10 percent in 2013. That move commenced a downward spiral."

Now, more than a thousand Puerto Ricans leave the island every week for places with slightly less-bad politicians. But this will make life even tougher for Puerto Ricans left behind. Government having fewer suckers to tax makes it even harder to pay the bills.

Puerto Rico's debt has risen in the past 15 years from 60 percent to 100 percent of its gross domestic product. If it were a country, its fiscal situation would be about as bad as that of Greece. Like Greece, Puerto Rico is discovering that, eventually, other people get tired of bailing you out.

A group of hedge funds issued a report recommending going farther down the free market path Fortuno started on. They call for further simplification of labor regulations, cutting the number of government workers and privatizing government-run firms.

But some in Congress, warning of a "humanitarian crisis," want to bail the island out instead. Fortuno says that's a terrible idea. "That would reward irresponsible behavior."

It would. The real solution is to build a future in which bailouts aren't necessary, in which growing businesses, not government spending projects, flourish.

I hope Clinton and Trump learn something by watching other economies fail before the entire U.S. ends up like Puerto Rico and Greece.