In a bid to sure up their island’s dire fiscal situation and address its $72 billion in outstanding public debt, Puerto Rican lawmakers narrowly passed a bill on Tuesday to significantly raise taxes on the territory’s inhabitants. The controversial legislation specifically increases Puerto Rico’s sales tax from 7 to 11.5 percent, the highest in the United States, and introduces a new 4 percent tax on professional services. If the bill is ultimately signed by Puerto Rico’s governor Alejandro Garcia Padilla, which seems likely given his avowed pro-austerity views, then the tax hikes will be implemented within the year.
Tuesday’s news comes after an announcement from San Juan that the government will be closing nearly 100 schools and 20 public agencies in the near future in order to save money.
Puerto Rico is in the midst of a crippling 8 year recession, characterized by devastating unemployment and poverty levels and unprecedented population flight. Critics of Tuesday’s bill decried the fact that the burden of the San Juan’s latest austerity scheme falls squarely on Puerto Rican consumers; they argue that the new taxes will seriously undermine already lagging economic demand on the island and ultimately deepen and prolong Puerto Rico’s longstanding recession, making it impossible for the territory to get out from under its smothering debt in the longterm.
Proponents of the legislation, on the other hand, say that such tax increases are desperately needed in order to stave off a government shutdown in the short-term. Foreign creditors, whose ongoing financing of the island’s government has become indispensable, with vested interests in Puerto Rico’s future solvency have long threatened to pull out of the U.S. territory in the absence of substantive austerity measures there. Policy makers in San Juan are hoping that the $1.2 billion in revenue that the new taxation is expected to yield will calm creditors abroad and attract new investors on the international bond market.
While credit rating agencies’ repeated downgrades of Puerto Rican treasury bonds have led many to reconsider their fledgling investments in the territory, one institution is actually seemingly eager to go all in on the struggling island.
You might be wondering who in their right mind could possibly want to purchase chunks of Puerto Rico’s behemoth and seemingly insurmountable debt. Why it’s our old friends over at Goldman Sachs; you know, the infamously predatory Wall Street banking conglomerate, and Federal Reserve junkie, that Matt Taibbi once hilariously, and poignantly, dubbed “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Well, according to recent article from Bloomberg Business, Goldman is currently gobbling up Puerto Rican bonds at breakneck speed, even as other investors flee for the hills. That a firm as historically and continually immoral and incompetent as Goldman Sachs is tripping over itself to buy up junkish Puerto Rican bonds should unnerve everyone. There’s a scam afoot here ladies and gentlemen, and you and I are the marks… again.
We’ve seen this movie before, and we know how it ends. If past is pretext, and -considering the U.S. government’s failure to break up Wall Street’s seemingly omnipotent “Too Big To Fail” banking cartels and fundamentally reform how it regulates and subsidizes such firms in the wake of the 2008 crash- it almost certainly is, then American taxpayers will get stuck bailing out Puerto Rico’s bondholders if and when the island eventually goes belly up fiscally. But by that point, the sharks at Goldman will have presumably already swam off into the Caribbean sunset, having sold off most of their toxic Puerto Rican assets to unwitting investors and simultaneously made lucratively risky and cynical bets against those same sales long before the island’s financial collapse. Wall Street will have transformed another crisis into a golden opportunity for itself, and the dismantling of Puerto Rican society will continue apace.