Krugman: Puerto Rico Crisis 'exacerbated by the Jones Act'

by Mike Hansen, Hawaii Shippers Council, August 3, 2015

The liberal New York Times columnist and Nobel prize winner in economics, Paul Krugman, in a piece published August 3, 2015, commenting on the Puerto Rico financial crisis described the economic and logistical issues facing the Commonwealth acknowledging the negative impact of the Jones Act:

What went wrong? There was a time when the island did quite well as a manufacturing center, boosted in part by a special federal tax break. But that tax break expired in 2006, and in any case changes in the world economy have worked against Puerto Rico.

These days manufacturing favors either very-low-wage nations, or locations close to markets that can take advantage of short logistic chains to respond quickly to changing conditions. But Puerto Rico’s wages aren’t low by global standards. And its island location puts it at a disadvantage compared not just with the U.S. mainland but with places like the north of Mexico, from which goods can be quickly shipped by truck.

The situation is, unfortunately, exacerbated by the Jones Act, which requires that goods traveling between Puerto Rico and the mainland use U.S. ships, raising transportation costs even further.

NYT: America’s Un-Greek Tragedies in Puerto Rico and Appalachia

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Puerto Rico: IBD Points Finger at Jones Act

by Michael Hansen, Hawaii Shippers Council, August 4, 2015

The widely respected Investors’ Business Daily (IDB) wrote in an editorial published Tuesday, August 4th, that the government of the Commonwealth of Puerto Rico defaulted on a bond series yesterday and among other things pointed a finger at the Jones Act for the poor economic conditions on the island territory.

Key excerpts quote.

Puerto Rico is in an economic "death spiral," with debts that are "unpayable." That's not journalistic hyperbole. It's how Gov. Alejandro Garcia Padilla described the mess. The final straw came this week when Puerto Rico Public Finance Corp. paid just $628,000 on a $58 million payment that was due.

The commonwealth bears most of the blame for its fiscal failure, but the U.S. is complicit as well.

For starters, the Jones Act requires ships carrying goods from one U.S. port to another to be U.S.-built, owned and staffed. Economists in trade-dependent Puerto Rico estimate that the law costs the island close to half a billion dollars a year — a huge amount.

Aug 3, 2015: Marine Academy Masters Thesis Calls for Jones Act Reform