(WASHINGTON POST) Last week, the Treasury Department announced their recommended approach to the profound economic and financial crisis engulfing Puerto Rico. It is big, bold and broadly appropriate, and it should be the basis for prompt congressional action. How things play out from here will be an important test of whether Washington is, as some allege, controlled by financial interests.
The Puerto Rican economy has declined by more than 10 percent since 2006 and employment has declined by 14 percent. Nearly 2.5 percent of the population left the island in 2014.
The problems are in part structural, coming from the combination of labor costs close to the U.S. level but productivity more comparable to the richer nations of the Caribbean. They are in part cyclical, as the bursting of a real estate bubble has led to sustained bank deleveraging: The overall balance sheet of Puerto Rican banks has declined more than that of Greece. And they are in part a result of weak Puerto Rican policy going back many years.