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The “New Fiscal Plan for Puerto Rico” (April 19, 2018): An Unrealistic and Misleading Path to Nowhere

Author

Listed:
  • J.Tomas Hexner

    (President of Hex, Inc. Founder and director, Science Initiative Group at the Institute for Advanced Study at Princeton, New Jersey)

  • Arthur MacEwan

    (Professor Emeritus of Economics at the University of Massachusetts Boston)

Abstract

The New Fiscal Plan for Puerto Rico, issued by the Fiscal Oversight and Management Board on April 19, 2018, is deeply flawed. It is based on two incompatible goals: establishing a foundation for growth of the Puerto Rican economy and assuring that the Puerto Rican government will move quickly toward meeting its debt obligations. As result of this incompatibility, the Plan is deeply flawed and should be abandoned. The Plan imposes an austerity program, which will undermine possibilities for growth, harm the well-being of the populace, and likely undermine the government’s ability to meet debt obligations. Also, the plan makes unrealistically optimistic assumptions about positive impacts of the structural reforms it imposes on economic relations in Puerto Rico. This paper: (1) explains the austerity nature of the Plan and its negative impacts; and (2) discusses the Plan’s proposed structure reforms—labor reforms, tax reforms, education and human capital reforms, and government regulations and the organization of government agencies.

Suggested Citation

  • J.Tomas Hexner & Arthur MacEwan, 2018. "The “New Fiscal Plan for Puerto Rico” (April 19, 2018): An Unrealistic and Misleading Path to Nowhere," Development Discussion Papers 2018-09, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:408
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    More about this item

    Keywords

    New Fiscal Plan for Puerto Rico; PROMESA; Puerto Rico debt; level playing field austerity;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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