I can watch only so much CNN and MSNBC before I get nauseated, but I have seen enough the past day or two to be appalled at how the media are spinning the post-hurricane disaster of Puerto Rico: It’s another Katrina. The Trump administration hasn’t responded fast enough or aggressively enough to help the battered territory, where two hurricanes shut down electric service, cell phones, the transportation system and government services. Others can engage in the blame game if they want to, but I want to point out the obvious: Puerto Rico illustrates the incapacity of a bankrupt government to carry out basic functions under highly stressful circumstances.
And let that be a warning to everyone. Puerto Rico is the future of many U.S. states unless we get our acts together. Garnering less attention than the human tragedy in Puerto Rico, the states of Pennsylvania and Connecticut have made headlines, too, in the past week. After Pennsylvania passed a budget without enough revenue to pay for its spending, S&P Global Ratings downgraded the state’s debt to A+, down two notches from the coveted AAA rating. Meanwhile, despite having the highest median household income in the country and the second highest tax burden (taxes as percentage of income), Connecticut faces a $3.5 billion biennial deficit. The state, notes the Wall Street Journal, is groaning under heavy debt load, large unfunded pension liabilities, and a shrinking population. S&P has placed nine Connecticut localities on negative credit watch.
Those two states have a long way to go before they achieve Puerto Rico-levels of insolvency, but they indicate the direction the U.S. is heading. On a national level, Republicans have abandoned any pretense at crafting a tax reform plan that will shrink the deficit (something that can be pinned on the Trump administration). The national debt is $20 trillion and growing, even in the absence of a recession, at a rate of more than $600 billion a year. It’s not a question of if we will share Puerto Rico’s fiscal fate, but when.
So, what happens when governments approach fiscal insolvency? One thing they do is starve infrastructure maintenance. Puerto Rican roads were in worse physical condition than roads in any U.S. state. Of the island’s 2,280 bridges, 55.8% were considered structurally deficient or functionally obsolete before the hurricanes struck. The territory has chronically under-invested in its water systems, which also failed during the hurricanes, and the government-owned electric system, the Puerto Rico Electric Power Authority (PREPA), has been a disaster-in-waiting for years now.
Reports the Los Angeles Times:
As of 2014 the government-owned company was $9 billion in debt, and in July, it filed for bankruptcy under the provisions set by the Puerto Rico Oversight, Management, and Economic Stability Act, a law signed by President Obama in 2016.
Problems accumulated. Cutbacks in tree pruning left the 16,000 miles of primary power lines spread across the island vulnerable. Inspections, maintenance and repairs were scaled back. Up to 30% of the utility’s employees retired or migrated to the U.S. mainland, analysts said, and the utility had trouble hiring experienced employees to replace them.
The neglect led to massive and chronic failures at the Aguirre and Palo Seco power plants. The three-day blackout in September 2016 underscored how fragile the system was, and that the company was “unable to cope with this first contingency,” the Synapse Energy report said.
No wonder the island’s electric grid collapsed. No wonder officials say it will take four to six months to restore electric power.
If you want your city, county or state to show resilience in the face of natural disasters, you need to have governments and utilities that are fiscally resilient. Entities hobbled by excessive debt scrimp on maintenance and upgrades, leaving roads and utilities more vulnerable to disruption and depriving authorities of resources with which to respond to emergencies.
Puerto Rico would be in terrible shape no matter what. Hurricane Maria wrought devastating destruction, and recovery is impeded by the fact that the island, unlike Houston and Florida, is inaccessible to help by land. But the incapacity of bankrupt government and utilities have made the challenges immeasurably worse.
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