Puerto Rico faces a ‘death spiral’ that goes way beyond the humanitarian crisis

When President Trump, who has already been criticized for his response to the crisis — because he was busy feuding with professional football players instead of rallying the country to help — finally turned his attention to the island he was quick to point out that its economy was in poor shape to begin with.

“Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble. It’s (sic.) old electrical grid, which was in terrible shape, was devastated,” Trump tweeted on Tuesday. “Much of the Island (sic.) was destroyed, with billions of dollars owed to Wall Street and the banks which, sadly, must be dealt with.”

I read that as the President saying Puerto Rico’s not getting off the hook — no matter what.

And this is where the Trump could see Hurricane Maria turn into his very own Hurricane Katrina. Airlifting food and generators is, of course, vital at this point, but not also immediately considering what the US can do to rebuild Puerto Rico’s economy will be devastating in the long-term.

Debt relief, Setser says, may be out of the federal government’s hands because Puerto Rico’s government owes money to private bondholders and some distressed debt funds.

“Congress doesn’t usually forgive debts owed to other people,” Setser said. “And Congress already has provided a bankruptcy-style process for restructuring Puerto Rico’s debts.”

There are things that can be done about it though. “What I do expect is that the oversight board will adjust the fiscal plan so that there is essentially no money for debt service in the next few years,” Setser said.

Even outside of the debt, Puerto Rico needs a long-term economic plan from the federal government, now more than ever. The catastrophe will require a concerted response likely lasting several years and the island must become an integral part of any infrastructure package proposed by the president or Congress.

It’s not just the debt

Trump was skewered by the conservative editorial page of the Wall Street Journal on Wednesday, for refusing to waive nearly 100-year-old shipping rules that raise the cost of importing goods to the island. Here’s how the paper explained the impact of the Jones Act:

Puerto Ricans pay dearly for this protectionism, which reduces competition and raises costs. A 2012 Federal Reserve Bank of New York report said the Jones Act helps explain why household and commercial goods cost roughly double to ship from the East Coast to Puerto Rico than to the nearby Dominican Republic or Jamaica. Food and energy costs are far higher than on the mainland.

And there are countless other ways the federal government can consider the Puerto Rican economy as it rebuilds — like investing in solar and wind technologies appropriate for an island territory so it doesn’t have to haul in its fuel.

The president can keep telling himself, as he told reporters Tuesday, that “we’re doing a great job” in Puerto Rico.

But if a serious economic response is not forthcoming, this catastrophe will eventually catch up with an already troubled White House.