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Show Hinckley Journal of Politics Spring 2000 predictions. Jenkins, when applying cliometrics (the application of quantitative methods in economic history), confirmed that once statehood is introduced, Puerto Rico would produce a net benefit to the United States. His first criticism is found concerning the CBO's macro-economic model projecting the island's future without Section 936: The CBO's concept of Puerto Rico's economy under statehood was based primarily on the removal of Section 936 tax benefits and changes in federal transfers to the island. However, the assumptions underlying the CBO's projections are unrealistic in several key respects. The model makes no allowance for the prospect that the Puerto Rican government could alter its economic strategy to compensate for the termination of 936. It also failed to take account of investors' changed perceptions of Puerto Rico as a state both fully integrated politically and economically with the United States (Jenkins 1998, 12). When the identical economic scenario is simulated using a computable general equilibrium (CGE) model, the projected economic impact is much less dramatic. Real gross product drops by 5.6%, instead of the CBO's 10-15%. Employment fall is less than XA of the CBO report (U.S. Congress 1990, 34). The CGE model also suggests that sensible policy measures by the Puerto Rican Government could readily compensate for the loss of section 936. Congress agrees with Jenkins' new economic findings, and has taken three steps to completely eliminate Section 936: (1) limiting the amount of tax credit that U.S. corporations could claim under Section 936; (2) the 1996 Small Business Job Protection Act, fully eliminating Section 936 benefits for new claimants; and (3) phased-out benefits for existing recipients over the next 10 years. Historically, U.S. government interaction with the island has been beneficial, but only for a brief period; both Section 936 and "Operation Bootstrap" provide supportive evidence. Jenkins, as do most new economists (Roberts 1996, 57-70), sees 24 years of positive gains and substantial growth as evidence of real potential in Puerto Rico, not as a failure. He claims that through statehood, this economic development will not only occur, but also be sustained. "Operation Bootstrap" was a success due to investor confidence. Puerto Rico, when covered financially with the United States' stability bubble, produced a level of investor confidence that was sufficient to promote industry. Statehood would stimulate the Puerto Rican economy to grow 2.2-3.5% faster through full integration with the U.S. economy and political system (Laney 1998b, 6). In turn, per-capita income would increase as the unemployment rate decreases. Local government has begun to avoid the stagnant downfalls of "Operation Bootstrap" in order to demonstrate to U.S. officials that there is a future on the island. Currently, sophisticated financial institutions, world-class hotels, and a mature services sector have begun to spark the once lifeless economy. The Governor has introduced bills to improve the tax structure, to reform the public sector, and to encourage investment in tourism. He has also pushed the development of privatization in management and ownership of some public corporations. There is no way to hide the delinquent numbers and percentages of Puerto Rico. As stated above, the per capita income is very low and unemployment rates are high. Upon researching these low-ball figures, Jenkins (and J. Tomas Hexner of Hex, Inc.) found that several factors had been missing from the initial estimates. First, the U.S. government provides funds to Puerto Rico at a rate of less than one-half that of its allocations to individual states. Upon the reception of these additional federal funds, per-capita-income rates would skyrocket. Second, an immediate convergence with the U.S. market would not only produce the above-mentioned increase in investor confidence, but also create jobs, therefore lowering the unemployment rate. Finally, Jenkins and Hexner concluded that under commonwealth status, the Puerto Rican economy cannot expand (as compared to statehood). For example, if Puerto Rico had become a state in 1952 (instead of a commonwealth), islanders would now be making over $6,000 more than their current figures indicate (Jenkins 1998, 4). When Jenkins and Hexner's additional factors are combined with the historical data available, Puerto Rico actually becomes a net benefit to the United States if statehood were to occur. In the author's view, it is difficult to dispute the fact that the Hawaiian economy doubled within 15 years of statehood. Also, historical convergence among individual states is motivational. In 1940, Mississippi (the poorest state in America) had only 22% of the per-capita income of Delaware (the wealthiest state in America). By 1990, Mississippi (though still the poorest state) already had income equal to 50% of the income of the wealthiest state (Jenkins 1998, 46). Puerto Rico under statehood will grow and converge with each state's economy. Under commonwealth status, the federal government has done its part to try to boost the Puerto Rican economy, but success has always been short lived. Despite these failures, there is much evidence-according to the new economic history-that statehood could exceed all expectations and become an instant net benefit to the United States. The situation is simply begging for the right kind of economic and political leadership. Puerto Rico's Political Parties and Their Views What do most Puerto Ricans think? According to a 1998 Gallup Poll, only 6% of Puerto Ricans would like to see the Caribbean island become an independent nation. On the other hand, 46% prefer it be admitted as the 51st state and 48% would opt to maintain Puerto Rico as a U.S. commonwealth (Gallup Organization 1998). There is a different Puerto Rican political party backing each political choice. First, founded in 1938, the Popular Democratic Party (PDP) 27 |