Why Puerto RIco is a Socialist State

The Boy in the Plastic Bubble- John TravoltaToday marks a historic moment. Today, May 1st, with the multiple work stoppages, boycotts, and demonstrations against the Governor's plans to lay-off 30,000 government employees, we are officially declaring Puerto Rico to be Socialist state.

Why else would so many same people reject reducing a government that is so large it's size is only dwarfed by that of California. Now let's consider this for a moment. California is estimated to have 36,756,666 residents. According to a recent article in the Dia, they have 394,000 government employees, or about 1.07% of all citizens. Puerto Rico on the other hand has an estimated population of 3,927,776 and has 300,000 government employees, or about 7.6%. What about other states?

  • Texas = 282,000/23,904,380 or 1.17%
  • New York = 249,000/19,297,729 or 1.29%
  • Florida = 191,000/18,251,243 or 1.04%.
See a trend here? In the four largest states, the government's size as a percentage of population is around 1% (about an average of 1.26%). So if we reverse that, then Puerto Rico's government should be around 50,000. 50,000 people, 50,000. And yet, all of the government worker's unions and probably a significant portion of the population of Puerto Rico would deny that our government is grossly too big.

Disclaimer: I am not immune to the hardship caused by eliminating government jobs, but the fact of the matter is that if we do not DRASTICALLY REDUCE the size of our government, no amount of stimulus spending or economic development can ever rescue us from a catacylismic destruction of wealth in Puerto Rico.

Socialism Defined

Socialism is simply defined as a society where the government owns more than just manpower (the 300,000 workers). Staying with that simple definition here are the reasons why Puerto Rico is a Socialist society:
  1. The government is the biggest employer (by far)
  2. They own the water and sewer company
  3. They own the power company
  4. And they still own 10% of the telephone company.
I submit, as I have done in the past, that the reason our government is so big is that previous "economic development" advisers made the case that there were simply not enough jobs to keep up with the population explosion Puerto Rico was experiencing. Their solution was to rapidly expand the government to absorb the excess employees and keep the economy growing. Propped up upon a generous influx of greenbacks from Tio Sam and a huge cash-based economy, prosperity reigned.

Who's in the bubble now?

It is estimated that only about 29% of all eligible workers file a planilla. In general numbers, 4 million residents equals about 2 million eligible workers, equals about 580,000 planillas. If 300,000 are from the government employees themselves, then really you have a mere 280,000 workers funding the government. Of course we need to add in business tax income and the IVU.

With a contraction of the global economy on the heels of the elimination of generous tax benefits, bona-fide businesses and jobs are disappearing from Puerto Rico at such an alarming and consistent rate that our economy is in chaos. In the past three years alone it is estimated that the tax collections have missed their target by more than $2.7 billion, with another 800 million (it'll be more) deficit expected for 2009.

And yet, I've not heard any journalist, nor any politician, come forward and state the grotesque truth. We are socialists and are incapable of facing the "facts" that our government is 6 times the size it should be.

Let's say that anyone who doesn't recognize this is John Travolta. They should be VERY AFRAID that their bubble is about to burst. Someone with authority needs to step forward and lay out the facts. No matter how disgusting, nor matter the wailing and gnashing of teeth, if we don't dramatically reduce our government, the credit agencies will eventually downgrade our government bonds to junk, and then the proverbial fecal matter will really hit the fan.

14 comments:

luis

1 de mayo de 2009, 07:34
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dijo...

MC, been reading for a couple of months and really like your blog. Keep up the good work.

I am forced to comment today to correct a wrong figure that gets thrown around hastily and is currently being used as a excuse for the massive layoff occuring in the government. PUERTO RICO IS NOT THE SECOND STATE WITH MORE GVMNT EMPLOYEES.

Please see this link with the info http://spreadsheets.google.com/ccc?key=pMHc_4x-wf93JU4x4ReIFHg&hl=en

As you know, most government services in the US are given at the County/City/Town level. Hence most of the gvmnt employees (police, firefighter, teachers, nurses) are employed at the municipal level. For historical and geographical reason, in PR those employees who make up the majority of the government payroll and cannot be laid off are hired at the State lvl. We you take that into consideration, PR is the 26th state with government employment and the 14th proportionally.

Of course a rank of 14th is still high, but it is not as high as purported by the administration propaganda machine. There is NO need to layoff 30,000+ gvmnt employees at once. In fact, just with attrition the government today has 14,000 employees less than it did in 2005 (this was confirmed yesterday by the Planning Board President in the Budget's public hearings).

This is just a farse to justify Fortuño's republican worldview. If he was an honest person, he would do like Ronald Reagan and say government IS the problem and fight it openly. But using subterfuge, lies and deceit make him as bad as any other run of the mill politician.

MC Don Dees

1 de mayo de 2009, 08:03
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dijo...

Thanks for the positive feedback. Your readership and participation are HIGHLY appreciated.

Also, many thanks for the spreadsheet, but as any good spin leader will tell you, give me some statistics and I'll make fit my message.

Just a few questions for you:

1. How does the overall facts and their context have anything to do with politics? If I got my numbers from the El Nuevo Dia, are you saying that they are in Fortuno's pocket? After decades of a distinctively Popular/Independent perspective, I find that dubious. Anyway, it should be THEIR responsibility to clear up just such misunderstandings.
2. By privatizing the power and water companies, couldn't we help reduce the government numbers? Or is that too non-socialistic?
3. Do you think the 62K number for the number of municipal government employees is reliable? Compared to other similarly sized states, that number is significantly lower.

Oh and by the way, I prefer Obama's perspective. It's not whether the government is too big or too small, rather, is it effective? The evidence is enormous that despite our expenditures, our government is probably failing on every possible measurement than you could think of. So not only are we NOT talking about significantly reducing numbers, but no one is talking about how to improve the services offered.

The Insider

1 de mayo de 2009, 13:54
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dijo...

Ineffective government employees are just another form of welfare... a higher paying version... you have to show up (sometimes) and "appear" like you are doing something in order to get your check and wait it out until the next holiday... the good old 10 to 3pm, Tuesday to Thursday gig at it's best.

Whether Puerto Rico is #1 or #14 in the hall of "government bloat" shame, does this really look like a country/state that has that many employees "working" for it? This place is Thunderdome in the making.

Effectiveness? Great question. If these employees would do their part with the same enthusiasm they have for saving their "meal ticket" (i.e. now with the protests) every day when they go to work, things might be improved here.

Want to save the jobs? Fine. Justify them. Assign those 30,000 employees to go out and pick up trash that is everywhere in Puerto Rico. When they turn in their 20 bags at the end of the week, they get their check. At least then, we'd have a measurable performance metric. In 90 days when Puerto Rico is looking really clean and nice, we'll reassign them to the next thing that will add measurable value and improve the country, rather than hiding in a back office somewhere dis serving customers. Maybe, with a little work, we can even build a sustainable tourism industry where visitors would like to come here more than once, and won't go back home talking about trash and dead dogs.

No sense propping this bloat machine up. The economy is in a mess. Puerto Rico has no real economy. Better to learn that now and start preparing, rather than ignore it and think that government job is enough to take it easy and "sail" into the future.

Note: I spoke with a young lawyer (who is moving up the political ranks, and being groomed by Fortuno himself for a future in the party) asserting that things could be run vastly more efficiently, using better technology. He agreed and said, something to the effect of "Yes, that's great, but we can't do anything that would make us cut a government job".

So, yes the government is a problem, but that is the overwhelming attitude of the people in Puerto Rico, who elected that government, and are now out there supporting the bloat. The government AND the people are at fault. There are a few lone voices out in the blogosphere, advocating change, but their voices are drowned out in the chaos...

Since there are so many "working for government" they are literally writing their own check. Ask someone who does not work for government, what *they* think? Keep paying your sales and income tax to keep these guys in gas/docking fees for their boats?

Hurry up Obama/Castro. Make your moves quick. Perhaps we can trade in this socialist state for a another one with better long term growth prospects... Cuba or perhaps Venezuela.

justmeguy

1 de mayo de 2009, 15:41
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dijo...

You have managed in a few paragraphs to pinpoint Puerto Rico's main problems. And labor unions are a big part of this. Their leaders, mainly concerned with their quotas and on looking tough in front of their members, are creating an atmosphere of social division which is really scary. The down with the rich and powerful speech smacks of much more than socialism, its simple Marxism. Their greed and cynical rhetoric (labor leaders are all rich, aren't they?) is truly dangerous.

MC Don Dees

1 de mayo de 2009, 18:07
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dijo...

Did I say all that? Justmeguy, you've got a point. My brother works at Chrysler and the UAW is just as complicit. At this point the union leaders would do just about anything to sustain their "jobs" running the union. If Chrysler goes under their sweet deal on behalf of all of the united auto workers is over.

How can they possibly be representing the worker's interests while simultaneously watching out for #1, themselves. Answer. They can't, a man can not serve two masters.

MC Don Dees

1 de mayo de 2009, 18:29
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dijo...

When you're right, you're right. The Insider points out, that we are all complicit in this failed socialistic experiment. It's a shame. We've let the government become an entity that no longer serves the people. That my friends is something we let them do while we were busy over-consuming and living up to the low expectations we set for ourselves.

The question becomes, can we mobilize ourselves enough to wrench away enough attention to make a difference? If so, what weapons shall we use? Whatever the means, one thing is clear. If we don't make a stand, no one else will.

As I spoke with Gil the Jenius this week. We believe that the time to stand aside and watch us demolish "our paradise" is over. It is time for action. We've got to DO something else besides blog and twitter away our frustrations.

luis

1 de mayo de 2009, 19:34
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dijo...

MC, sorry for not replying sooner. For some reason my office filter blocks your site (as pornography!) and I couldn't answer during the workday.

Anyway, let me first state that the table I posted cites census figures, but also know that I first learn of the table via a press release by Sen. Eduardo Bhatia. I did not prepare it, but at face value I do not doubt it. I merely cited the numbers to put them in perspective. And yes, your numbers from END are technically true, since it is true that only the STATE government of CA has more employees than PR, but it is also true that the STATE government of CA, nor any other state government for that matter, does not employ any teachers, police (except for highway troopers), firemen, nurses, etc. So it is an unfair comparison and Fortuño knows it, and the press is too lazy to care. And we are 14th proportionally INCLUDING municipal employees.

Second question, I personally do not favor privatizing public utilities. Public utilities are natural monopolies either under private or public ownership. Say we sell the AEE tomorrow, big deal. The new owners will still need to employ the same amount of tree cutters, linesmen, drivers, etc and they will still be unionized under federal and local law. I'm sure a private employer will be able to cut some grease on middle and higher management (where most of the political "batatas" are), but I'm sure the private executives will make a lot more money than today's public that will eat up most of the cuts. For emxample, when AAA was privatized the ONDEO CEO made 450,000 yearly, plus a house in la Villa de Torrimar for over 9K a month, and an allowance for his children private schools. The current public director of AAA makes 195,000. And since they are private monopolies, they will be highly regulated by the government, so we will still need to create a public agency to look after the new private utilities. All in all it will be no bargain, except for the privatizer, to sell the public utilities. Also, I do not buy the idea of "better" service. I have not lived in the states, but I have lived in Chile with private utilities and the service is as bad or worse as our local public corporations. Ask any of your stateside friends and see if they like their power company.

I favored the privatizing of telefonica because we were on the verge of real competition in the field. Right now I don't have a land line in my house, and I get great prizes for my cell and internet services. But there is no way you can make a competitive market in water, gas or electric, since you cannot have competing pipes reaching your house at the same time.

3. Yes the number for municipal employees is reliable. I was going through Fortuño's budget to get the number of municipal employees but I can't find it. I know old budgets had it, but OGP has removed old budgets from its page. Anyway, I know for a fact San Juan has only 9,500 employees for a population of 450,000. That's 2.1% of the population. So taking San Juan as a model, then 2.1% of the island workforce would be comprised of 44,000 municipal employees. Add political "batatas" to that and 66,000 feels about right. Remember, mayors don't have much else to do than pick up the trash (for which they hire private co.s) and hire a couple dozen municipal police. They don't have teachers, hospitals, schools, or overarching programs that require a lot of employees. They don't even have to use their employees to collect taxes, since the Central government collects the IVU and the property taxes and dolls them out proportionately.

That answer your questions, I'll tackle the rest of your comment and other commenters on a subsequent post. It's social friday, I got to socialize!

justmeguy

4 de mayo de 2009, 10:00
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dijo...

Privatizing the telehone compnay was an excellent idea, yet all the unions fought against it, the so called "sociedad civil" was against it. There was a whole doomsday scenario attached to it. And yet, the result was entirely positive.

And more important, the privatization ended the "going on strike on a an election year" routine to get all they wanted from the gutless politicians, dying to get re-elected. Actually, privatization in the PRTC brought labor peace to the place.

As for service, I have lived in the states, 4 years in Minnesota and 3 years in Pennsylvania and not once did I lose electric power and the idea of no running water was frankly unthinkable. And if you want to use a tropical place as ana example, a couple of years ago there was a power blackout in Mimai and it was THE top story in the NBC Nightly News. Imagine that.

roberto

23 de mayo de 2009, 11:12
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dijo...

I'm so glad someone else agrees with my point of view, for the past years I've said the same thing to my friends and family, who are Puerto Ricans, and they've looked at me like I'm crazy. another intersting facts that i've noticed, is that the government employs 12% of the total workforce which is 47% of the population, and employ 17% of those actually working, which currently is around 33%.

I think the way they're going about the reduction leaves for much to desire. unfortunately, I think that we will see a lot of political party "Sacrifices" instead of a reduction that will lead to a better and more effective government. I don't affiliate with any of the parties, but I see the direction of the reductions leading to a "Bluer" government instead of an effective one. and lets stay tune for the repercussions to follow.

Hector Garcia

5 de junio de 2009, 14:46
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dijo...

Like Luis said earlier, your facts are wrong. The Republican Party of Puerto Rico writes in its page that the size of Puerto Rico's government is only second to California. As a California resident, you should know that its Wyoming the state with the largest government, no California.

The reality is that Neo-liberalism is a economic ideology that is discredited not only in academia but also in political practice across the world. That Gov. Fortuno is re-heating this dinosaur just indicates the intellectual bankruptcy of the New Progressive Party.

You also should read this article which indicates that large governments benefit small countries but not large countries.

Governments and Growth: Size Matters
Country Size, Government Size, and Economic Growth+
Rob Salmond*
Version 2.2: August 2006

MC Don Dees

5 de junio de 2009, 20:16
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dijo...

[...shaking head...]

brrbbrbbb large governments benefit small countries, socialism say what?

Hector, I appreciate the comments and reading the blog. They really weren't my facts, there were the facts reported by the El Nuevo Dia. Even by Luis numbers, Puerto Rico's government is big.

But I'm still sticking with my essential thesis. Puerto Rico is overpopulated. Puerto Rico severely lacks jobs. And "the government," Red, Blue, and Green, have used highly paid, perhaps un-needed jobs to buy votes and keep Puerto Rico's economy on life support.

Then if you mix in a little black, as in black market, as in cash-based, non-tax paying underground economy, you end up with a system that can not sustain itself. There just aren't enough inputs to balance out all of the outputs.

Hector Garcia

6 de junio de 2009, 10:04
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dijo...

Thanks for this blog.

However, your main point was that large governments basically mean socialism (which is conceptually wrong)and that there is an ineffective government. So this is not about the numbers but about a clientele system of political batatas that both the PPD and the NPP have used to perpetuate themselves.

This will continue to happen whether a large of smaller government exists. Who said that private coprorations are alaways efficient? GM, ENRON, or all the failed financial institutions?

Don't create a myth about how capitalism works, it is a myth. The most efficient private corporation, using your expectation is WalMart.

It is also the one that pays the lowest salaries which lead people working for them to receive food stamps to subsidize their income. So, the "efficient" company ends up being subsidized by public funds.

What we have is socialism for the rich and capitalism for the poor. Puerto Rico should constitute itself as a financial corporation, claim bankruptcy and request $20 billion dollars, then it can solve its problems.

The Insider

6 de junio de 2009, 12:51
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dijo...

I'm not armed with a premium membership to CIA factbook, and focusing much energy on political philosophy like Neoliberalism takes too much time away from checking my email (even without being an informational super sifter like the Jenius), but I'll express a few thoughts, rather than allow them to seep away into the ether. ;)

Re: Governments and Growth: Size Matters / Country Size, Government Size, and Economic Growth

I did not read this full article. You might have (Hector), so I'll allow you to explain:

"In this paper, I accept the argument that big government may be bad for growth over the short term, but I argue that the size of this effect will differ markedly across differently-sized nations. Specifically, I argue that growth rates in large (and therefor comparatively domestic-focused) economies are more susceptible, over the short term, to changes in government size than are growth rates in small or comparatively trade-focused economies."

You said:

"You also should read this article which indicates that large governments benefit small countries but not large countries."

The paper seems to introduce the idea that big government is "bad for growth over the short term". It hypothesizes that the *negative* impact is *less* for smaller countries, but still a negative effect, no? You've interpreted it to mean that large governments actually provide a benefical/positive effect for small countries?

Is Fortuno really re-heating an old dinosaur, or is he simply cutting back jobs he cannot afford to sustain?

What are some other factors that might cause a government to become large and/or oversized?

- Size of population served: Obvious.
- Dispersement of population geographically: More local offices required, increased overhead, reduce efficiency. Note: Eastern part of island's condensed population advantageous. Small geographical size advantegous.
- Level of education of the population: The lower educated expected to require greater assistance, and have more difficulty interacting with government processes (on average) than their more sophisticated counterparts. Note: Major issues for Puerto Rico.
- Support technology: Software and systems available to make processes more efficient (example: Internet based permitting, fee payment, etc). Also related to level of education. Note: Apparently major issues for Puerto Rico (slow growth in IT).
- Skilled management: Availability of efficiency focused management resources, familiar with concepts of streamlining processes. Hire a fast food upper executive / industrial engineer! Note: If they exist here, they are in Pharma.
- Political Motivation: Voting buying/keeping. Note: All of Puerto Rico's parties. Fortuno breaking the cycle by force of necessity?
- Wealthy surrogates: Injection of funding encourages spending in "offices to manage/disburse the money" instead of R&D and re-investment. Note: USA/Puerto Rico. Obvious. A propped up economy.
- Cultural factors: Collectivist versus Individualist nations.

Other?

(continued...)

Hendrick

9 de mayo de 2011, 14:54
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dijo...

Those who don't work it's because they don't want to. For fudge sake Coffee goes to waste because there isn't enough people to work despite unemployment being around 16%. People rather live off food stamps than work. If you're a registered farmer under the department of agriculture 90% of net income is TAX FREE.