The Washington Post is carrying a story today about the rising economic misery facing the U.S. territory of Puerto Rico, home to 3.67 million Americans, the government of which has racked up $70 billion worth of debt. That places the territory third after California’s $96.4 billion and New York’s $63.3 billion in terms of its total amount of debt.
We thought it might be interesting to take data that was presented in the article and translate it into how much the individual public debt burden is for each of these governments, and compare them to the individual debt burdens of U.S. cities and counties that have declared bankruptcy in recent years. The chart below presents what we found:
If we were to adjust Orange County, California’s public debt per person to account for the effect of inflation since 1994, it would be $876.40 in terms of current U.S. dollars.
Considering Puerto Rico’s situation, in the absence of a much larger federal government bailout that doesn’t appear likely at present, the territorial government could soon be forced to default on its public debt, since filing for bankruptcy is not an option available to it.
Puerto Rico is well down the debt death spiral path, as it has significantly hiked tax rates in attempting to increase its revenue to service its debt payments, which have negatively impacted the territory’s economy. The economic situation of the territory is such that more Puerto Ricans now live elsewhere in the United States than are currently living in Puerto Rico, as its residents have increasingly fled the deteriorating economic conditions within the territory.
The impact of a default will be felt in the U.S., because a large number of investment funds own debt issued by Puerto Rico’s government among their municipal debt holdings, which would negatively affect Americans who rely on income from these kinds of funds for their retirement income.