Therehas been significant discussion about the massive 72-billion-dollar debtaccrued by the island of Puerto Rico. This debt is the result of several factorsincluding the commonwealth status of the island relative to the United States,the structure of the Puerto Rican healthcare system and bad investments.However, the economic and public policy issues plaguing Puerto Rico may bebetter understood by examining them through the lens of path dependentprocesses and historical institutionalism. The purpose of this paper is to usethe concepts of path dependence and historical institutionalism to examine thedecline in the Puerto Rican economy as it relates to social programs in PuertoRico, namely Medicaid. In doing so, I will explore the political status ofPuerto Rico, the structure and background of the Puerto Rican economy, and how thePuerto Rican Medicaid system is different from that of the mainland UnitedStates.
Path Dependence andHistorical Institutionalism Beforediscussing the situation in Puerto Rico, it is crucial to understand what ismeant by path dependent processes and historical institutionalism. Pathdependence is discussed most often as a series of “self-reinforcing” feedbackprocesses (Pierson 2000). In the mostgeneral terms, path dependence means that what happens next depends on both thecurrent context and events that have occurred in the past. Phrased even moresimply, history matters. Historicalinstitutionalism refers to this same concept but can be thought of as a morecomplex framework through which institutions can be understood or researchedfurther. Pierson and Skocpol assert that historical institutionalism is focusedon “substantiveagendas, temporal arguments, and attention to contexts and configurations” (Piersonand Skocpol 2002). What this means is that rather than just broadlyunderstanding that history matters, those who employ a historicalinstitutionalist approach ask substantive questions that seek to answer whycertain outcomes happened in one place but did not happen in other similarlocales, or why certain institutions developed in the manner that they did asopposed to other methods or avenues of development, and so on, placing agreater emphasis on context. Historical institutionalists consider the temporalcontexts and consider interactions among or between institutions and otherprocesses.
This is significant, especially as it relates to political sciencebecause there tends to be a greater focus on developing and testing theoriesthat are largely specific to individual institutions rather than considering thatin a real-world context what occurs within any institution does not happen in avacuum. Rather, there are a frequently factors completely outside of theindividual processes that occur within institutions that can impact what willoccur in the future. Historical institutionalism effectively takes this intoconsideration. Something else fundamental to thehistorical institutionalist perspective is the concept of criticaljunctures.
Criticaljunctures are periods of abrupt change that result in a number of decisionsthat will impact the decisions made in the future by closing off alternativeoptions and leading to the establishment of institutions that “generateself-reinforcing path-dependent processes which are then very difficult toalter” (Capoccia and Kelemen 2007). Critical junctures are the starting pointor catalyst for path dependent processes. It would be remiss to not at leastbriefly address the critiques of a historical institutionalist approach becausethe aim of this paper is to demonstrate the impact of path dependent processes,triggered by decisions made during critical junctures in Puerto Rican historythat have resulted in the current economic and health crisis on the island. There are other social scientists,many within the field of political science, who are critical of this approachbecause they do not see potential for deeper analysis or conclusions to bedrawn aside from that history can have an impact on the future. More substantialcriticism results from some assertions that historical institutionalism viewspublic policymaking as institutionalism conceives ofpublic policymaking and political change as a discrete process that placesexcessive emphasis on incrementalism (Peters, Pierre and King 2005). The opponents of this approachclaim that historical institutionalism functions onan assumption that policymaking systems tend to be conservative and find waysof defending existing patterns of policy, as well as the organizations thatmake and deliver those policies.
Further, there are also those who take issuewith the notion that policy can become locked in. Hacker, quoting Pierson, whohas written extensively on path dependence and path dependent processes, saysthat “policies frequently ‘provide incentives that encourage individuals to actin ways that lock in a particular path of policy development'” (Hacker 2002). The critique lies within the notion thathistorical institutionalism has no way of dealing with more gradualtransformations away from a path. This critique though, is not well-founded.
The critical juncture element of the literature allows for these diversions.Also, it is important to consider what the goal of this approach is. Hackerstates that his own research places emphasis on “the political institutionswithin which policy decisions are made and the diverse feedback effects thatthose decisions have on subsequent political struggles (Hacker 2002).
It couldbe argued that this also in many ways accounts for gradual transformations. Withregard to Puerto Rico, historical intuitionalism is a useful approach to betterunderstand the negative economic plight of the island and the limitations ondifferentiation in public policymaking there because of critical junctures inPuerto Rican history that effectively placed it on that path. Even with regardto just the last decade or so, it can be demonstrated that the history ofPuerto Rico, especially relative to its political status as a United StatesTerritory has created a narrow direction for public policy to follow. In thecase of Puerto Rico, there is not substantial room for autonomy or completeself-determination as it relates to public policy. Political StatusIn order to have a full grasp of thecontext in which Puerto Rico exists vis a vis the United States, it is usefulto think of three specific periods that have created the political limbo inwhich the island stands. First, is necessary to think about the 1900 ForakerAct passed shortly following Puerto Rico’s cession to the U.S. from Spain, the1917 Jones Act, and its commonwealth status which came to fruition in 1953.
1900Foraker ActThecurrent status of Puerto Rico was established by the 1900 Foraker Act. PuertoRico was ceded to the United States government in 1898 from the Spanishfollowing the Spanish American War (Cabranes 1978). In 1900, the Foraker Act, acivil law that established a civilian government in Puerto Rico was signed byPresident William McKinley. This act established a new government. Thegovernment consisted of a governor and an executive council that was appointedby the President of the United States. It also established a House ofRepresentatives with 35 elected members, a judicial system including a SupremeCourt, and a non-voting representative in Congress. Additionally, the act meantthat all federal laws of the United States would be applicable to Puerto Rico. Right after this, in 1901, in what are knownas the Insular Cases, the U.
S. Supreme Court were faced with deciding what shouldbe done with all of the territories acquired following the 1898Spanish-American War. It was determined that Puerto Rico was an “unincorporatedterritory” which meant that instead of possessing full constitutional rights,Puerto Rico only had “basic protections from the Constitution such as the writof habeas corpus, prohibition against cruel and unusual punishment, andprotections against unreasonable searches and seizures (Rezvani 2007).
Thismoment foreshadowed frustrations that would build regarding Puerto Rico’spolitical status because there were citizens of the island who had hoped forautonomy and sovereignty. This decision was made with no consultation with thepeople of Puerto Rico (Fernos-Isern 1953). The government that was establishedcame to be based on the interests of the United States.1917Jones ActIn1917, the passed the Jones Act was passed. This legislation was a crucial pointin Puerto Rican history because it granted U.S. citizenship to Puerto Ricans.However, it must be noted that it did not provide the Puerto Rican governmentany real decision-making powers.
Issues of importance were still decided uponby the U.S government. The U.S. government was responsible for major centralgovernment appointments on the island, such as the governor, the attorneygeneral, the auditor, and the commission of education, who were under theinfluence of the U.
S. Department of the Interior. Thinking about what thehistorical intuitionalist literature discusses relative to critical juncturesthat spawn path dependent processes, the Jones Act can be seen through thislens. It continues to have major implications even in present Puerto Ricansociety.Someof the first examples of the limitations placed on Puerto Rico by the Jones Actwere when Puerto Rico’s assembly voted to allocate funds to help earthquakevictims and to establish scholarships to encourage education. The attorney generalcanceled the allocations as violations of the Jones Act and those violationswere upheld. As will be discussed further in a future section of this paper, theUnited States did make some efforts to address the widespread poverty anddestitution on the island, however, it paled in comparison to any assistancegiven to actual states.
CommonwealthStatus Between1950 and 1952, a number of events culminated in the establishment of theCommonwealth of Puerto Rico. In 1950, a bill was signed by President HarryTruman that allowed Puerto Ricans the ability to draft their own constitution establishingthe commonwealth. In 1951, Puerto Rico was given the ability to governthemselves to some measure. In 1952, Puerto Rico was officially grantedcommonwealth status when all sections of the 1900 Foraker Act were repealed. Atthis point, Puerto Rico was able to self-govern to the degree that the keypositions would no longer be appointed by the US government. The change cameabout as the result of a compact between the people of Puerto Rico and theCongress due to growing frustrations within Puerto Rico and calls for fullindependence.However,it still must be noted that Puerto Rico still remains subject to the Jones Act.
It is also of note that Puerto Rico cannot set its own monetary policy and mustabide by many US economic statutes. Further, Puerto Rico has no realrepresentation in Congress. Instead, Puerto has a resident commissioner who canraise concerns and participate in debates over legislation in the House ofRepresentatives, but has absolutely no voting rights (Fontencilla 2017). Thiscan be a source of frustration because citizens have no say in matters relatingto their own rights nor a viable manner in which to argue for specific rightsand protections.Allof these factors provide context for better understanding the economicstructure and healthcare system that exists in Puerto Rico. All of thedecisions that have been made on the behalf of the United States regardingPuerto Rico have played a role in its current political status and the mannerin which the island can or cannot respond to important matters.
This becomesmore evident as underlying causes of the massive debt owed by Puerto Rico arefurther explored. EconomyTheeconomy of Puerto Rico is the largesteconomy in all of Latin America. The primary industries driving the economy withinPuerto Rico are manufacturing and tourism. The small size of Puerto Rico, thelack of raw materials, and control by the United States relative to foreignpolicy and trade restrictions have impacted its direction significantly.As Pierson notes, “Placing politics in time – systematically situatingparticular moments (including the present) in a temporal sequence of events andprocesses – can greatly enrich our understanding of complex social dynamics”(Pierson 2000). Puerto Rico, as referenced earlier, has had a historicallycomplicated political status relative to the United States that has hadeconomic and social implications. PathDependent Processes in the Puerto Rican EconomyThere are two significant historicalevents that can be argued to have initiated path dependent processes that haveresulted in the current state of the Puerto Rican economy, namely, aninitiative based on collaborations with the Puerto Rican government and theUnited States to industrialize and build up the Puerto Rican economy calledOperation Bootstrap, and provisions written into the tax code in the 1960s,effectively making the island a tax haven. OperationBootstrapOperation Bootstrap began in earnestin the early 1950s.
As aforementioned, it was an initiative made possiblethrough investments made by the United States to shift the economy in PuertoRico from one that was primarily based on sugarcane plantations to anindustrialized economy. It should be noted that in the period immediatelyfollowing the implementation of Operation Bootstrap in the 1950s and 1960s wasaccompanied by social stability and relatively peaceful labor relations, whichwere essential for a program that was dependent upon foreign investments. Thiswas because in the 1950s and 1960s the economy experienced relatively sustainedgrowth as firms were able to compete effectively against mainland manufacturersof low-cost manufactured wage goods ((Caban 1989). Puerto Rico attracted smallbusiness firms by offering low wages, tax exemptions and subsidies. However,after this, other less developed countries provided similar incentives forforeign capital to manufacture the same products.
This point is importantbecause it repeated itself more than once, severely impacting the economy eachtime. Theprincipal aspects of Operation Bootstrap that impacted the Puerto Rican economymoving forward was that it transformed the island from a poverty strickenagricultural economy to a comparably healthier industrialized economy, andfurther entrenched the dependence on United States investments to stabilize theeconomy. USTax Code and Puerto RicoFor roughly a century, federal taxlegislation has provided U.S. companies with incentives to invest and operatein Puerto Rico. Following Operation Bootstrap, in 1976, Congress gave a taxbreak to U.S.
companies that established subsidiaries in Puerto Rico whichhugely incentivized pharmaceutical corporations flock to there. This program “led to increasedemployment in the short run but did not alter the fundamental economicproblems” (Schwartz et. al 2008). In 2006, this part of the tax code, section936, fully expired.
This section was a vital part of the economy of the islandbecause it established tax exemptions for corporations from the United States that settledin Puerto Rico and also allowed its subsidiaries operating in the island tosend their earnings tax free to the parent corporation at any time.Following the expiration of this statute, pharmaceutical companies beganpulling money out of the island in droves triggering an economic depressionfrom which it has never recovered. Industrializationand tax incentives have undoubtedly shaped the direction of the Puerto Ricaneconomy to the present day. Understanding this armed with knowledge of PuertoRico’s political status, it becomes clear that all of this together has definedthe path to economic instability where the island currently lies.
Puerto Rican DebtTheexpiration of section 936 of the tax code could be considered the catalyst ofthe current debt crisis in Puerto Rico. While the economy of the island has hadmany ebbs and flows and has reckoned with moderate to high unemploymentthroughout its history, since 2006, the economy has continued to falter,causing many Puerto Ricans to migrate to mainland United States. In 2015,Puerto Rico partially defaulted on a $58 million debt payment, the first timethat has ever occurred in its history.
This has had many implications on PuertoRican society.Heath CrisisPuerto Rico receivesless federal funding for healthcare than the other 50 states and the Districtof Columbia even though Puerto Ricans pay social security and Medicare taxes(Roman 2015). In recent years, a number of funds have been in jeopardy of beingcut.
This is of extreme importance in relation to Puerto Rico’s economicoutlook because the dearth of support for the healthcare system is responsiblefor over a third of Puerto Rico’s $72 billion debt. Further, there iswidespread belief that the healthcare system is on the brink of collapse. Acrucial factor in all of this is that healthcare makes up 20% of the PuertoRican economy, resulting in a direct effect on” reimbursement rates forphysicians while promoting the disintegration of the island’s healthcareinfrastructure” (Roman 2015). Pierson and Skopcol assert thatutilizing a historical institutionalist approach to the social sciencesrequires the belief that “the patterns of resources andrelationships in which individuals find themselves have powerful channeling anddelimiting effects (Pierson and Skocpol 2002). According to this perspective,it is not surprising to understand why Puerto Rico finds itself in this currenteconomic state, and also the compounding of additional problems stemming fromthis crisis.
MedicaidJust to touch on the implicationsfor social policy in Puerto Rico, as well as, further discuss how intertwinedthe economic crisis there is related to the healthcare system, it is importantto have greater clarity on what differentiates Medicaid in Puerto Rico fromMedicaid in the United States. At this point, it has been established thatPuerto Rico operates within a unique space relative to the United States.Although Puerto Ricans on the island are not eligible for the full range ofprograms available in the US, Puerto Ricans have access to Medicaid. The Medicaid program in Puerto Rico differs fromUnited States Medicaid programs in several important ways. First, it operateswithin a larger, centrally administered health care delivery system. Approximately half of Puerto Rican citizensare poor and depend upon the public health system for their medical care.Second, recipients are not free to choose their own provider, but are referredto the proper level of care by public health care system professionals.
Additionally, federal financial participation has beencapped by the United States government since 1968 (Pagán-Berlucchi and Muse1986). In comparison, states receive a guaranteed federal matching rate basedon what they spend. Poorer states, receive a larger percentage of their Medicaidcosts matched. In Puerto Rico, the U.S. government’s overall capthrough the block grant received by Puerto Rico has meant an effective matchingrate of 15 to 20 (Center on Budget and Policy Priorities 2016).Affordable Care Act It has been demonstrated that PuertoRico is greatly impacted by decisions made by the United States. Something elseof note is that this is also true relative to public policy decisions.
AlthoughPuerto Rico has no voting representative in Congress, it is still subject tolegislation passed in the US. The Affordable Care Act (ACA) hasbeen controversial since its passing in 2010 and continuous pushes to repealit. At the same time, the ACA has helped expand coverage in Puerto Rico.Further, about 1.6 million Puerto Ricans enroll in Medicaid and temporary fundsallocated through the Affordable Care Act cover up to 900,000 of those people (Luthi2016).The ACA authorized an additional $925 million for Puerto Rico in place of theexchange subsidies offered to the 50 states and DC. Puerto Rico exhausted thismoney in 2017 (“Puerto Rico Medicaid” 2016). While historical institutionalismabsolutely refers to the notion that history matters, as an approach it alsoplaces great emphasis on not just history as context, but as a catalyst forspecific path dependent processes.
Many criticisms of this approach take issuewith the notion of processes as “locked-in”. However, as has been observed byexamining the history of Puerto Rico, taking note of its political statusrelative to the United States and the structure of the economy and healthcaresystem, it does seem to demonstrate that decisions and the historical contextin which they were made have a tremendous effect on subsequent and futuredecisions. Works CitedCaban,Pedro A. “Industrial Transformation and Labour Relations in Puerto Rico: From’Operation Bootstrap’ to the 1970s.” Journal of Latin American Studies, vol.
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