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Empire of Lies: How the US Continues to Deceive the World About Puerto Rico

Members of Congress are trying to lower Puerto Rico’s minimum wage — and say they’re “stabilizing” the island’s economy.

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“There are three kinds of lies,” said Mark Twain. “Lies, damned lies, and statistics.” Unfortunately for Puerto Rico, this is not an aphorism; it is an operating principle.

Separated by an ocean and a language from the mainland, Puerto Ricans have watched the US government lie brazenly and repeatedly — to the American people and the world at large — about its actions and interests in the Caribbean.

The latest walk down liar’s lane is a cut to the minimum wage, as proposed by the US House of Representatives’ Committee on Natural Resources.

Efforts to Lower the Minimum Wage

On April 12, 2016, the House Committee on Natural Resources released HR 4900: the Puerto Rico Oversight, Management, and Economic Stability Act, with the acronym of PROMESA. The bill creates a Financial Control Board, which will act as a collection agency for the hedge funds/vulture funds throughout the island.

Taking their cue from The Wall Street Journal, The Washington Post, the Krueger Report and a study commissioned by 34 hedge funds, the committee decided that a “good” way to spark the Puerto Rican economy and improve the lives of its residents would be to lower their minimum wage … so they stuck that in the bill, as well.

This appears in Section 403 of PROMESA (p. 75-6) with intentionally convoluted language. The section title, “First Minimum Wage in Puerto Rico,” suggests that Congress is creating a minimum wage on the island. It then requires you to read Section (6)(g)(4) of the Fair Labor Standards Act.

Only then do you realize that PROMESA will cut the minimum wage of newly hired young workers throughout the island, from $7.25 to $4.25 per hour. This will apply to everyone aged 20 to 24, whenever they start a new job.

In Puerto Rico, there are over 200,000 people in this age bracket. Many of them are paying student loans. Few of them can afford to live on $4.25 per hour, unless they continue to live with their parents.

The supply-side argument that this will “create more jobs and economic development on the island” is woefully myopic. At $4.25 per hour, $170 per week, $8,840 per year, a young worker will make 25 percent of the per capita income of a resident of Mississippi, the poorest state in the US. Someone needs to explain to the House Committee on Natural Resources that this is not “economic development.” It is indentured servitude that smells of racism.

Standing for Ethics and Integrity — While Accepting “Gifts”

Another brazen contradiction, which reeks of dishonesty, is the PROMESA policy toward “gifts” for the Financial Control Board.

On the one hand, the Control Board will conduct island-wide audits, subpoena witnesses, impose fines and imprison anyone who obstructs its mission of fiscal accountability and honest government.

On the other hand, the Control Board will be authorized to accept and use “gifts, bequests, or devises of services or property, both real and personal.”

It is not clear why the Board needs to receive “gifts,” or how these gifts enhance their standing as an “honest and ethical” ruler of the Puerto Rican economy. What is clear is that this open invitation to bribery, influence peddling and money laundering appears on page 21 of the PROMESA bill.

Dark Money Ads

The Orwellian deceptions are not limited to a “helpful” minimum wage cut, or “gifts” for a Control Board. Right now, as recently as May 17, a multimillion-dollar ad campaign funded by “dark money” sources (i.e. anonymous and undisclosed) is willfully deceiving the entire American public.

Throughout April and May of 2016, a group called the “Center for Individual Freedom” (CFIF) purchased hundreds of TV ads in media markets all over the US to convince legislators to deny any Chapter 9 bankruptcy relief to Puerto Rico.

The ads aired on Fox, NBC, ABC and CBS affiliates nationwide. They ran on local news programs and on the April 10 episode of “Meet the Press.” You can view one of these ads here.

Like a toxic intravenous fluid, these CFIF ads are continually updated and injected into the US corporate media. The latest injection occurred on May 17, 2016.

These commercials are part of a larger propaganda machinery. According to The New York Times, “a coalition of hedge funds and financial firms has hired dozens of lobbyists, forged alliances with Tea Party activists, and recruited so-called AstroTurf groups on the island to make their case. This approach has proven successful overseas, in countries like Argentina and Greece, yielding billions in profit amid economic collapse.”

As a “dark money” group, CFIF is not required to disclose its donors, so the sponsors of these ads are unknown. It is reasonable to assume that several vulture funds and their lobbyists are involved, but federal law and the Citizens United decision of the US Supreme Court make it illegal to compel the disclosure of who is paying for these “commercials.”

Worst of all, the commercials are lying. They all urge a block of the “Washington bailout of Puerto Rico” and suggest that US taxpayers will be forced to pay for it. But bankruptcy restructurings are not bailouts, and vulture funds are not taxpayers.

When I pressed the CFIF for a clarification of its ads, CFIF leaders did not get on the phone. Instead they sent a position paper, which, after 2,031 words of obfuscation, admits that Chapter 9 bankruptcy is not a government-funded bailout, and would not be paid for by the US taxpayer.

Obviously, CFIF is not a bastion of truth. It is a hired gun. Its cynical conflation of terms is geared to create public confusion and provide political cover for members of Congress who are allegedly “responding to their constituents,” when in fact, they are servicing their lobbyists and campaign donors.

This is Citizens United on steroids and nakedly transparent — but 1,500 miles away, the people of Puerto Rico are powerless to stop it.

As they say on TV, “but wait, there’s more!” The lies are not limited to the US Congress and “dark money” organizations. Some of the most lethal whoppers were hatched on Wall Street. Cynically and systematically, the entire Puerto Rican economy was set up to fail by the ratings agencies, with a junk bond rating scam.

Junk Bond Ratings

In 2010, the Big Three rating services (Fitch, Moody’s, Standard & Poor’s) all warned Puerto Rico to “get your act in order.” If this “order” was not established, the services would slap Puerto Rico with the lowest possible credit rating: junk bond status. And so, in 2010, the government of Puerto Rico dutifully laid off 30,000 workers.

In 2013, it raised corporate tax rates to 39 percent and hiked the water rates by 60 percent. Also in 2013, islanders paid double the average electricity costs of the rest of the US, at 29 cents per kilowatt. The government also raised the retirement age, increased worker contributions and lowered government pensions and benefits.

Despite all these fiscal austerities, the three rating services pulled a last-minute trick on Puerto Rico. They kicked the island’s credit rating into the gutter — after Puerto Rico had done everything that the rating services demanded. In February 2014, all three rating services downgraded Puerto Rico’s debt to junk bond status. This “junk bond” maneuver — a bait-and-switch tactic by the three rating services — cut the island off from any further credit, and accelerated its path to default.

These are the same rating services that were sued by federal and state governments and pension funds nationwide for their complicity in the subprime mortgage crisis.

A History of Lies

“How could this happen?” a reader may ask. “How can they get away with this?”

The answer is very simple: What happens in Vegas stays in Vegas, but what happens in Puerto Rico … never happens at all. For over a century, the abuses heaped on the island’s residents are simply not reported in the US mainstream media. This happens so brazenly and frequently that, for many Puerto Ricans, the US is seen as an empire of lies. This mendacity is deeply rooted in the history of US relations with Puerto Rico. Here are just a few historical examples:

1) Blessings of Enlightened Civilization

On July 29, 1898, Gen. Nelson A. Miles delivered the first official US proclamation to Puerto Rico. As his men hoisted Old Glory over the Ponce town hall, Miles declared, “We come to bring you protection, not only to yourselves but to your property, to promote your prosperity, to bestow upon you the immunities and blessings of the liberal institutions of our government … and the blessings and advantages of enlightened civilization.”

But just two years later, in 1900, the US devalued the island’s currency by 40 percent. Then, in 1901, Puerto Rico was prohibited from negotiating commercial agreements with any other nation, and prohibited from determining its own tariffs.

By 1930, US banking syndicates owned more than half of the island’s farmland. They also owned the postal system, electric utilities, coastal railroads and the San Juan International Seaport.

So much for “protecting your property and promoting your prosperity.”

2) US Citizenship

On March 2, 1917, the Jones-Shafroth Act conferred US citizenship on every resident of Puerto Rico. One month later, 18,000 Puerto Ricans were drafted and sent to fight in World War I.

But 57 years later, after spilling their blood in five wars, Puerto Ricans were still being denied the federal minimum wage … for working on the very land that they’d once owned.

3) The Ponce Massacre

On March 21, 1937, on Palm Sunday, Puerto Ricans marched peacefully and with a permit to protest the land and employment abuses of the United States. Under the orders of then-Gov. Blanton Winship, the police shot at them with machine guns. Seventeen unarmed men, women and children were murdered and more than 200 were sent to the hospital. Among the dead was Georgina Maldonado, a 7-year-old girl who was shot in the back.

For weeks, The New York Times, The Washington Post and others in the mainstream US press kept reporting this as a “Puerto Rican riot,” and insisted it had been a “gunfight with Nationalists.” This lie was only exposed because of one photo.

4) The Gag Law of 1948

Under intense US pressure, in June 1948, Public Law 53 was passed in Puerto Rico, which made it a felony to say one word, sing a song, whistle a tune or communicate anything against the US or in favor of Puerto Rican independence. Ownership of a Puerto Rican flag was also a Law 53 violation.

The US called this an effort to “fight communism” in Puerto Rico, but it was actually a gag law to silence Pedro Albizu Campos (the independence leader who’d just been released from prison), and to discourage anyone from joining the Nationalist Party. Law 53 violations were punishable by 10 years in jail.

Ironically, this gag law was passed in the same year that George Orwell completed his novel 1984.

5) Commonwealth Status

In 1952, the US informed the UN Committee on Decolonization that Puerto Rico had freely chosen to associate itself as a “commonwealth” of the United States. This meant that Puerto Rico was no longer a colony and should be taken off the UN list of non-self governing territories (i.e. colonies).

Years later, the draftsman of the commonwealth filing documents and the “constitution” of Puerto Rico, José Trías Monge, the chief justice of the Puerto Rico Supreme Court, repudiated this commonwealth as a diplomatic ruse.

Monge explained that the US could not wage a 1950s Cold War against the Soviet Union and be the “leader of the free world” while maintaining the oldest colony on the planet — and so the US invented this “commonwealth” status. Monge’s book was appropriately titled Puerto Rico: The Trials of the Oldest Colony in the World.

The US government agrees with Monge. The Obama administration recently repudiated the entire “commonwealth” relationship and told the US Supreme Court that the island remains a dependent US territory.

So the commonwealth was a lie.

Countering the Lies

The entire 118-year history of the US-Puerto Rico relationship is riddled with deception, but the lies have become unsustainable, and Puerto Rico is at a breaking point. The sales tax is 11.5 percent. Electricity rates are 300 percent higher than in New York. In 2013, the water rates rose by 60 percent. Thanks to the Jones Act, the cost of living is 12 percent higher than in the United States, yet the per capita income is hovering at $15,200. No tortured logic, no trickle-down theorist or hedge fund hustler can credibly argue that a minimum wage reduction to $4.25 will help the island — especially when the rest of the US is pushing for $15 per hour in all 50 states.

Even if ostensibly limited to workers aged 20 to 24, a $4.25 minimum will place a downward pressure on all wages throughout Puerto Rico. It will also discourage tens of thousands of students from attending or finishing college, thus creating a permanent underclass throughout the island.

If anything, this minimum wage cut will increase unemployment, because full-time work will pay less than the combined package of welfare, Medicaid and food stamp benefits for which a family of three will qualify.

Unless of course, the federal government intends to cut those, as well — and then tell the rest of the world that Puerto Ricans are lazy, shiftless and need to “learn how to work” for $4.25 per hour.

This is not public policy. It is thievery in broad daylight.

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