Puerto Rico Economic Crisis

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Part 1: Puerto Rico was already in an economic crisis before they were hit by Hurricane Maria. It had filed for municipal bankruptcy back in May. The storm caused an estimated fifty percent drop in the U.S. collections of taxes and fees, adding to the eleven year recession. The damage costs done to Puerto Rico, estimate around $45 to $95 billion (Jervis, “Harvey, Irma, Maria: Different Disasters, Different Recovery”). So far, only $5 billion has been approved by Congress to aid the island. The damages were so severe that tens of thousands of people left Puerto Rico, businesses were closed, and barely any electricity and water are being generated at a normal capacity. Puerto Rico also represents roughly 30% of the territory’s GDP which will …show more content…
This is designed to stimulate the economy during times of recession. Government spending is a good tool because it has the power to raise or lower real GDP. The spending also applies to businesses who sell the goods bought by the government which then allows consumers to earn money from work and then go spend it. To implement more government spending, acts or funding are proposed then passed along to help the economy for that designated area. In the long-run, government spending may lead to a rising national debt (Hoople, “The Budgetary Impact of the Federal Government's Response to Disasters”).

Taxes can affect a consumer’s income which then leads to changes in real GDP from consumption changes. By affecting taxes, government can influence the economic output. A part of it would be benefit payments for those who incomes fell and for claiming of tax deduction for casualty loses. To enact the tool, acts for tax limits would be produced. An example would be income tax cuts that would increase consumer spending, driving the economy to boost. This plan will work in the short-term with putting more money into circulation but in the long-term, if it depresses the economy it can also add to the national
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