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POLICY INSIGHT
BEYOND THE NUMBERS

Helping Puerto Rico

| By CBPP

Two recent CBPP papers discuss ways that federal policymakers can promote economic growth in Puerto Rico and help the island address its budget problems.  Here’s the introduction for each one:

  • Puerto Rico Economic Growth Package Should Include Work-Promoting Earned Income Tax Credit

    As a congressional task force studies proposals to boost economic growth in Puerto Rico, tax relief for low-income working families — delivered through an Earned Income Tax Credit (EITC) — should be a key component of such a package.

    The EITC is now available to low- and moderate-income working families in the 50 states and the District of Columbia.  Creating a separate EITC for workers in Puerto Rico would be a more effective way to boost labor force participation and reward the work of low-income families than alternative forms of tax relief that have been proposed.  (These alternatives include a tax credit similar to the 2009 Recovery Act’s Making Work Pay credit, which equaled 6.2 percent of wages up to $400 for singles and $800 for couples, and a temporary cut in the employee share of the Social Security payroll tax from 6.2 percent of earnings to 4.2 percent.)  An EITC also would boost consumer demand in Puerto Rico more effectively than those alternatives. . . .

    Click here for the full report.

  • Addressing Puerto Rico’s Medicaid Funding Shortfalls Would Help Ensure Fiscal Stability and Growth

    In June, President Obama and Congress enacted legislation — the Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA — to help address Puerto Rico’s immediate debt crisis.  Unfortunately, the law didn’t address the island’s inadequate federal Medicaid funding, which is critical to remedying Puerto Rico’s short- and long-term budgetary and economic problems. 

    Although Congress should also consider some Medicare policy changes to assist Puerto Rico, Medicaid should be the clear priority.  Nearly half of Puerto Rico’s residents are enrolled in Medicaid, leading Puerto Rico’s severely stressed health care system to rely disproportionately on Medicaid payments.  As Treasury Secretary Jacob Lew and Health and Human Services Secretary Sylvia Burwell recently wrote to the Congressional Task Force on Economic Growth in Puerto Rico, which PROMESA established to develop federal policy recommendations for Puerto Rico, any “serious proposal for Puerto Rico’s future growth starts with addressing the inadequacies of Puerto Rico’s treatment in the Medicaid program….”  Congress should seriously consider an Obama Administration proposal to increase Puerto Rico’s federal Medicaid funding, which would better ensure that the island’s Medicaid beneficiaries have access to needed care while also helping shore up its health care system. . . . 

    Click here for the full report.