Core Causes of the Puerto Rico Debt Crisis

Puerto Rico's debt crisis can be attributted to a string of multiple factors but mainly stems from the fact that they were unable to create a sustainable tax base coupled with the availability to easily borrow funds through the issuance of triple tax exempt municipal bonds.

The relative ease they had in issuing debts bonds allowed the Puerto Rican government to run up a deficit over multiple years with each government hoping that the following year would be the year they would recieve enough revenue and they would catch up...However that never materialized.

Each year since 2002, the Puerto Rican government began to spend more than they were taking in. The gap widened as the years followed. The fact that Puerto Rico debt bonds were tax free for those who purchased them made it much easier and more tempting for the local Puerto Rican government to borrow instead of finding ways to cut spending..
we have to couple this with the fact that much of Puerto Rico's tax revenue has never been sustainable mainly due to the fact that its own jurisdiction was supplanted by the power or laws coming from the US federal government that would often override anything the local Puerto Rican government had decided.

For example, Puerto Ricans were never able to develop the economy of Puerto Rico throughout its history. Their economic development was first in the hands of Spain up to the end of the19th century and then was passed to the United States. Although granted favorable tax laws from the US federal government for much of the 20th century, in 1996, US president Bill Clinton signed legislation phasing out important parts of the favorable tax code eventually ending them in 2006. This was done without any input from the Puerto Rican government. The end of this favorable tax code led to companies leaving the island which eventually led to tax shortfalls..It was during this period when the local Puerto Rican government began to issue an unusually large number of debt bonds..

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