Shutdown negatively affects Puerto Rico

by | Feb 20, 2019 | Economy | Comments

On December 22, 2018, the US government began a shutdown as a result of the budget for the next fiscal year remaining unapproved, which occurred this year due to disagreement over Trump’s border wall: a project estimated to cost anywhere from $12 billion to $70 billion.

This past month’s partial government shutdown is the longest in US history. It’s economic effects are wide-reaching, including a pronounced economic impact on Puerto Rico. The government shutdown entails closed nonessential offices, no pay for workers of closed offices, and suspended federal funding of parks, monuments, museums, and other areas deemed nonessential. 14,000 federal workers live in Puerto Rico, and of these, 4,500 are directly affected by the government shutdown. The typical government worker has missed out on $5,000 in wages. Multiply this by 4,500, and the resulting total adds up to $22.5 million in missed wages.

Most recently, starting January 24, 2019, Puerto Rico provided free utilities for federal workers. Prior to this, the territory’s governor Ricardo Roselló confirmed the territory would suspend tax collection from federal workers, along with providing unemployment and nutritional assistance benefits and free transportation to affected workers. The Puerto Rican development bank has also been considering the possibility of providing low-interest loans to federal workers in need. Even more fiscally dire, federal aid still accounts for 40 percent of Puerto Rico’s government revenue, which is particularly high compared to the US average of 26.2%.

Gustavo Velez, an Economist at Inteligencia Económica, stated that “Around 27% of Puerto Rico’s personal disposable income depends on federal government payments.” Although the present loss of federal workers’ wages is hefty, he also adds that most government funding programs have been untouched by the shutdown.

President Trump signed a bill to temporarily reopen the government for three weeks, bringing the 35 day shutdown to a halt. If the shutdown continues past the three weeks however, national losses are projected to climb to $6 billion total by the end of the first week.