Statehood would bring windfall for poverty-striken Puerto Rico, supporters say

Statehood would bring windfall for poverty-striken Puerto Rico, supporters say

SAN JUAN, Puerto Rico (December 10, 1998 3:51 p.m. EST http://www.nandotimes.com) -- The television ads show a river of dollar signs cascading from the United States down to Puerto Rico, promising lower taxes and annual federal aid checks of up to $3,500 a family. A veritable windfall of federal funds lies ahead, the ads say, if only Puerto Ricans finally choose to join the United States in a referendum Sunday.

The vote is non-binding, but President Clinton has said he hopes Congress will abide by the result.

Statehooders -- those who want Puerto Rico to become the 51st state -- are relying heavily on a 1996 report by the General Accounting Office which shows federal spending in that case will nearly double, from $10.3 billion to $19.8 billion. It also says six of every 10 islanders would pay nothing in federal taxes because their incomes are so low.

The precedents of Alaska and Hawaii -- the last states to join in the union in 1959 -- suggest that statehood does bring economic growth, analysts say.

But with so many intangibles, no one can say for sure what the economic effect of statehood would be for Puerto Rico.

"Statehood is the only answer if Puerto Rico is to confront the 21st century and for growth to take place," said economic consultant J. Tomas Hexner of Cambridge, Mass.

Gov. Pedro Rossello hopes for at least a plurality for statehood in Sunday's referendum, which he would use to lobby Congress, the ultimate authority on the island's status.

Under the current "commonwealth" arrangement, Puerto Ricans are U.S. citizens but do not vote for president, Congress nor pay federal taxes.

Statehood would allow Puerto Ricans to vote and entitle them to aid at even higher levels, statehooders say.

A GAO report in 1998 shows that a new U.S. child tax credit could cost the Treasury up to $200 million a year for Puerto Rico.

Furthermore, under statehood, spending caps would come off many federal programs. Statehooders quote the GAO reports to promise $81 million in federal job training, $30 million in extra welfare payments, $15 million more social security payments and $27 million in child care supplements.

"Under statehood, we will be able to demand the funds we are entitled to," Carlos Romero Barcelo, the island's sole and non-voting representative in Congress, told a rally this week. "We will have equality."

It's a potent pitch on a Caribbean island where more than half the 3.8 million people live below the U.S. poverty line.

Opponents say under statehood, some of the tax monies that now go to the Puerto Rican government would instead go to Washington. And since island's government is its largest employer -- with over 200,000 employees -- that raises the specter of possible layoffs.

Beyond that, critics argue that Rossello's crusade has inadvertently raised concerns in Congress over allowing the territory to join as well as the costs of keeping it a commonwealth.

"There can be no more free ride for Puerto Rico," Caribbean Business weekly quoted Rep. Dan Burton, R-Ind., as saying Thursday.

Puerto Rican Rep. Victor Garcia San Inocencio, who favors independence, says "every time the statehooders make those promises in Puerto Rico, they are laying the foundation for an even more overwhelming rejection of statehood in Washington."

But a new GAO report in July provided a partial response, estimating that the federal government could gain corporate income tax revenue from Puerto Rico ranging anywhere from $1 billion to $4.6 billion annually under statehood.

By CHRIS HAWLEY, Associated Press Writer