Puerto Rico – you don’t count……to the U.S. government

Hurricanes Irma and Maria devastated Puerto Rico in September destroying homes, crops and communications. Many weeks later, less than 20 percent of the electricity has been restored, and no one really knows when the rest of the island will regain power.

How much did the devastation caused by these storms on Puerto Rico impact key U.S. mainland indicators like GDP, unemployment and inflation?  The answer might surprise you; not at all.

How Does The U.S. Government Handle Puerto Rican Numbers?

Branches of the U.S. government that collect statistics generally do not include Puerto Rico in national totals.  For example, the U.S. Census Bureau has calculated Puerto Rico’s population since 1910.  It even lists the island’s almost 4 million people along with the population of the other 50 states.  However, the total population of the U.S. does not include the island’s people unless they move to the mainland.

GDP shows the size of a country’s economic pie.  The U.S. Commerce Department’s Bureau of Economic Analysis tracks U.S. GDP at a very detailed geographic level.  If you want to know the GDP of Oshkosh, Wisconsin ($10 billion in 2016) or Altoona, Pennsylvania ($5 billion), the U.S. government has you covered.

What they don’t track is Puerto Rico.  This is strange since the Bureau does track the GDP of four smaller U.S. territories.  Data are published annually for the U.S. Virgin Islands, Guam, American Samoa and the Mariana Islands.  The press release discussing territorial GDP does not explain why Puerto Rico isn’t part of the list.

One reason might be that Puerto Rico produces its own numbers.  However, Puerto Rico produces Gross National Product (GNP) figures. The U.S. mainland tracks Gross Domestic Product (GDP).  While the two sound alike, they are not comparable.  GNP measures what Puerto Ricans produce where ever they live.  GDP tracks what is produced within the U.S. borders irrespective of citizenship or immigration status of the worker.

Unemployment and Prices

Other important economic data are information on unemployment and inflation, which are produced by the U.S. Department of Labor’s Bureau of Labor Statistics.  Like population, the unemployment figures for Puerto Rico are calculated and released along with other states.  However, Puerto Rican numbers are not included in the national total, which means Maria’s destruction of jobs and businesses will have no impact on U.S. unemployment.

Just as interesting is the region in which the Bureau of Labor Statistics classifies Puerto Rico.  The Caribbean island is part of the New York-New Jersey region.  It is not part of something geographically close like Florida.

Hurricane Maria has raised the price of food and other necessities on the island.  However, the hurricane will not impact U.S. mainland inflation.  U.S. inflation figures are calculated by changes in the Consumer Price Index or CPI.  The U.S. CPI collects prices from 87 cities.  None of those cities is in Puerto Rico.

Conclusion

Does Puerto Rico count at all in U.S. statistics?  The answer seems to be summed up by the Central Intelligence Agency, CIA.  The CIA publishes an amazing statistical resource called the CIA World Factbook.  The Factbook provides a fast and simple method of tracking key statistics needed to understand the political, economic and military capability of any country.  The CIA has a separate entry for Puerto Rico, which they consider “a self-governing commonwealth in political association with the US.”

Overall, there is no impact on the U.S.’s GDP, unemployment or inflation after the extensive devastation of Hurricane Maria since Puerto Rico is not included in the calculation of key economic data.

Is there any silver lining to being ignored by the U.S. government?  The Internal Revenue Service (IRS) does not care about Puerto Rico. Island residents do not have to pay U.S. federal income taxes on their earnings.  This means there is at least one upside to being overlooked by Washington.

How to kiss babies, Donald Trump style

Politicians have a long history of trying to be elected by kissing babies. However, with about four million babies being born in the U.S. each year, there isn’t enough time in the current presidential race to kiss enough newborns to make any real difference. So Trump is trying to find another way to convince Americans he cares about babies. Continue reading

Does The Federal Reserve Know More Than Other Government Economists?

The U.S. Federal Reserve has a complicated mandate. The legislation governing this agency states the Fed is supposed to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” It does this by controlling or influencing interest rates and controlling the U.S.’s money supply. The Fed has pushed down interest rates close to zero for many years to increase the number of employed people and reduce unemployment. By pushing interest rates down, it has explicitly ignored two of its three mandates. The key question for the Fed is when should it stop focusing on employment and refocus its attention on stable prices and moderate long-term interest rates? Continue reading

Cops May Feel the Biggest Impact from Driverless Car Revolution

Recently, the McKinsey Global Institute published an article that predicted self-driving cars will disrupt major parts of the economy. Positive numbers from the article, such as 90% of all accidents would be prevented and commuters would gain 50 minutes a day of free time were trumpeted in the news. The press also focused on industries that would be harmed by self-driving cars. The two largest industries McKinsey pointed out that would be hurt are auto insurers and auto repair shops. McKinsey, however, missed one of the key impacts of self-driving cars in their study. Self-driving cars will have a tremendous impact on police forces around the world. Continue reading