NEVER LET A CRISIS GO TO WASTE:

Puerto Rico's Governor Channels Ronald Reagan: Luis Fortuño wants deep tax cuts to spur growth. Are Republicans in D.C. paying attention? (MARY ANASTASIA O'GRADY, 10/31/10, WSJ)

When Mr. Fortuño took office in January 2009, Puerto Rico had a 46% budget shortfall equal to $3.3 billion. Things were so bad, he told me in a telephone interview from San Juan on Tuesday, that he had to fly to New York while still governor-elect to explain his fiscal plan to the investment community in order to avoid a sharp downgrade of Puerto Rican debt. "We were one step from junk status," he says.

After 22 months in office and a boatload of spending cuts, the deficit is now down to about 11%. That achievement notwithstanding, the commonwealth still is spending more than it takes in. In the Washington political handbook this means Puerto Ricans are not paying enough in taxes.

Mr. Fortuño has a much different view of the problem: He thinks high taxes have destroyed the Puerto Rican economy. He has already signed into law a five-year property tax holiday for real estate purchased through June of next year and waivers on fees for those transactions. Last week he handed his legislature a radical plan to simplify the tax code and sharply reduce corporate and individual rates.

Mr. Fortuño says that Puerto Rico's recession—which began two years before the U.S. recession—only partly explains the current crisis. "If you look at the past decade, Puerto Rico has had negative growth for the entire period." (According to his office, the economy contracted 0.2% in the 2000s.) This shows, he argues, that "we are in need of a major overhaul. If we just tweak it a little, we won't accomplish what we need."

Life just doesn't offer you that many chances to swing for the fences when you're a political party. You've gotta take them.

Posted by Orrin Judd at November 1, 2010 5:31 AM