Many things have gone wrong. Most important, however, is that the United States government assumed too big a role in the Puerto Rican economy, and its largesse enabled the commonwealth's government to do the same. Through hubris, clumsiness and sheer size, these governments knocked Puerto Rico off the promising path that it was following, and the island's economy is now lost in a thicket of bad incentives. Two federal intrusions stand out: an oversized welfare state, and misguided rules on business investment.
For many people, however, the money that can be earned through federal transfers and a little informal work is more than the market wageand requires much less effort. Meanwhile, in a strange echo of America's immigration debate, people from the Dominican Republic do many of the jobs in Puerto Rico that pay too little to attract the locals.