Tag Archives: Puerto Rico

I’d like to expand the Jones act so more ships can do US trade.

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If you visit most any European port city, you’ll see a lot more shipping than in the Midwestern US. In Detroit, where I am, your’ll see an occasional ore boat from Wisconsin, and an occasional tourist cruise, but nothing to compare to German, Belgian, or Turkish ports. The reason for the difference is “The Jones act.”

The port of Istanbul with many ships

The Jones act , also known as “The Merchant Marine Act of 1920”, requires that all ships depositing cargo or people between US ports must be US owned, US built, US captained, US flagged, and at least 70% US manned. This raises costs and reduces options. The result is that few ships can move people or cargo between US cities, and these ships are older and less efficient than you’ll see elsewhere. World wide water traffic costs about 1/8 that of rail traffic per ton-mile, but in the US, the prices are more comparable. The original justification was to make sure the US would always have a merchant marine. The Jones act does that, sort of, but mostly, it just makes goods more expensive and travel more restrictive.

The port of Detroit — we rarely see more than one ship at a time.

Because it does some good, I don’t want to get rid of the Jones act entirely, but I’d like to see US shipping options expanded. Almost any expansion would do, e.g. allowing 50% US manned ships delivering along US rivers, or expanding to allow Canadian built ships or flagged, and ships that are more than 50% US owned, or expanding to any NAFTA vessel that meets safety standards. Any expansion of the number of ships available and would help.

The jones act increase the price of oil transport by a factor of five, about.

Currently, the only exceptions to the Jones act are for emergencies (Trump voided the act during several storms) and for ships that visit a foreign port along the route. This exception is how every cruise ship between California and Hawaii works. They’re all foreign, but they stop in Mexico along the way. Similarly, cruises between Florida and Puerto Rico will stop in Bermuda typically, because the ships are foreign owned. Generally, passengers are not allowed to get off in Puerto Rico, but must sleep on board. This is another aspect of the Maritime act that I’d like to see go away.

Because of the Jones act, there is some US freight-ship building, and a supply of sailors and captains. A new, US ore-ship for the Great Lakes was launched last year, so far it’s been used to carry salt. There is also a US built and operated cruise ship in Hawaii, the “Pride of America,” that makes no stop in Mexico. I’d like to see these numbers expanded, and the suggestions above seem like they’d do more good than harm, lowering prices, and allowing modern container ships plus roll-on-roll-off car transports. Our rivers and lakes are super highways; I’d like to see them used more.

The port of Antwerp – far busier than Detroit.

Another way to expand the Jones act while perhaps increasing the number of US-built and operated ship would be through a deal with Canada so that ships from either country could ply trade on either countries rivers. As things stand, Canada has its own version of the Jones act, called the Coastal Trade Act where Canadian vessels must be used for domestic transport (cabotage) unless no such vessel is available. Maybe we can strike a deal with Canada so that the crew can be Canadian or US, and where built ships in either country are chosen on routes in either country, providing they meet the safety and environmental requirements of both.

Robert Buxbaum, June 14, 2023.

Puerto Rico’s minimum wage and statehood

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Puerto Rico is in deep trouble and it’s getting worse. Unemployment is at 12%, double the next worst state or territory (Alaska). Tourism is down and poverty is at 41%. US tourists have begun going elsewhere where prices are lower: Bermuda, Haiti, Jamaica, and Cuba. The island is effectively bankrupt and would have filed for bankruptcy last year except that, as a US territory, they legally can’t. But neither can they pay their bills. The territory will go into default in 2 weeks, on July 1, 2016 unless congress creates a new funding mechanism for them. Statehood would allow Puerto Rico to go bankrupt, but there is no way for statehood to be achieved by July 1. Nor will bankruptcy help them, long term.

Puerto Rico's minimum wage is vastly too high; here it is compared with other US states.

Puerto Rico’s minimum wage is vastly too high for its median wage. From Preston Cooper, Economics21.

It is worthwhile to ask why Puerto Rico is in such bad shape. Why are they worse off than Guam, for example; Guam is far more isolated. Puerto Rico is run poorly, but it’s no worse than Guam or  Illinois. One problem particular to Puerto Rico is that their minimum wage is way too high relative to the median wage.

Because of the climate, living expense are low in Puerto Rico, but Puerto Rico’s economy is mostly tourism. It competes for tourist dollars with lower-wage Caribbean countries, Jamaica, Haiti, and Cuba. Neither Alaska nor Guam must compete this way, with a nearby, low cost alternative. Puerto Rico could compete better if they could lower their minimum wage. Tourism would be more attractive, and the government would not have to spend as much either for minimal-skill workers.

With a lower minimum wage, more Puerto Ricans would be able to find jobs, and the government would likely manage to balance its books. But Puerto Rico is part of the US, and we set the minimum wage. I think the federal government should grant them an exemption. Without one, there is no obvious way for Puerto Rico to pay its bills.

Four years ago, in my first blog post, I suggested that Detroit should lower its $15/hour ‘living wage‘, a wage rate that unduly burdened the city budget, and added to Detroit’s rampant unemployment and corruption. A year later, the city dropped it as part of bankruptcy, and saw significant improvements. I’m not alone in suggesting a lower minimum wage. It’s better than state-hood and immediate bankruptcy.

Robert Buxbaum, June 19, 2016.