Federal Bailout of CNMI Proposed

January 31, 2011

I think it is ridiculous to propose that the “feds should compensate the CNMI for negative impacts of its actions”,  as Senate Vice President Jude Hofschneider has suggested. Hofschneider prefiled a resolution stating that the CNMI should receive “millions from the federal government to mitigate the negative impacts of recent federal actions on the local economy-actions that include takeover of local immigration, minimum wage increases, and lifting of world trade quotas that led to the death of Saipan's once booming garment industry.”

Firstly, the federal government is not responsible for the CNMI’s failed economy. The CNMI leaders are. The leaders failed to implement a plan to identify replacement industries and/or revenue knowing that the tariff rules would result in the exit of garment companies from the CNMI. They did nothing. (Well, actually leaders did something.  They pointed fingers, blamed, complained and whined.) They refused to implement a plan to replace the predictable loss of revenue. U.S. taxpayers should not be responsible for the CNMI’s failed policies and lack of judgment, especially since the CNMI taxpayers do not pay federal income taxes.

The CNMI leaders cannot seem to understand that they need to immediately raise revenue.  Why aren't they looking at property, income or sales taxes?  Now that everything is unraveling, the CNMI leaders do what they have always done. They ask the federal government and taxpayers to bail them out of their mess. No thanks!

It is far too late to try to scramble to lure new industries to put down roots in the CNMI. Any such plan would take years to implement before revenue would flow. The CNMI leaders are capable only of talking in circles and coming up with some impractical "get rich quick schemes" such as legalizing marijuana, casinos, Internet gaming, and on and on. The CNMI leaders need to stop talking, stop complaining, stop pointing fingers and start getting to work on developing a plan that will erase the deficit and provide a secure and lasting revenue source that will grow over time.

Senator Hofschneider cited a February 2000 GAO report that said that most of the CNMI’s revenue came from the garment industry and tourism. As stated in the Department of Interior’s response to the report, that fact merely stated what was obvious.

What Hofschneider failed to state was that the DOI and others found much fault with the report and urged the CNMI to immediately start identifying revenue sources and not to wait until the garment companies left.

From the DOI letter in the GAO Report:
The draft report accepts without question the definition of the CNMI economy as composed of alien workers, alien based industry, and indigenous workers dependent on government employment without raising the fundamental question of the appropriateness of such an economy in the context of American tradition, values, and laws. The economy of the CNMI is described in reports by the Bank of Hawaii as a "two-tiered economy" in which the garment industry, parts of the tourist industry, and those directly associated with them, benefit, while the foundations of economic growth, including employment and training of local residents, fall behind. Our concern is that the GAO report may be utilized as an economic evaluation of this enclave-based economy or, worse as a prescription for continuation and growth of an economy dependent on non-resident alien employment. An economy whose principal industry grows by 30 percent annually while its government deficit increases and its citizens endure increased unemployment deserves a more thorough analysis, one that would seek to answer basic questions of economic analysis: What are the long term benefits of existing or planned industries to the economy? What are the effects in training and employment of citizens? What are the alternatives to the current economic system? Unfortunately, concepts such as comparative advantage, opportunity costs, long-term viability of industries, and employment and training of citizens are outside the scope of this report...
Another relevant DOI comment was that, "The draft report is not oriented toward the future, even the short-term future, it ignores the obvious danger of over-dependence on an industry that is not merely uncertain, but scheduled to cease abruptly in five years' time."


The CNMI attracted garment factories to the islands because of the exemption on quotas and tariffs on goods shipped to the US.  The General Agreement on Tariffs and Trade (GATT), which had regulated all global textiles and apparel trade since 1974, expired in January 2005, ending quotas on textile exports to the United States.  Factories on Saipan left to China, Vietnam, and other third world countries where the minimum wage is lower and there is less oversight.

This exodus was not a surprise! The CNMI leaders knew for years in advance that the World Trade Organization was going to end the CNMI's favorable quota system. In fact, they knew since 1998 and had eight years to come up with a revenue generating plan to replace the taxes from garment factories that had floated the CNMI's economy, which actually was an economy built on quicksand. They did nothing, and now want the US taxpayers to bail them out!


There is no evidence to show that the meager minimum wage increases have hurt the CNMI economy. Perhaps because the wage is so low while the costs of utilities, food and other necessities are so high (compared to the mainland) consumers cannot afford to spend money to stimulate the local economy.

Hofschneider also claimed: “A change in legal status will create new entitlements for guest workers and responsibilities on behalf of the CNMI government. These recent changes in the law have had a devastating effect on the CNMI economy, and on real wages of U.S. citizens in the CNMI.” Yet he again failed to cite how any changes from PL 110-229 have negatively impacted the CNMI economy.

It's time for the CNMI leaders to grow up and start identifying genuine sources of revenue other than the federal taxpayers.

25 comments:

Anonymous said...

The Feds decided to take over immigration as per the convenat agreement. No real drama there, but there are costs, and situations, associated with the decision.
Remember the US could have just left us alone. This is basically what they are doing in the US mainland-nothing.
That said, Wendy is correct this time. The CNMI had plenty of time to get it's act together, but decided to stick it head in the sand thinking a space ship full of gold would land.
While there should probably be some compensation for the immigration move it is only a very, very temporary...fix. Ah, fix is a good name for it. Our leaders are just like junkies that score a dime bag of heroine. When the US does give this government some money they are going to sit back and enjoy the high...for a while. They the withdrawal symptoms begin again and they go looking for another fix. Blaming everyone and trying to score wherever they can.
Hey, maybe we need to get that show "Intervention" over here. Maybe the people of the CNMI need to stop being the enablers to these people. We need to tell them all "These are the terms and if you don't like it you can leave" Tough Love. The government needs to go to re-hab

Anonymous said...

This is the kind of "nonsense" that is proposed by elected that are uneducated.
Even the ones that went to a place of higher learning did not get "educated" (Cinta comes to mind as an example.)
While many can read (but don't) the same ones and many more do not have any comprehension of what it was that they read.(in the few cases where they actually did attempt to read any pertinent info.)
It is also the "entitlement" mindset that they think that the US owes them everything and should just keep throwing more money after bad.
As I have said stated before, I think that the Feds should just pull the plug on this place and let it settle back into pre TT days. The Tourism would probably eventually flourish.
The many skilled that are present could leave to Guam or the US mainland and use NMI as a vacation home or a retirement place for when they retire and return home.
Many are and will continue to leave to Guam anyway as the jobs are/will be there with decent wages.
After the CW regs are out in March, that will be interesting if they allow for the CW to work in Guam to defray the estimated 25k additional "H" visa workforce that will be needed once the buildup gets on track.
This may be sooner than later as there must be a "reduction in force" for this Govt. to be able to even manage to trudge along.

The best thing that could happen would be for the people to rise up and take to the streets (in a peaceful movement)and demand for the elected to step down starting with the Gov. on down the line.

Anonymous said...

who elects these people like hofscheinder. please come forward and display yourself, if for nothing else but pure comedy.

Anonymous said...

I don't know enough about the possible responsibilities of the Feds per the takeover of immigration, but they definitely did not live up to their responsibilities under the trusteeship. They developed no real economy, they improved very little infrastructure, etc. There is a real argument there for compensation.

Anonymous said...

No, there is no sane argument for compensation. GROW UP NMI! Some words for the elected officials to look up in the dictionary:
Leadership
Honesty
Responsibility
Accountability
Maturity
Motivation
Self-reliance

Anonymous said...

9:43 While you may be correct about the absence of many of those attributes, where the adminstration of government, and in fact, individual politicians is concerned, 8:54 is correct in their suggestion that the US did not live up to the requirements of the trusteeship. They didn't come close to meeting their responsibilities under the trusteeship. That lack of infrastructure, economic and social development laid the groundwork for many of the "get rich quick" schemes, like the garment factories. You may feel slighted by that, but it is the truth. A truth that is available in many a UN report.

Anonymous said...

apparently the truth is available in many a UN report, but you failed to cite to a single one. if you can't back it up, will you just keep trolling and repeating your bs until you and some other sucker believe it?

Anonymous said...

Do your own homework. Go ask some knowledgeable people who were here during that period like Sam McPhetres or Charles Jordan.

Anonymous said...

Noni 7:41

I agree with the commenter at 2:38. If you claim something is documented provide a link or a quote. So many people toss out garbage or make statements that are false.

We are not talking about the US relationship during the Trusteeship. Move on people and take some responsibility for the state of the NMI. Or continue on the path you are on as a welfare state. You act like helpless babies begging for US dollars. Then you try to talk the big talk when you go to DC and look like idiots because your actions don't match your words.

The US has given the CNMI BILLIONS IN DOLLARS, has provided grants for studies, training and a host of economic and infrastructure projects. You people that can only blame the federal government just want everything handed to you like you are spoon fed babies. When will the NMI grow up? You should be ashamed.

Anonymous said...

No, many of us don't want everything "handed" to us. But we do believe agreements should be lived up to. There were good reasons for them, and there are clearly ramifications that have come from not living up to them. That applies to both the many obligations that weren't met by the US under the trusteeship, as well as, the obligations of the CNMI government under the covenant.

The state of the Commonwealth is not such due solely to one side. This might be a little to complex to fathom, and it's always easier to just find simple blame, but it's not that simple.

Anonymous said...

Average budget for all UN Trustee Islands 1947-1970: 4million (1.4mil-7mil various years) Over 50% of this was used for salaries of US Personnel.

1961 Time Magazine:
The U.N. Trusteeship Council made the U.S. embarrassment more acute. Back from a six-week tour of the islands, a four-nation (Bolivia, Belgium, Britain, India) committee was full of criticism of U.S. policies and performance. The U.S., charged the committee, has 1) done little to encourage economic development, 2) failed to revive island industries launched by the Japanese during their prewar tenure, 3) failed to initiate any new industries 4) allowed school buildings to run down and neglected to provide enough secondary education, 5) proved reluctant to place Micronesians in top administrative posts. In short, the U.N. mission called on the U.S. to make "greater and speedier" efforts to prepare Micronesia for eventual self-government and independence.

(This might hurt to hear, but it is outlined in many such assessment reports by the UN.)

Anonymous said...

Not all UN reports from the TTPI era concerning Micronesia are on the internet, as hard as that may be to believe.

But try to Google "Solomon Report".

The U.S. was woefully remiss in the exercise of its Trusteeship responsibilities, particularly in infrastructure and economic preparedness.

Most of the CNMI's problems that are blamed on failed local leadership are directly attributable to federal failings.

Even land compensation issues go back to federal failures. There are records at Interior that clearly show this. Ask Attorney Tom Clifford, a West Point grad who was at the OAG working on, among other things, land issues from 1995-99, and since has been doing other things in private practice.

Anonymous said...

Are you guys for real? You are referring people to links that are 50 years old? Seriously? Hello. This is 2011. MOVE THE F ON! The NMI NEED TO LOOK FORWARD NOT BACKWARD. Without whatever federal help was given, imagine how bad the NMI would be today! GEEESHHHHHH!

Anonymous said...

Noni 6:02

Yes, unfortunately they're for real, which is why the NMI will never prosper. These people are so obsessed with blaming the feds that they refuse to sit down and make plans and work to benefit the CNMI. Blame equals federal money to them. Give me more money because it's your fault. Pathetic!

Anonymous said...

It's not about blame. It's about identifying the issues that lead to where we are now, and it's about identifying the resources to "fix" the problems.

Your arguments that we shouldn't look back, are silly. Ah, she's already been raped, move on already. Oh, slavery was two hundred years ago, move on already. Oh, the nuclear waste was removed from that area thirty years ago.

It's hard to admit the faults of your own "white knight", but lancelot had his faults and there is fault all around. Real resolution begins at identifying the seed of the problems.

Anonymous said...

Let's identify the issues:

Corruption in NMI government
Nepotism
Political favors
Election fraud
Nondisclosure of contracts
Illegal activities endorsed by NMI officials
Refusal to share statistics and data
Immaturity
Self-motivation of NMI officials takes precedence over public good
Dishonesty of public officials
Refusal to abide by laws
Waste of government funds
Childish behavior of NMI officials
Ineffective Legislature
Spent over $10 million to lobbyists as infrastructure failed


Just to start....

Anonymous said...

8:33 Deanne just stop.

Anonymous said...

Let's identify some of the roots of the problems:

-Inadequate infrastructure built during the US trusteeship administration.
-Inadequate education system set up during the US trusteeship (Micronesians had to convince their daughters to pretend they wanted to become nuns just to get them an education at Mt. Carmel)
-Inadequate healthcare system set up during the US trusteeship.
-No cultural institutions set up during the US trusteeship.
-No real industry or economic development pursued during the US trusteeship.
-Little to no social and/or honest political development under the trusteeship.
-No address of land issues, and in fact, land grabs during the tenure of the trusteeship.
-The list goes on.

Anonymous said...

It took the US 24 years before they even built one public high school, and it was a poor high school at that.

Anonymous said...

How many high schools has the NMI built? How much revenue has the NMI raised to fund its projects or services?

8:33 says, "It's not about blame. It's about identifying the issues that lead to where we are now, and it's about identifying the resources to "fix" the problems." Resources in your mind is federal dollars. The NMI needs raise some revenue. the free ride needs to end.

Anonymous said...

The CNMI has raised more revenue per capita over the past 25 years than any other territory sans Guam. Unfortunately, much of that revenue has gone towards addressing problems that were obligations of the US under the trusteeship, and/or mismanagement that can be linked in many ways to the same unmet obligations.

Anonymous said...

I'm sorry did I miss something? Did the federal government create problems like decaying buildings and eyesores that repel tourists like bug zappers? Did the federal government create the red light district that turned off family vacationers? Did the federal government push back every time reform was offered? Did the federal government invite tens of thousands of aliens to the CNMI? Did the federal government order the CNMI government to become an employment agency hiring all local political friends and family members? Did the federal government destroy NMC with political interference? Remove the federal government from the equation and the CNMI balloon of place will pop. Not deflate slowly, pop. End. Over. Finished. The CNMI is a spoiled brat with a gimme, gimme, but I refuse to listen to you attitude.

Anonymous said...

why not ask for donations from Abramoff, Delay, Norquist, Willens, Siemer, Ring, Doolittle, Reed, Tan. they were such a big help the first go 'round.

Anonymous said...

11:22 you are painfully stupid.

Anonymous said...

The US spent ten times more on the development of one flop bomber, than they've spent in their entire post-war Micronesian "holdings". They've spent something like 3-5 billion in the last 50 years in Micronesia (including Guam and the Northern Marianas, excluding Guam-based military facilities). A pittance. They spent 50billion just to develop the B2 bomber.