Study: A return to 1985 economy under federalization

Under federalization, the CNMI economy will essentially turn back to 1985. That’s what a recently released report analyzing the current CNMI economy says.

The report, Economic Impact of Federal Laws on the CNMI, provides two scenarios: what will happen under federalization and what will happen if the federalization laws are repealed or moderated, coined the “relief” scenario.

According to the report, under federalization, the CNMI economy stands to lose approximately 44 percent of its real Gross Domestic Product, 60 percent of its jobs and 45 percent of its real personal income by 2015.

“Unequivocally, this is a depression of great magnitude,” the report states.

Under the relief scenario, the CNMI would see a loss of 9 percent in employment. The economy would see a gain of approximately 11 percent in real Gross Domestic Product, 7 percent in real personal income and 21 percent in per capita personal income.

“These do not represent strong growth rates, but they do not represent an economic depression either,” it states.

Richard Pierce, the governor’s special assistant for economic affairs and trade relations, said that, according to the report’s findings, there is no doubt the CNMI is experiencing a downward turn in the economy. Pierce sought funding for the report and was primarily responsible for facilitating the necessary data.

“While definitions of recession and depression are somewhat arbitrary, the United States citizens in the Commonwealth are experiencing a worsening depression by any common understanding of the term,” he said of the report’s findings.

The Covenant establishes that the U.S. will help the CNMI government achieve a progressively higher standard of living as part of the economy of the United States. It also establishes that the United States will help develop the economic resources needed to meet the needs of a local self-government.

“This report suggests that the U.S. has not met this obligation,” Pierce said.

He said the Covenant’s federal application of the minimum wage and immigration changes is now destroying the CNMI economy.

“The Covenant worked very well in the first several decades of the CNMI…obviously, something has gone seriously wrong,” Pierce said of the report’s findings.

Federal lawmakers have had difficulty in determining what they should or could do to help territories like the Commonwealth develop.

“They are convinced, however, that the territories should be economically self-reliant of self-supporting. Even when, against all odds, the CNMI was able to establish a thriving garment and tourism industries, the federal government acted to decimate them,” he said, summarizing the report’s findings.

He added there have been deficiencies with U.S. territorial policy.

“There have been attempts to formulate programs that assist small communities in low-income or low-growth areas. However, Congress regularly deals with trade and investment policies in ways that harm the economic development prospects of the territories,” he added.

The report was completed with a federal grant from the U.S. Interior Department. A request for proposals was placed and a team was chosen and contracted with the Office of the Governor.

Pierce said the report was not done to provide evidence for litigation that did not exist in 2006.

“If anything, it was meant to demonstrate that, by withdrawing any economic incentives that made the CNMI prosper from between 1984 and 2000, the exact opposite should be expected to occur,” he said. “If some wage, labor and trade incentives built a booming economy on a small Pacific island in a matter of years, like gravity, the elimination of those incentives for development by those that supplied them has sent an economy in exactly the opposite direction by virtue of their disappearance.”

The report already has achieved some of the reasons it was produced, Pierce said. Existing and potential investors to the CNMI are able to use the report to get a better understanding of the current economic situation with accurate information. The Strategic Economic Development Council will use the report to meet grant prerequisites for future economic development.

“This report will get mileage,” Pierce said.