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How Dirty Politics Are Threatening An American Economic Success Story

The following op-ed, written originally for The Huffington Post by Keith O’Neale of the V.I. Economic Leadership Council, is being republished with permission.

"It’s the economy, stupid!" Nearly two decades after James Carville introduced the axiom, it is more relevant than ever for Democrats and for America. Every company that wants to stay in America and contribute to our economy is important. And every Democratic leader fighting to keep these companies here – and fulfilling the electoral mandate to stabilize and grow the economy needs support, not attacks from fellow Americans.
In the U.S. Virgin Islands, we face the same recession-driven hurdles as the rest of the country. The USVI’s difficulties are compounded by our inherently limited economy, a challenge for more than 50 years. We must be smart, work hard and think creatively, building on our strengths and core industries. One of those is rum making, which dates to the 1760s in the USVI. Rum is serious business for us. It creates direct economic growth in America’s Caribbean islands. It supports indirect jobs, from our transportation companies to our local stores and restaurants. And under the rum excise tax cover-over program, it generates an essential revenue stream for the USVI government. To successfully expand our economy, rum is a vital tool.
So you can understand our consternation and bemusement when the USVI is attacked for making economic decisions that are good for our territory and America. Because remember, "it’s the economy, stupid." The latest barrage – with its hyperbole and misinformation – has come from a strange alliance of Puerto Rican statehood backers and a few conservative bloggers. They simply are not interested in the truth.
The USVI has few tools in its arsenal to promote economic development, while both the USVI and Puerto Rico receive fewer federal benefits than the 50 states. The rum excise tax cover-over is among the most important. It rebates the excise tax paid by rum producers when they import rum to the U.S. mainland back to the government where the rum is produced.
The Congressional Research Service reported that the cover-over program was created nearly a century ago to generate business activity and spur economic growth. CRS also declared that cover-over revenue is under full local control. The USVI is using it to keep companies in the United States, create new local government revenue, modernize the rum industry and clean up the environment.
The USVI’s Governor John deJongh – a Democrat with a business and economic development background – struck two innovative public-private partnerships with Diageo and Fortune Brands to produce Captain Morgan and Cruzan Rum brands in the USVI. The key to these agreements is that we will work together to grow rum production so our investments bring in significantly more cover-over revenue to the USVI. This is found money. By more than doubling this revenue stream, our government can fund economic development and public needs, from upgrading infrastructure, to building schools, to fixing our pension system’s unfunded liability. The partnerships have already prevented layoffs of thousands of government workers.
Equally important, the partnerships lock in the companies to stay in the USVI for 30 years. You won’t be reading newspaper headlines about these companies moving to a foreign location for cheaper production, weaker environmental protections or lower labor standards.
So what’s the problem? Puerto Rico and its allies don’t like our agreements. After decades controlling America’s rum industry, providing billions of dollars in funding to their rum producers, they say our investments and incentives are too high. They toss around scary statistics and made-up production figures with no basis in reality. And they are pushing federal legislation that would retroactively overturn our partnerships, divert revenue from the USVI to Puerto Rico’s coffers and maintain Puerto Rico’s 80-plus percent market share. Yes, 80-plus percent market share.
The reality is another story. Our investments have protected American jobs. They are already benefiting small businesses. They improve the environment with best-in-the-world sustainable facilities. They guarantee our children have a better future. And they make sure companies that want to stay in America do so.
Most leaders in Washington have rejected Puerto Rico’s smear campaign against the USVI. So the attacks have become more offensive. Now Puerto Rico is targeting Democratic lawmakers and possibly harming the Democratic party this fall as it fights for every Congressional seat and statehouse.
Miguel Lausell, the chairman of one attack group, the National Puerto Rican Coalition (NPRC), claims to be a Democrat but endorsed Senator McCain over then-Senator Obama. He recently wrote of Democratic "failures," called Democrats "unethical" and claimed we do not deserve to lead. A board member of this group (NPRC) was just appointed by the Obama administration to a senior role at USAID. How does he explain Puerto Rican assaults on the President’s own party that seem to have come from the GOP’s playbook and are undermining the Democratic majority and senior Democrats on Capitol Hill?
Instead of attacks, Puerto Rico should look for solutions. Creating economic growth requires commitments from businesses and governments that are fair and guarantee a real return-on-investment for local residents. In the USVI, where Diageo will start producing rum later this year, this ROI is tangible. The contractors and employees at work, the "under construction" signs and the ringing cash registers are proof of which all Virgin Islanders are proud.
In a year of "it’s the economy, stupid," letting politics stop economic progress is a recipe for disaster.

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