This is the Cato Daily Podcast for Tuesday, June 30, 2015.

I'm Caleb Brown.

Puerto Rico's budgetary mismanagement is significant, but is not the only reason Puerto Rico is in such dire financial straits.

Its island status means certain regulations cost Puerto Rico far more than they do states

on the mainland.

Nicole Kating, a budget analyst at the Cato Institute, explains.

Puerto Rico currently has about $72 billion in outstanding debt obligations.

And that puts their debt to GDP ratio.

It's a good way to compare different sized states and countries at about 70%.

For comparison, the average U.S. state has a debt to GDP ratio of about 15%.

The state with the largest debt to GDP ratio is Rhode Island, and it's at approximately 20%. So Puerto Rico has a very, very large

debt burden. And what they said, what the governor said this week is that frankly the island can't pay its debts back and its

state-owned utility company will likely miss a debt payment this week.

What has Puerto Rico's contribution to the debt problem been?

The island's budget is frankly a mess. The island has refused to tackle and acknowledge of how bad its budget crisis has been.

It has done things like raised taxes, but then provides a number of loopholes to corporations that basically exempt them from taxation, it continues to spend wildly,

it's basically refused to tackle these issues.

A great example, several years ago, the island actually released its budget document in Spanish.

Spanish is of course a very prominent language in Puerto Rico.

But refused to actually release the budget documents in English

so that most other budget analysts could actually go through the budget, see where they were

spending money, where they were wasting money.

...