The glory and genius of our nation -- one, under God -- is that our Founding Fathers devised just the right formula for a system of government that would allow the newly born society to attain some of the greatest advances not just in individual freedoms, democracy, and human rights, but in economic prosperity, scientific and technical innovation, and progress for itself and for all mankind.
From Puerto Rico, where Old Glory flies high atop La Fortaleza, the oldest working Executive Mansion in the entire Western Hemisphere, both the value and fragility of the fundamental freedoms that sustain the American experiment are plain to see. Not far from our shores, two well-known despots continue to espouse and attempt to export ruinous ideologies that stifle individual freedoms and enslave people to the state. Other neighbors, although democratic, have economic systems that thwart their citizens' ability to reach their full potential.
This is the country that the world still turns to and emulates as the greatest force for freedom, progress, and prosperity in history. But the truth is that not all threats to the political and economic freedoms that undergird the United States are external. It is from within, in fact, that we face the threat of government encroachment and irresponsible fiscal policies that undermine the very foundations of our nation's success and imperil the future of the rising generations of the 21st century.
At the state and territorial level, many of my fellow like-minded governors are striving to do everything within our power to stem the tide of red ink. When I took the oath of office in January 2009, our administration inherited a budget deficit of $3.3 billion, the highest deficit, proportionally speaking, in the country. Following the better part of a decade of reckless spending and bloated government, Puerto Rico's credit teetered on the brink of being downgraded on Wall Street to junk status.
I went to work to fulfill our voters' mandate to restore fiscal responsibility and align public policy with proven pro-growth strategies that would help Puerto Rico reach its full potential for economic growth and a better quality of life for all our citizens. Now just past the midway mark of my current term in office, I am pleased to report that my constituents are beginning to reap the benefits of the tough decisions we made and the wise course of action that we have relentlessly pursued.
In just two years, we have shrunk our budget gap from 44 percent to 11 percent -- now, 31 states of the Union have higher deficits, proportionally, than Puerto Rico -- and we will achieve a balanced budget in fiscal year 2013. Last year, Puerto Rico received the highest credit rating increase of any other state or territory in the nation, as well as its first positive credit outlook in nearly three decades.
Most importantly, as a result of the tough but necessary action we took to right our course, we're now in a position to truly unleash our people's freedom to prosper, by implementing the biggest tax cuts in Puerto Rico's history. Thanks to these tax cuts, the tax burden on individuals will be reduced by an average of 50 percent, and the tax burden on businesses by 30 percent.
The benefits of tax reform are central to a new era of economic vitality on the island, and they go hand in hand with the implementation of state-of-the-art public-private partnership investment legislation, reform of permitting, and energy reform, among other pro-growth initiatives.
Our experience in Puerto Rico, as well as those of other states and territories that are also grappling with equally formidable fiscal panoramas, can provide a lesson for Washington. As we rise together to meet the perilous challenges of fiscal irresponsibility and government encroach-ment that face us as a nation, we all have a responsibility to lead and keep the United States the number-one driver of peace, progress, and prosperity for generations to come.
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