Helping Puerto Rico Without A Bailout
By Marco Rubio
June 29, 2016
Puerto Rico is suffering today like never before. The Zika virus is spreading rapidly, with at least 1,809 total people infected so far, including at least 191 pregnant women, a reality that will further strain an already frail public health system. But while Zika is a fairly recent development in Puerto Rico, a fiscal crisis has been brewing for decades. San Juan’s politicians have misspent taxpayer money, borrowed money they don’t have to the tune of a $72 billion debt, and mismanaged Puerto Rico’s public institutions. In doing so, they have crushed opportunities and dreams for hundreds of thousands of American citizens born in Puerto Rico who have had no other choice but to flee to the mainland U.S.
Last year, the politicians on the island who got Puerto Rico into this mess enlisted an army of lobbyists and special interest groups to come to Congress and insist that there was only one solution to this mess: allow the indebted Puerto Rican municipalities and utility companies driving this crisis to reorganize their debts under U.S. Chapter 9 bankruptcy laws. Many portrayed this plan as a silver bullet solution, and they asked for this relief without meaningful commitments that would put the island on a path to sustainable growth and solvency. For months last year, I studied Puerto Rico’s dire situation closely, reviewed this proposal and even offered my colleagues some ideas on how to improve it. Ultimately, I concluded that Chapter 9 alone was the wrong policy at the wrong time. While some form of debt restructuring may become necessary at some point, it should be a last resort with the onus first being on San Juan’s politicians to get their fiscal mess in order and adopt pro-growth policies. Only then will the conditions for long-term economic growth and prosperity in Puerto Rico exist.
But Congress has a role to play too, given that our Constitution gives the House and Senate responsibility over all U.S. territories like Puerto Rico. The Puerto Rico Oversight Management and Economic Stability Act (PROMESA) is an appropriate first step by Congress to deal with this calamity. The bill would create a fiscal oversight board to help fix the mess, ensure that bondholders’ rights are protected and make sure a taxpayer bailout does not happen. I understand that federal oversight is a tough pill to swallow for some on the island – and it’s an option I don’t take lightly, given my belief that government usually works best when it is closest to the people, not dictated from Washington. But in Puerto Rico’s case, it has become a necessary condition to ensure that tough decisions are made now, so that an even bigger crisis can be avoided.
The legislation also seeks to have the different stakeholders voluntarily renegotiate debt and, if that fails, recommend a debt restructuring overseen by a federal court as a last resort. Additionally, the bill contains some modest pro-growth measures. But most importantly, with PROMESA, not a single taxpayer dime will be spent on paying Puerto Rico’s debt.
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