Bankruptcy for Puerto Rico? Bad Idea
Puerto Rico’s years of fiscal mismanagement, cronyism and corruption have come to a head. The island territory is at least $73 billion in debt, and guess who Congressional Democrats think should pick up the tab: American taxpayers, savers and seniors.
Puerto Rico Resident Commissioner Pedro Pierliusi and Governor Alejandro Garcia Padilla are working with fellow Democrats to lure Republicans into passing a bill (H.R. 870) that would give Puerto Rico a bailout, and allow Puerto Rico to walk away from its debts.
We at CFIF are concerned that some Republicans in Congress are receptive to this taxpayer bailout. Representative Goodlatte of Virginia, who chairs the House Judiciary, recently visited Puerto Rico to explore pursuing Chapter 9 having set the legislative process in motion when he consented to having a public hearing on the proposal back in February.
Chapter 9would hurt thousands of hardworking Americans on the mainland and in Puerto Rico who have invested savings in Puerto Rican bonds. And longer-term, it would do nothing to reform a broken Island. Furthermore, a Chapter 9 bailout flies in the face of principles for which Republicans are supposed to stand: limited government, fiscal responsibility and the rule of law. Some Puerto Rican apologists have even suggested that if Puerto Rico is not granted Chapter 9, the Island will just come calling for a bailout. But that is a false choice, and a stick-up by San Juan and their cronies.
Fortunately, better alternatives exist.
For example, the Puerto Rican Government could actually pay the hundreds of millions of dollars it owes to the power authority (PREPA) or Congress could also impose greater oversight over Puerto Rico. Remember, a financial control board was effective in reforming the District of Columbia’s finances 20 years ago, accomplished on a bipartisan basis by a Republican Congress and a Democratic President. Ultimately, that might be the way to put in place comprehensive, structural reforms so that Puerto Rico never again spirals out of control.
This brings us back to the Republican Congress, specifically Rep. Goodlatte. At a minimum, holding a hearing signals openness to the bill. Yet, this changes the rules in the middle of game and can have economic consequences, which Rep. Goodlatte has acknowledged.
Now that Rep. Goodlatte has met in Puerto Rico with its leaders, fellow conservatives are looking to him to put the brakes on this bailout. As Jay Marts of the Virginia Northern Shenandoah Tea Party writes, “H.R 870 is not a conservative solution,” but “a gift to the Democrats.”
American taxpayers should not be saddled with yet another bailout and force Americans saving for retirement to take a financial hit. Instead, Congressional Republicans should guide Puerto Rico into doing the right thing: trim spending and taxes, stand up to unions and undertake badly-needed governing reforms. The time is right for a control board.