Only Congress Can Rescue Puerto Rico

THE NEW YORK TIMES – By THE EDITORIAL BOARDAPRIL 23, 2016

San Juan, Puerto Rico Credit Victor J. Blue for The New York Times

San Juan, Puerto Rico Credit Victor J. Blue for The New York Times

Puerto Rico is beset by problems. Its government is straining under a mountain of debt, the economy is deteriorating and the Zika virus is spreading. Only Congress has the power to help, but it is not moving fast enough.

It has been clear for months that the federal government needs to give Puerto Rico a way to restructure its $72 billion debt and impose a financial control board to oversee decisions by local lawmakers. But the effort to pass legislation is facing stiff opposition from some House Republicans, who have bought into false arguments made by hedge funds and other investors that this would amount to a federal bailout or that it could open the door to bankruptcy filings by state governments.

Puerto Rico, which has already defaulted on some of its debt, does not have the money to make big bond payments that are coming due in May and July. The island’s government is so short of cash that it has delayed more than $2 billion in payments to vendors and delayed tax refunds to individuals. Public hospitals have closed floors and are rationing medicine at a time when health experts fear a surge in Zika infections that can cause birth defects.

Some Republicans, including the House speaker, Paul Ryan, are supporting a bill, called the Puerto Rico Oversight, Management and Economic Stability Act, that would authorize a financial control board and allow Puerto Rico to restructure its debt. But that legislation has big flaws that need to be fixed in negotiations with Democratic lawmakers and the Obama administration.

For example, the House bill would require five of the seven members of the financial control board to allow Puerto Rico to restructure its debt and then give a minority of creditors the ability to block a restructuring plan. These provisions could greatly delay a resolution to the island’s financial problems. The bill would also exempt the island from federal minimum-wage and overtime regulations, which it has to abide by now. In addition to denying Puerto Ricans labor protections that apply to all Americans, these provisions would encourage more people to leave to find work on the mainland. In 2014, net migration from Puerto Rico to the states was 64,000, up from 26,000 in 2010, according to the Pew Research Center.

Done right, legislation that would help Puerto Rico through its financial crisis would not cost the federal government any money. And allowing the island to restructure its debt would not mean that Congress would have to give states like Illinois that also owe a lot of money to investors the ability to do the same.

If Congress does not act now, Puerto Rico’s financial crisis could drag on for years. The island’s government would have to cut more public services, and more of the island’s 3.5 million people would seek a better life on the mainland, which would further reduce tax revenue. It is hard to see how this downward spiral would help anyone.

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