PROMESA provides for reforms for Puerto Rico Debt Crisis[/caption]
The U.S. territory of Puerto Rico finds itself facing more than $118 billion in debt from bonds and unfunded pension liabilities. The government has been unable to manage this debt and has already begun defaulting on its repayment. As a result, Congress has debated how it can and should address this debt crisis. The government of Puerto Rico has requested Chapter 9 bankruptcy. The Barack Obama Administration has supported that, and sought a bailout as the way to address the debt crisis in Puerto Rico.
The pro-reform side argued against bailout and bankruptcy, and urged reforms of the financial and government sectors of Puerto Rico to prevent the root causes of the debt crisis, prevent another crisis like it, and bring about lasting prosperity to the citizens of the island Commonwealth. Given that we have a progressive Democrat president, we could have easily expected the pro-bankruptcy view to prevail in this political battle.
The Administration and their allies didn’t back down from the fight for bankruptcy and special treatment for their bondholder friends. Obama ally Anita Dunn was paid $3.5 million in government money to promote bankruptcy for Puerto Rico, and Millstein and Co. was paid millions in consulting fees to advocate a special deals for hedge funds who have investments in Puerto Rico’s debts. Both efforts failed. The result of the process is a very strong pro-reform bill released in Congress yesterday.
The end result of the process is a bill that has the support of many conservatives and grass-roots organizations representing taxpayers and fiscal conservatism, supported by many grass-roots organizations representing American taxpayers, including Citizens Against Government Waste, Americans for Tax Reform, as well as Niger Innis of Tea Party Forward.
That legislation is the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), introduced by Rep. Sean Duffy (R-WI) as well as Reps. Rob Bishop (R-UT) and Jim Sensenbrenner (R-WI). This bill, if enacted, will create an Oversight Board to assist the Commonwealth in enacting reforms and reign in their out of control welfare state as well as managing their debts. It does not in any way bailout Puerto Rico with taxpayer funds, nor does it include or enable bankruptcy for the Commonwealth.
This released draft of PROMESA creates an Oversight Board that will have the authority to enforce balanced budgets and government reform if the Commonwealth’s government fails to do these things. This board will have the authority to sell states assets, reform state-run enterprises, and it’s authority is supreme over that of the government of Puerto Rico. Additionally, the bill will give the Oversight Board the authority to do what is necessary to reform the financial and governmental sectors of Puerto Rico if the government of the Commonwealth fails to uphold their responsibility to get their house in order. One might call this approach “tough love,” but that is exactly what the Commonwealth needs to enact meaningful reforms and create the lasting prosperity the people of the island deserve. All of this will be accomplished without appropriating or spending a penny of U.S. taxpayer money.
Not only does PROMESA not spend any money on bailing out Puerto Rico, it also does not allow or provide for any bankruptcy. While Chapter 9 bankruptcy is an option for municipalities or U.S. states under the 10th Amendment, it does not apply to Puerto Rico given its territorial status. Under PROMESA, the debts of Puerto Rico will be managed by the Oversight Board, and the process will not set any precedent or affect how any other debt crisis in any U.S. city or state will be managed.
Overall, this is a strong bill with solid support from conservatives and pro-taxpayer groups, and with strong support from grass-roots conservatives, it can pass in Congress and gain the signature of the president. This bill is good for U.S. taxpayer and great for the future of the people of Puerto Rico.]]>
