As a U.S. territory, Puerto Rico's plight will ultimately become the responsibility of the U.S. taxpayer. So now, with a growing sense of urgency, Congress is considering options to keep Puerto Rico solvent.
U.S. Rep. Tom Marino, R-10th District, is shepherding a bill through Congress that would allow Puerto Rico to declare bankruptcy.
But instead of what could turn into a short-term bailout, it would be much wiser to insist on responsible measures that focus on comprehensive, long-term remedies. Steering clear of bailouts should be a priority.
Let's hope Members of Congress who take their duties to taxpayers seriously decide to slow the process down and fully examine the options.
Puerto Rico's finances have been an evolving disaster for years and the day of reckoning has arrived.
Puerto Rico's finances have been an evolving disaster for years and the day of reckoning has arrived.
The island has a staggering $73 billion in debt. Sadly, there is no political support in Puerto Rico for real reforms from budget cuts to pension reform.Puerto Rico Gov. Alejandro Garcia Padilla has exacerbated the financial situation by signaling his intent to avoid paying debts, which has left the island's credit rating at junk status and reduced investor appetite.
It is important that Congress not legitimize the governor's irresponsible policies.
In February the House Judiciary subcommittee that Marino chairs heard arguments for granting Puerto Rico eligibility under Chapter 9 of the U.S. bankruptcy code, which would allow Puerto Rico to declare bankruptcy as the way other cities like Detroit have.
This seems innocuous at first glance but a closer look reveals bankruptcy could pose a threat to taxpayers as well as to Americans' retirement savings.
Proponents of Chapter 9 insist it is a limited step to allow public corporations to restructure their debts, and escape the pressures of Wall Street creditors. But this view doesn't address the pain it could cause average people here in Pennsylvania and around the country.
Many Americans, through their 401(k)'s and mutual funds are invested in Puerto Rico's bonds and could take a financial hit as a result of Chapter 9 being extended to Puerto Rico.
What's worse, proponents want Chapter 9 applied retroactively. This could result in a blow to investors and average folks' retirement savings. Congress should not let this happen.
Beyond shortchanging hardworking Americans, Chapter 9 would allow Puerto Rico to continue with the bad governance and short-sighted economic policies that allowed it to descend into a financial abyss in the first place.
Under Chapter 9, some or all of Puerto Rico's debt could be wiped clean, which disincentivizes real policy changes and flies in the face of taxpayers who financed the debt to begin with.
Before Marino and his colleagues consider ways to address the financial crisis in Puerto Rico, they should think carefully about whether it would be fair to ask taxpayers and investors, including pensioners, to sanction a deal which would perpetuate the misguided policies that have caused them harm.
Ultimately what Puerto Rico needs is a top-to-bottom review of its governance and a comprehensive plan to get its finances on the right track.
One solution that deserves a serious look would be to institute a federal board of control similar to that created for the District of Columbia 20 years ago.
District politicians and many citizens balked at the time, but the control board worked. Debts were paid, budgeting efficiencies were adopted and the Nation's Capital was back in business before long, attracting investment and continuing to improve governance.
For starters, a control board could undertake a comprehensive assessment of Puerto Rico's economic policies and an accounting of the debts of the central government and municipalities.
It could then lay out a program to reduce the size of government and implement legitimate tax reform that does not attack the middle class.
Given Gov. Garcia Padilla's track record, it is doubtful that a declaration of bankruptcy would compel Puerto Rico's leaders to undergo a stark self-critique or adopt unpopular choices needed to right the Island's finances, such as reducing bloated public payrolls and union pensions.
But anything short of that could provide an escape hatch from current debt and enable similar mistakes in the future.
This would be unfair to the Puerto Rican people and leave U.S. taxpayers ultimately responsible for their growing debts.
While Puerto Rico is a long way from Pennsylvania, its insolvency is a looming problem for taxpayers here.
Marino and other lawmakers should reject any sort of bailout and demand comprehensive changes in Puerto Rico's governance and finances.
Anything less would shortchange both Puerto Rican families hit hard by the current financial instability, and taxpayers on the U.S. mainland.
Mario H. Lopez is president of the Hispanic Leadership Fund, a Washington D.C.-based political advocacy group.
By
U.S. Rep. Tom Marino, Congress should consider alternatives to Puerto Rico bankruptcy
No comments:
Post a Comment