The Puerto Rico crisis: What's next

Puerto Rico is stuck in a nasty downward spiral. Its economy has contracted almost every year for the past decade. In turn, its population is shrinking as young people decamp for Florida, New York and other U.S. states seeking job opportunities. That, in turn, only further depresses its economy. It’s also stuck under a mountain of debt due to years of mismanagement, making it hard for the Puerto Rican government to break this cycle.

Last month, Puerto Rico’s governor announced that his island’s debt is ‘unpayable,’ angering creditors and setting off a renewed push on Capitol Hill to allow Puerto Rico’s municipalities to seek Chapter 9 bankruptcy, a financial move available to U.S. states. Puerto Rico’s non-voting representative, Pedro Pierluisi (D-P.R.), has been lobbying Congress to pass his bill that would give Puerto Rico that right. Sens. Chuck Schumer (D-N.Y.) and Richard Blumenthal (D-Conn.) are set to introduce a companion bill as well.

How exactly does a non-voting member get traction on Capitol Hill? The Agenda’s Danny Vinik sat down with Luis Fortuño, who was the governor of Puerto Rico from 2009 through 2013 and the non-voting representative from 2005 to 2009. He explains the legislative and political strategies he employed to garner support in Washington—and has harsh words for the Obama administration.

Danny Vinik: Can you tell me a little bit about how some of these debt issues have developed over the years in Puerto Rico?

Luis Fortuño: Sure. The economy in Puerto Rico has underperformed…for the last two decades, but in the last decade or so, actually, Puerto Rico fell into a situation where it was experiencing a deficit every year and, on top of that, the economy was not performing well.  So, overall, governments tended to incur into deficit spending to try to get the economy moving, which didn't work, and secondly balance the budget.

DV:  Did some policies from Congress contribute to the economic issues there?

LF:  I would say yes.  Some of them applied overall to the rest of the country.  Others, perhaps, affect Puerto Rico more than others.  For example, the Jones Act forces all maritime traffic to use U.S.-made vessels.  This is a pre-New Deal law that probably made sense during the war, but nowadays it doesn't make any sense, and especially if you are an island, it affects you a lot harder than if you are in Iowa or California.

Secondly, I would say that because Puerto Rico is a U.S. territory, not a state, there are a number of programs that do not fully integrate Puerto Rico.  And actually Puerto Rico is short-changed in many of them, some of which have to do with infrastructure and others have to do with social programs.

Thirdly, I would say there are all these regulations that actually perhaps New York state, California, Florida can pay for, but a less-affluent jurisdiction like Puerto Rico is not equipped to deal with.

DV:  Do you get the sense that policymakers understand that Puerto Rico gets hit more than other places?

LF:  No.  To be very honest, most of the time, when legislation is discussed and approved in Washington, Puerto Rico is not at the top of the list, for obvious reasons. First of all, politically speaking, it doesn't carry as much weight — or none at all, oftentimes — as compared to the 50 states.  And so, the answer will be no, and perhaps that is part of the reason why some of it occurs over and over again.

DV:  And to talk a little bit about Chapter 9 bankruptcy, why is this so important for Puerto Rico to be able to use?

LF:  What Chapter 9 does is it allows the bearers to restructure any debt that it cannot pay.  Puerto Rico has 17 different types of debts or credits.  Some are constitutionally protected. …There are others, like some of the public corporations, that perhaps need to be restructured.  And in those cases, it would be ideal to have some sort of structure that is not a free-for-all litigation scenario where only lawyers would gain.

DV:  Take me a little bit inside what Mr. Pierluisi is trying to do right now.

LF:  Sure.  When you're a territory, you don't have your two Senators and you only have one representative in the U.S. House of Representatives.  And actually, that person can vote in committees, can file bills, can vote on amendments, but cannot vote on final passage of any bill.  So, not only do you have to represent in the case of Puerto Rico five times as many constituents as the rest of the members of the House, but on top of that you don't have your other counterparts in your House delegation and certainly not in the Senate, making life very difficult. And I've been there, done that, and I understand what Mr. Pierluisi goes through every single day.

DV:  Is there a method or way to get senators, for instance, to care more about these issues?

LF:  Historically, the senators from Florida have been very close to Puerto Rico issues.  I can tell you that Senator Marco Rubio (R-Fla.) and Bill Nelson (D-Fla.) both were very helpful during my tenure.  The senators from New York, and I can tell you that Senator Schumer (D-N.Y.) and Gillibrand (D-N.Y.) were very helpful, as well.  Just because, in both cases, those states have over a million Puerto Rican Americans and certainly they carry a lot more weight than the Puerto Rican American community in Mississippi.

DV:  Did you find that you were successful in switching some votes down on the floor when the time came?

LF:  Of course. … There were so many issues going on every week that oftentimes people don't have the full background. And when you sit down and are able to discuss them in more detail, people are more than willing to switch around.

DV:  Do you find it frustrating that Republicans are more opposed to Chapter 9 bankruptcy for Puerto Rican public corporations?

LF:  My feeling was that there was traction with this bill until last week.  The Puerto Rican government made the announcement that it made that it would not actually stand up to its obligations and meet them fully.  That sends a monkey wrench into the process, but I'm not sure yet how it's going to play out…. I've been in the majority and in the minority.  When you're in the minority you say whatever you need to say because it's not going to happen.  When you're in the majority, you tend to be more careful as to what you commit to do.  So, again, it has to do, I think, more with being in the majority or the minority than your party affiliation.

DV:  So, you think if this came up for a vote at some point you'd see a stronger outpouring of support when it actually came down to it?

LF:  Again, there was this monkey wrench that was thrown into the process last week.  So, I'm not sure exactly how that's going to turn out, yet. … I believe it will only happen if the majority of the Republicans are on board.

DV:  Are there certain things that the White House could do that would help out Puerto Rico?

LF:  Well, actually, yes.  To begin with, Puerto Ricans that live in the island — and any American citizen that lives in Puerto Rico — pays full Medicare taxes, and there is a very high participation of seniors in Puerto Rico in the Medicare Advantage program.

CMS, which is a division of the Health and Human Services Department over here in Washington, a couple months ago announced that it was raising Medicare Advantage funds across the nation 1.5 percent and it was cutting those same funds for Puerto Rico 11 percent.  It makes no sense, and it's based on faulty data that's inserted into a formula process.  So, yes, actually, it is shocking that the administration on the one hand has been saying over here in Washington that it wants to help Puerto Rico.  On the other hand, this is happening under their noses, really, and it hasn't been addressed or solved.

DV:  Does it seem like this White House has been receptive on some of these issues?

LF:  There's a lot of lip service, that's about it. No action.

DV:  And has this been the case throughout?

LF:  Yes.  Under my tenure, the same thing happened, a lot of lip service, very nice conversations, excellent meetings, no results.

DV:  Are there certain ways that you can switch peoples' minds or get officials in the administration to open up here?

LF:  Well, this town operates based on elections.  And to win elections, you need to vote.  And if you cannot vote for the Commander-in-Chief, you don't elect two senators and you don't have the full congressional representation you would have as a state, it is an uphill battle.  It is very tough, very difficult.

DV:  Jeb Bush came down earlier this year and came out for Chapter 9 and other issues.  That seems pretty important.

LF:  Governor Bush is a conservative who fully understands that we do not enjoy full political powers. Thus he was willing to listen, pay attention, and not ask for a bailout — actually, he came out against a bailout, but he said, however, something ought to be done.  So, that's exactly the kind of policymakers that you need in Washington to make sure that things change for the better in Puerto Rico.

DV:  And Senator Rubio hasn’t given a direct answer on this issue, Do you get the sense he’ll eventually come out for this?

LF:  Again, anyone that wants to compete in the Florida primary on March 15th of next year will probably have to win the Puerto Rican American vote. … But that issue will come up and I'm convinced that any credible candidates will have to put forth a plan or an answer.

Former Governor Luis Fortuño on how to influence policy in Washington without a vote

By Danny Vinik

The Puerto Rico crisis: What's next