Puerto Rico Reform Bill Is A Conservative Win, But It Needs Pro-Growth Tax Reform

This week, the House Committee on Natural Resources will consider H.R. 5278, a bill to address the Puerto Rican fiscal and debt crisis (the bill carries the acronym “PROMESA”). Despite a well-funded misinformation campaign by hedge funds intent on killing the legislation, PROMESA is widely expected to pass the committee in a broad, bipartisan vote. The full House will take up the bill after the Memorial Day recess, and the Senate reportedly will send it along to President Barack Obama for his signature. It enjoys the support of Americans for Tax Reform and the Council for Citizens Against Government Waste, among other respected and prominent conservative groups, leaders and publications.

PROMESA comes not a moment too soon. Earlier this month, Puerto Rico defaulted on a debt payment of over $400 million. In July, they are expected to do so again, only this time the payment is $2 billion.

Congress has little choice but to act in the face of this massive default. Puerto Rico is a possession of the United States, won in the Spanish-American War. Its 3.5 million residents (down 10% in the past decade, mostly migrating to Florida) are all U.S. citizens. It’s unfortunately our problem.

In many ways, the bill is a big win for limited government conservatives. It has no taxpayer bailout of Puerto Rico–not a single dime of taxpayer money is sent down there. Rather, Puerto Rico will have to work their own way out of $72 billion in debt and defaults. They will be helped by an “oversight board” majority-appointed by Speaker Paul D. Ryan and Senate Majority Leader Mitch McConnell. This board is modeled after the D.C. control board from the 1990s and 2000s, and their job is to approve fiscal plans and budgets, conduct audits, etc.

There’s no bankruptcy, either, despite this being a goal of the inept Puerto Rican government, Congressional Democrats and the White House (who famously called for “Super Chapter 9″). The oversight board will control this whole process. It will first try to get the 18 classes of bondholders to agree to a voluntary debt restructuring with the Puerto Rican government and government sponsored enterprises. If that fails, the control board will recommend a debt restructuring plan to be enforced by a non-bankruptcy federal judge. Any plan must ultimately be approved by the control board.

Ryan Ellis 

Puerto Rico Reform Bill Is A Conservative Win, But It Needs Pro-Growth Tax Reform