Politics

Puerto Rico Bill A Step Toward Solving Island’s Financial Crisis But Needs Improvement

Puerto Rico Bill A Step Toward Solving Island’s Financial Crisis But Needs Improvement

More Conservative Reforms Could Make the Bill Stronger

Washington, DC– Following the markup of the Puerto Rico Oversight, Management, and Economic Stability Act (H.R. 5278), FreedomWorks Senior Economic Contributor Stephen Moore commented:

“The Puerto Rico rescue bill being considered today by the House Committee on Natural Resources is an important step in the right direction in helping solve the financial crisis on the island.”

“The major component of the bill is a strong financial control board to take over fiscal decision-making in San Juan to stop the out-of-control borrowing and spending that has rendered the island nearly insolvent. The control board is imperative and urgent. We know this model can work: it solved many of Washington, D.C.’s financial problems 20 years ago.”

“Crucially, the bill also is not a bailout. Federal taxpayers should not be on the hook to pay for financial malfeasance in Puerto Rico.”

“There are improvements that should be made to the bill to make it stronger. First, the bill must provide more overt protections of the legal and constitutional rights of bondholders, especially those with full faith and credit guarantees. The stay on seeking court remedies is too lengthy and has worrisome triggers to extend it, which could deprive bondholders of due process protections.”

“The legislation could be clearer on the matter of debt restructuring. The current language could open the possibility for the control board to pay off other political stakeholders, especially unions. The bill’s language instructs the financial board to honor union pensions.  This could require retirees in and out of Puerto Rico who own the Puerto Rico bonds to take a cut in repayment to benefit public sector workers, whose massive pensions helped cause the crisis in the first place.”

“The bill would benefit from economic reforms that will fix the Puerto Rican economy for the long term. Regulatory reforms – such as suspension of federal minimum wage, which has killed starter jobs on the island, were not included in the bill. The lack of structural economic reforms means that Puerto Rico may likely find itself in the same stage of crisis in the years ahead.”

“The work being done by the House Committee on Natural Resources is encouraging. On balance, the bill provides a helpful way forward to deal with the fiscal crisis in Puerto Rico. The bill avoids a taxpayer bailout and the control board will help address the island’s economic crisis. More conservative reforms could make it stronger and help Puerto Rico prosper into the future.”

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