Prescott Valley, AZ Correspondent-As Puerto Rico is an island territory of the United States as opposed to a city or town, neither should laws be re-written to allow Puerto Rico to go through the bankruptcy process nor should taxpayers fund a bailout of Puerto Rico.
Though Puerto Rico is under American law and the Constitution and has to abide by both, as a territory it is not entitled to seek bankruptcy under U.S. law. Under the law, municipalities can file for bankruptcy, but states and territories cannot.
In the mid 1980’s, Congress created special legislation that refused bankruptcy for Puerto Rico’s city governments and its various departments along with Puerto Rico’s entire island ruling government. In addition, the island’s government bonds were exempted from taxation. These restrictions on Puerto Rico allowed for low interest rate lending through American lenders, which eventually created debt for the island.
Puerto Rico’s problem is its economy, as only 40 percent of the adults there are employed and about a third of them are working for the island government, whose paychecks come through Puerto Rico’s taxpayers. With high unemployment (12.5%), island residents are leaving and many who have already left were Puerto Rican taxpaying professionals with good incomes.
With a declining productive and professional population, high unemployment, and $73 billion plus in government debt, Puerto Rico is unable to pay down the debt in its scheduled payments that are due, with missed subsequent payments as well.
Current thoughts on permitting bankruptcy for Puerto Rico are vehemently opposed by Republicans and Conservatives. Bailing out Puerto Rico would serve as a reward for fiscal recklessness and failure. This large of a reprieve, comparable to the Wall Street bailouts in 2008, Detroit’s bankruptcy, and other bailouts simply opens the doors to other financially troubled American cities to avoid their own mountains of debt without repayment, so a precedent would be set for other cities, states, and municipalities to seek taxpayer funded bailouts.
In attempt to resolve the Puerto Rican crisis, the Obama administration wants to address the problem through emergency legislation, the “territorial bankruptcy regime,” which would be established to protect the territory from lawsuits to collect mounting debts, but this kind of legislation would only prolong the debt related problems and is not the answer to the Puerto Rican issue.
Structural reforms that would jump start economic growth in Puerto Rico are the answers to the bankruptcy dilemma. Negotiating with their lenders and debt collectors outside of a bankruptcy setting is another part of the answer, and Puerto Rico has already started that process. The movement to negotiate payments would serve as momentum to encourage investment on the island.
Congress could be of help as well with pro-economic growth type legislation that would provide for the backing of funds for investment on the island as well as other measures to reduce minimum wage law, which would increase employment and infuse the system with taxpayer dollars. In addition, Environmental Protection Agency (EPA) regulations should be suspended in relation to Puerto Rico’s compliance with the EPA’s overregulation on the island concerning energy due to energy rebuilding /restructuring costs that would significantly raise energy costs for Puerto Rico.
Puerto Rico on its own can adopt pro-growth reforms through initiatives to revamp their welfare system, to discourage welfare assistance programs, and encourage participation in the workforce. Business regulations need to be reformed as well and restructured to stimulate business startups as do labor regulations to encourage accommodation in work force management.
With the revival of economic growth in Puerto Rico, its debts renegotiated and more of its unemployed and employable back in the work force, the islands coffers would fill, and the demand for welfare assistance would subside. These measures would help to pay off the island’s debts through negotiated terms. It could all work to Puerto Rico’s advantage with the commitment of Congress and the Obama administration, but it remains to be seen which road both will take in the bailout blues business model.
Sheffield, Jamaica Correspondent-Let’s face it, whether we want to admit it or not, Puerto Rico’s debt crisis is America’s dilemma. A ‘bailout’ is highly distasteful to U.S taxpayers. However, that does not intimate that a solution isn’t readily on hand. This solution takes into consideration justice for creditors and debtors, and how far Congress is willing to wield their constitutional powers to restructure Puerto Rico’s debt through a federal bankruptcy court. Yes, Puerto Rico should be pushed through the bankruptcy process but taxpayers should not be called upon to provide a bailout or Puerto Rico.
Let’s weigh the matter to see what both entails. In the past, creditors have vouched for a federal bailout of Puerto Rico’s debts. Many doubts have issued, lamenting that a ‘bailout’ is not in the interests of taxpayers in America. It is also said that neither citizens of Puerto Rico would benefit, since the consequence is equivalent to “undue risk-taking” and would ultimate be a slap to the economy, for failure to bring Puerto Rico back to its feet.
On the other hand, allowing Puerto Rico to go through the bankruptcy process would be simpler and less disorganized. Since Congress does have the capacity to do so, they are called upon to allow this move. Puerto Rico should be restructured through the bankruptcy process, since the bankruptcy system was created to protect all parties involved. This might create a precedent for all other states, cities, etc., but at this point, a restructure seems like the ideal solution for Puerto Rico.
Gastonia, NC Correspondent-The crisis in Puerto Rico has, like every other issue of national import in the last eight years, devolved into a partisan proxy war in which the Democrats and Republicans are both trying to score points and “win” for their own ideological views (and big contributors) while refusing to compromise one whit no matter how reasonable the offer may be.
The island is sinking. This isn’t due to global warming (although some will have us think that, too, is inevitable), but due to poor domestic fiscal management, a slow recovery from the global recession and the perpetual state of limbo in which Puerto Rico exists in regard to U.S. statehood. Puerto Ricans enjoy many of the benefits of being U.S. citizens, including free passage to and from the States, without truly being a part of the country.
That free passage is part of the problem, as it’s become traditional for young people in P.R. to flock to the U.S. to seek their fortunes, leading to a talent depletion at home that encumbers any effort to build a solid economy beyond tourism.
A bailout for Puerto Rico is, to my mind, a necessity. What’s the alternative? Do we let our protectorate sink into absolute financial ruin, prompting even more of its best and brightest to seek our shores? That’s not a viable choice. Yes, long-term changes need to come in the way Puerto Rico governs itself and in the choices made by its political and business leaders. However, for now, we need to write the check to right the ship and give the island residents a bit of breathing room in which to work.
Owatonna, MN Correspondent-The thought of rewriting laws and bailing out government entities or too-big-to-fail businesses should be considered a criminal act. In essence, if the U.S. bails out the Puerto Rican government, they send a message that mismanagement, ineptitude, bribery, embezzlement, budget padding, or plain old fraud are excusable, don’t need to be punished, and are therefore legal. After all, what government doesn’t suffer from those symptoms and/or causes of poor governance?
Even worse, shouldering taxpayers with the added burden of paying for all the mistakes of an administration adds insult to injury to our own debt servicing problems. Forgiving someone’s debt and giving it to someone else can’t possibly improve the collective financial situation.
Changing laws to accommodate inconveniences like bankruptcy is the same as saying “We’ll only enforce this law as long as no one breaks this law.” Granted, government bureaucrats are not paid to use logic or observe moral principals as much as they are paid to do what they’re told, so this may not be obvious to lawmakers or enforcement agencies.
A precedent definitely is set when a parent government bails out or changes laws for a lower-level entity. The perfect example is the massive bailouts of large banks and other corporations during 2008-2009. Winners and losers were chosen by the administration and Congress. Those with the right connections or those who effectively pleaded their case got bailout money. Those with no connections or persuasive power were tossed out like month-old leftovers.
Now, nearly 10 years later, many of those same too-large companies are reportedly in worse shape than they were in 2008. Everyone knows that if a crisis appears dire enough, the government will do the politically expedient thing, not the right thing, and bail out more companies. They’ll likely bail out a few repeat offenders too. So the citizenry will be saddled with even more debt thanks to players who cry for free markets and minimal government intrusion when it suits their wants, but come running for Uncle Sam’s benevolent umbrella of reassurance and remuneration every time they make bad business decisions and run their companies (or governments) into the ground.
Puerto Rico should not be bailed out. Bankruptcy laws should not be rewritten. A moratorium should be put on any bailouts for anyone, anywhere. A level playing field is only level if every player plays by the same rules and receives no favors from those with the power to grant them. Bailouts reward only failure.