After Puerto Rico missed a debt payment on May 2, the White House called on Congress to step in and help the USA territory avoid financial disaster.
Advertisement
In such a scenario, that argument could help establish a legal precedent that Puerto Rico is not a sovereign entity, possibly to justify imposing a federal control board or some other mechanism to address Puerto Rico’s roughly $70 billion in debt. In an effort to prevent future defaults and expensive litigation, Congress is forcing the island to take its medicine now, get its financial house in order and put Puerto Rico on strong financial footing allowing for future economic growth.
The U.S. Supreme Court on Thursday ruled that Puerto Rico can not pursue charges against people for the same crime that federal authorities have already prosecuted them, dealing a blow to the U.S. territory’s claim that while it is not a state it should be treated like one. The House voted 297 to 127 in favor of the legislation, on June 9, 2016.
Puerto Rico has missed several payments to creditors and faces the $2 billion installment on July 1. The plan would also create an oversight board on Puerto Rico’s debt structuring and budget. President Obama and Hillary Clinton both support it, as does Republican House Speaker Paul Ryan.
In a press release, Congressman Palmer said that exempting U.S. territories from the Jones Act has proven to be a stable and successful way of improving a territory’s economic environment, providing the baseless example that the costs of shipping goods to U.S. Virgin Islands, which is exempt from the Jones Act, from the U.S. mainland are now almost half that of shipping to Puerto Rico. The bill is not a comprehensive solution to the economic problems facing Puerto Rico, and there is significant room for improvement in many aspects of the bill.
The Senate’s No. 2 Republican, John Cornyn of Texas, said if Congress doesn’t act there will be a demand for a taxpayer bailout.
Some leading Democratic senators have voiced concerns about provisions, including one that potentially could reduce the minimum wage for young Puerto Ricans.
“If Congress is willing to undermine a territory’s constitutionally guaranteed bonds today, there is every reason to believe it would be willing to undermine a state’s guarantee tomorrow”, said Rep. Tom McClintock, R-Calif.
Others are supporting it, however.
“We acknowledge the government’s fiscal situation.but there is now way we can continue to offer our services with inconsistent payments and fees that are unsustainable”, Aeromed director Jose Hernandez said in an official statement.
Supporters argue PROMESA would not use taxpayer funds to help the island reschedule its debt.
It would also require the territory to create a fiscal plan. The island has underfunded public pension obligations by more than $40 billion.
Advertisement
Rep. Sean Duffy of Wisconsin, a Republican who sponsored the bill, fought back against the idea that the legislation is a bailout of any sort. The House bill would not spend any federal money.
