Monday, April 25, 2016

Morgan Griffith on Puerto Rico

From U.S. Representative Morgan Griffith (R-VA-9):

Puerto Rico
Among the issues being debated in Washington is the situation in Puerto Rico. Puerto Rico – which is a territory of the United States – has more than $118 billion in debt in the form of bonds and unfunded pension liabilities. Puerto Rico has already defaulted on portions of its debt, and also has not produced audited financial statements for two years.
Puerto Rico can’t seek bankruptcy protection. If it were a separate country, it could go to the International Monetary Fund for help. But it’s not a separate country. If it were a county or city in one of the 50 states, it could seek a special type of bankruptcy. But it is not a part of any of the states.
It would take another column to discuss whether Puerto Rico ought to be a state of the United States, an independent country, or remain a territory. But for now, it is a territory of the U.S. and therefore it is a responsibility of the U.S. government.
In the 1950s, Puerto Rico was granted the authority to have its own legislature and make decisions for themselves. Apparently they didn’t do well.
Discussions in D.C. indicate Puerto Rico created too many programs like the social democratic governments of Europe, and ran the ship of state onto the rocky shores of debt and despair.
The Wall Street Journal editorial board said, “In a better world, Puerto Rico’s 18 public debt issuers, 20 some creditor committees and government unions would agree to a restructuring without federal intervention. But creditors possess competing claims, bond covenants conflict, and public agencies have intermingled funds. And Puerto Rico appears unwilling to act in good faith when left to its own devices.”
Decades of fiscal mismanagement and inappropriate policies got Puerto Rico into this mess. And while there appears to be no simple solution to get Puerto Rico out of risk of default and its economy out of a tailspin, action must be taken.
I strongly believe that action must not be a bailout by the taxpayers of the 50 states.
Members of the House Committee on Natural Resources (which has jurisdiction over U.S. territories such as Puerto Rico) have held several hearings to address this crisis. After listening to stakeholder input, they have proposed legislation (H.R. 4900) that protects American taxpayers and contains a supervisory board and a restructuring process.
Borrowing from a Washington Post summary of the bill, H.R. 4900 would propose a way for Puerto Rico to “…restructure its obligations in cooperation with creditors and, crucially, with diminished opportunities for a minority of ‘holdouts’ to block agreements satisfactory to most.” Additionally, the bill would establish a supervisory board that “…includes a number of provisions that respect and protect the legitimate prerogatives of the island’s legislature and governor, while ensuring that they would not be able to prevent necessary fiscal reforms imposed by the board. Importantly, the bill would present Puerto Rico with a tough but realistic goal — four straight years of balanced budgets…” and it would no longer have a supervisory board.
Though negotiations are ongoing, as it stands, there are two main arguments against the bill.
The first is that this situation is Puerto Rico’s problem. Again, I don’t believe that’s right. I am not certain the proposal from Natural Resources is the right thing to do. But I am certain that Congress doing nothing would be the wrong thing.
The second argument involves the impact this may have on state-issued debt. Some argue that anything close to bankruptcy may cause destabilization of the bond market for states and municipalities. This is a debatable but legitimate concern we are working on.
As I said before and as Speaker of the House Paul Ryan (R-WI) recently said, “There will be no taxpayer bailout.” He continued, “That is our primary responsibility—to protect the American taxpayer and to help bring order to the chaos that will befall Puerto Rico if the status quo continues in the direction that it’s going.”
Grover Norquist, the president of the conservative Americans for Tax Reform, recently said about H.R. 4900, “My sense is that the House is on track, in the right direction.” He also said, “My understanding is that there’s no federal dollars flowing as part of this.”
The discussion and work on improving the bill is ongoing. I encourage you to continue following this issue.
If you have questions, concerns, or comments, feel free to contact my office. You can call my Abingdon office at 276-525-1405 or my Christiansburg office at 540-381-5671. To reach my office via email, please visit my website at Also on my website is the latest material from my office, including information on votes recently taken on the floor of the House of Representatives.