May 2, 2016
May 2, 2016
WASHINGTON, D.C. — Congressman Darrell Issa (R-CA) today penned an op-ed for National Review outlining a framework for how the United States could solve the fiscal crisis in Puerto Rico. In the piece printed today, Issa argues that instead of a bailout, the island needs a strong financial control board to put the island’s finances back on track.
Here are some of the highlights. You can also check out the full length piece here.
How to Solve Puerto Rico’s Debt Crisis
By: Rep. Darrell Issa (R-CA)
May 2, 2016
“There are prudent ways to address the problem, and there are short-term patches that will only make the problem worse in the long run. A bailout, like those we saw for Wall Street and the auto companies in the wake of the financial crisis, is a non-starter. Throwing good money at bad behavior would only entrench the poor financial management that led to the mess in the first place, while making everyone worse off down the road.”
“To solve this situation, we need only look back in time to how Congress addressed the financial woes of Washington, D.C., in the 1990s. The D.C. model worked because its cornerstone was a strong independent control board. In this case, Congress created an oversight board that supervised the city’s budgeting and spending practices, which stayed in place for six years until D.C. was able to get back on sound financial footing and had its fourth consecutive balanced budget.”
“But an independent control board alone is not enough. The island’s creditors – seniors, savers, and investors from all across the world — need to have a say in how the government debt is restructured. Remember, two-thirds of U.S. pension and retirement funds are invested, at least partially, in Puerto Rico municipal bonds. Seniors, retirees, and families would lose billions if these bonds aren’t repaid; they’d get only pennies on the dollar back for what was supposed to be an essentially risk-free investment.”
“Under current U.S. law, cities can declare bankruptcy. States, however, cannot. With access to the nation’s federal bankruptcy courts, states would be further emboldened to make bad financial decisions. After all, the federal bankruptcy courts would just bail them out no matter how bad a hole they had dug themselves into; this is one of the key reasons that states and other subsidiary governments haven’t had access to bankruptcy courts in the past.”
“Puerto Rico’s problems are symptomatic of irresponsible budgeting and careless overspending, and the only remedy is long-term financial reforms. These reforms must rein in the excessive spending that plagued the Commonwealth for several decades and must get the island off the addictive promise of easy money.”
The full length piece from National Review is available here.