White House Asks Congress To Pass Major Puerto Rico Debt Relief
By Roque Planas – October 22, 2015
The Huffington Post
The White House on Wednesday unveiled a sweeping plan to address the Puerto Rican debt crisis, proposing bankruptcy relief that would extend beyond the current proposal in Congress.
But the plan requires action from Congress, where legislation to allow bankruptcy relief for Puerto Rican municipalities and state corporations has stalled, leaving doubts that the plan will move forward quickly.
“Puerto Rico, and the 3.5 million American citizens who call the island home, are facing a serious crisis that requires immediate congressional action,” Treasury Secretary Jacob Lew, National Economic Council Director Jeff Zients, and Health and Human Services Secretary Sylvia Mathews Burwell said in a joint statement.
Legislation that would allow Puerto Rican municipal governments and state corporations to declare bankruptcy and rework their debts has languished before Congress all year, despite enjoying support from the two largest political parties on the island. Such bankruptcy relief — often referred to as “Chapter 9,” after its section in the tax code — is available to all 50 U.S. states, but not Puerto Rico.
Some members of Congress have avoided the issue, likening bankruptcy relief to a government bailout, despite the fact that reorganizing the debt doesn’t imply a cost to taxpayers unless they personally hold Puerto Rican bonds.
Speaking at an event at Columbia University in New York unrelated to the White House announcement on Wednesday, Nobel Prize-winning economist Joseph Stiglitz said legislation to restructure debt doesn’t face strong opposition in Congress. Nevertheless, the bill has failed to gain traction because it’s not a priority for most members in a Congress that has struggled to move legislation forward efficiently or build consensus.
“You have to have a bankruptcy law,” Stiglitz said. “You can’t manage a national economy without a bankruptcy law.”
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