Bernstein: Don’t Let Our Fellow Americans Live in a Failed State
“Fix Puerto Rico’s debt now, or taxpayers will bail Puerto Rico out later,” CBPP Senior Fellow Jared Bernstein warns Congress in a piece for the Washington Post. Here’s the opening:
Here are some facts:
— The commonwealth of Puerto Rico cannot pay its debt of more than $70 billion. The government has already defaulted on several payments.
— The human cost of the debt crisis is growing, especially for the near-majority of the population that lives in poverty. According to Gov. Alejandro García Padilla, the Puerto Rican government can “barely cover the costs of providing services to special-needs children,” let alone gas for police cars and fire trucks, electricity for hospitals, or measures to combat the Zika virus (it doesn’t help that many doctors are leaving the island).
— Attempts to resolve the immediate crisis by allowing Puerto Rico to restructure its debt have been languishing in Congress; House Speaker Paul D. Ryan (R-Wis.) introduced draft legislation in March, but it hasn’t gone anywhere.
— Restructuring has no costs for taxpayers. The burden falls on creditors, who will be paid less than the face value of the bonds they hold.
— However, without a restructuring, a taxpayer-funded bailout is surely forthcoming.
Okay, that last one is a prediction, not a fact, but I’m very likely to be right about it. And that would be a transference to taxpayers of the costs of cleaning up this mess from creditors, including hedge funds that bought Puerto Rican debt at a steep discount a couple of years ago.