Memo: A Conservative Response to Puerto Rico’s Debt Crisis
To: Interested Parties
From: Heritage Action
Date: March 10, 2016
Subject: A Conservative Response to Puerto Rico’s Debt Crisis
Some type of congressional action on Puerto Rico’s looming debt crisis is expected before the end of March. Puerto Rico, a United States territory, owes creditors more than $70 billion and is seeking congressional approval to file Chapter 9 bankruptcy.
The Heritage Foundation has written extensively on the current situation in Puerto Rico and has laid out the path Congress should take as it addresses this issue. While the situation in Puerto Rico is complicated, there are a few important things to know:
This is primarily a growth problem. Puerto Rico isn’t just facing an acute financial crisis; it is facing a chronic, long-term growth crisis. Puerto Rico is not merely in a temporary debt crisis, with sunny skies on the horizon if it can only get past this temporary hurdle — far from it. Under current policies, Puerto Rico simply cannot grow. In fact, if all of Puerto Rico’s debts and unfunded liabilities were wiped out tomorrow, without a transformation in governance and an economic turnaround, it would just be a matter of time before the island would be back facing fiscal trouble once again. No amount of bailouts, debt restructuring, or new bankruptcy proceedings will change this simple fact. Without growth, Puerto Rico’s problems will only continue to fester and get worse.
Congress can help. While most of Puerto Rico’s problems are of its own making, Congress has imposed policies on Puerto Rico that severely damage its ability to grow. Two policies worth noting…