Washington -- The House Natural Resources Committee released a draft proposal to address Puerto Rico's debt crisis, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Heritage Action released the following statement from chief executive officer Michael A. Needham:
"Heritage Action is still reviewing the text, but conservatives must ensure the bill would not set any bad precedents by retroactively changing the terms of contracts or reversing payment prioritizations. Additionally, for any plan to be worth supporting it must include strong pro-growth components, such as suspending the Jones Act and lowering the minimum wage."
Earlier this month, Heritage Action outlined the appropriate conservative response to Puerto Rico's debt crisis. Below are key excerpts from that memo:
Steps Forward
Congress should approach the Puerto Rico crisis with a mindset towards growth. Without a large growth component, any Puerto Rico package would be simply "rearranging the deck chairs on the Titanic."
Repeal the Jones Act. Congress should fully repeal the Jones Act, which would "promote competition, strengthen the economy, and benefit American consumers." Short of that, Congress could grant Puerto Rico an exemption from the Jones Act, as it has done for the neighboring Virgin Islands.
A Jones Act exemption would not be unprecedented, and should not be controversial: Congress long ago granted the neighboring Virgin Islands an exemption from the Jones Act, for the very same reasons it would benefit Puerto Rico. "Exempting Puerto Rico from the Jones Act...is the single most important step Congress can take toward enabling economic growth in Puerto Rico."
Grant Minimum Wage Flexibility. Congress should allow Puerto Rico to set its own minimum wage, so that it more appropriately reflects the economic conditions on the ground in Puerto Rico. "A lower minimum wage, set by Puerto Rico's own government, would bring...workers out of the shadows, enable economic growth, broaden the tax base, and decrease net migration to the mainland."
This, too, is not unprecedented, and should not be controversial: Other U.S. territories, like American Samoa, already have minimum wage flexibility, for the very same reasons it would benefit Puerto Rico.
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No Harm, No Bad Precedents
Congress should not grant any form of bailout to Puerto Rico, whether through traditional cash-bailout means, enhanced welfare checks, or Chapter 9 or other forms of coercive debt restructuring. Any such measure short-circuits needed reforms within the territory, sets bad precedent for investors, as well as for other troubled states, such as Illinois, who could interpret such actions as indicating future favorable treatment by U.S. taxpayers for their own fiscal irresponsibility.