While Europe is trying to spin giving in to Greece’s no vote on austerity as a sudden need for “humanitarian aid” and China is ordering investment firms to buy stocks to shore up its markets, here in the States we’ve got a $72 billion debt problem with Puerto Rico. Democrats in Congress say the time has come to fix 30-year old bankruptcy legislation to cover US territories and to get the island into bankruptcy courts.
Earlier this week, Puerto Rico’s governor declared that the nation’s $72 billion pile of debt was too much for it to handle. To avoid a “death spiral,” Gov. Alejandro Garcia Padilla said the commonwealth would have to break its promise to pay back some money owed.
But a quirk in the nation’s bankruptcy code is throwing Congress into the middle of the matter, as lawmakers will need to quickly pass a new law if Puerto Rico is going to gain access to the nation’s bankruptcy courts.
Puerto Rico’s nonvoting representative, Resident Commissioner Pedro Pierlusi (D) is working to build support for legislation that has simmered in Congress for months, but has taken on new urgency following the governor’s declarations.
Sens. Chuck Schumer (D-N.Y.) and Richard Blumenthal (D-Conn.) are working to build support for similar legislation in the Senate.
A 1984 update to the nation’s bankruptcy laws left Puerto Rico out of the picture, apparently by accident. Chapter 9 of the bankruptcy code gives states the power to allow agencies or municipalities to declare bankruptcy, as happened most recently in Detroit. But the law is silent on territories like Puerto Rico, leaving it on the outside looking in when it comes to public bankruptcies.
“As best we can tell, it’s a typographical error in the bankruptcy code,” said John Pottow, a bankruptcy expert and legal professor at the University of Michigan. “It should be noncontroversial.”
Hmm, where have we heard that before?
Oh yes, Republicans literally made a Supreme Court case out of the last typographical error in the law they could have fixed with one sentence. Of course, there’s two differences this time: one, the GOP just lost that Supreme court case, and two, the people affected by this fix won’t be those people getting evil socialist health insurance, but the island’s creditors in the banking community. Somebody’s got to make money off this mess, and given the sums involved, it sure as hell isn’t going to be the people of Puerto Rico.
Somehow I’m betting that this one-sentence fix gets passed pretty quickly as a result.
Belafon
Only if Obama comes out against it.
You seem to be under the misguided belief that Republicans are operating under some rule other than Cleek’s law.
OzarkHillbilly
Huh? When did they declare independence? A clearer indictment of today’s media I have never read. I don’t think even FOX News reported on that.
Amir Khalid
@OzarkHillbilly:
I blame the firing of the copy editors.
Frankensteinbeck
Puerto Ricans are definitely ‘those people.’ Only the most informed conservatives will see this as anything but bailing out lazy brown people.
Grumpy Code Monkey
Zandar, you’re such a cynic.
boatboy_srq
@OzarkHillbilly: @Amir Khalid: I blame the shredding of education budgets and over-reliance on Texas-Board-of-Education-approved textbooks.
boatboy_srq
@Frankensteinbeck: I’d actually watch for some wingnut pundit to suggest selling PR back to Spain to settle the debt – assuming Spain either wants it or has the euros to buy it back. Assuming of course the wingnutosphere is educated enough to want to “sell it back” to Spain and not to Mexico…
Lizzy L
What Belafon said. There will be no fix if the Republicans decide that not fixing this will embarrass, inconvenience, or otherwise cause problems for the Obama administration. Or they may just not fix it because brown people, or because not fixing it will piss liberals off.
nanute
So what, if anything, has Puerto Rico pledged as collateral for the debt? If there’s no collateral what leverage do the creditors have? I am guessing future tax revenue is the source of collateral. If Puerto Rico says we ain’t paying, then what happens?
Lee
I might be misremembering but wasn’t there an article about how all of this in PR is self inflicted?
They went full Austrian and SURPRISE it didn’t work.
KG
um, technically, since Puerto Rico is a territory and (again, technically) under the control of the federal government, their debt is our debt. what confuses people (like calling Puerto Rico a country) is that they have relative autonomy for a territory and rather than the president appointing a governor, we’ve delegated day to day governing to the locals so it runs more like a state than a traditional territory.
Personally, I’m for statehood, the feds can absorb some of the debt as part of the statehood process (the statehood bill could also include something to cover restructuring the outstanding debt). the question is whether there is enough support for statehood in PR.
Origuy
In the referendum held in 2012, the vote for statehood won. Congress was supposed to act; unsurprisingly, they haven’t.
srv
Why not give them independence and let them join the EU? Then it’s not our problem.
NonyNony
@Origuy:
Puerto Rico would quite likely be a reliable Democratic state in presidential elections and would quite likely send two more Democratic Senators into the US Senate. They’d also get a number of House seats which, given how the House is apportioned, would be taken from other states (the size of the House is fixed by law, so delegates would need to be shuffled around to account for the new state), so it’s unclear what the impact on the House would be as it would depend on how the apportionment shuffled around to account for the extra 3.5 million voters.
But yeah – there’s no upside for Republicans to admit another state into the country unless there’s another territory to admit that would be reliably conservative. Since there are no territories with a population of 3.5 million old white Fox News viewers asking for statehood, I suspect Puerto Rico is stuck until the Dems control the House and Senate again (and likely until either the filibuster is eliminated or the Senate has 60 Dems in it as well).
Arclite
True, but remember that they reflexively oppose anything that helps the browns.
Matt McIrvin
@Origuy: Whether statehood won is open to debate. Separating “should the status quo continue” and “which is the best non-territorial option” into two questions had the neat effect of making it appear as if statehood had majority support, which, my understanding is, it doesn’t: if, for instance, you offer a three-way choice between the status quo, independence, and statehood, the status quo has usually won a narrow plurality.
Matt McIrvin
…However, it does look to me as if support for Puerto Rican statehood is increasing, and may have an absolute majority soon.
It’d be an interesting state: not as small as you’d think, for one thing (it’s larger in population than many existing US states; in both population and area, it’s about the size of Connecticut and would have about the same number of representatives in Congress and electoral votes).
Per capita, it would be the poorest US state by a considerable margin, though I suppose statehood might change that. In the short term, adding the requirement for its citizens to pay federal income tax would be a hit to the economy, though many would not make enough money to qualify.
OnkelFritze
You’ve got that all wrong. While austerity has been harsh on the Greeks (and not necessarily the best policy, I agree with that) the Greeks did get emergency funds with which they were able to pay pensions and wages amongst other things. Europe did keep them afloat, albeit at a very low level. After the referendum there is a real danger that this stops altogether. Then they will actually need humanitarian aid, as in food and medication, or people will literally starve. That is a whole lot different from what’s happened before.