By TERRY JONES
Economics: Congress says its bill to deal with Puerto Rico’s out-of-control debt isn’t a bailout, and that’s a good thing. But while Congress buys time for the fiscally troubled island paradise to restructure, Puerto Rico’s $73 billion in debt remains unpayable, and the bill does little to address the real problem: a collapsed economy.
The Senate voted 68-30 on Wednesday to help Puerto Rico restructure and renegotiate its enormous debt while creating an oversight board to help it manage its finances. It’s a less-than-perfect solution, but that’s all that was available. President Obama has vowed to sign the bill into law.
The bill came as Puerto Rico faced a $2 billion debt payment on Friday — one it couldn’t make. This bill buys the island some time by halting potential litigation against the government that could have forced it to slash services and government wages indiscriminately, which might have led to political instability, riots or further mass migration.
While no federal money goes to Puerto Rico under this bill, it will still have a major impact on how the island is governed in the coming years.
A seven-person oversight board, to be selected by Obama from a list given to him by Congress, will have unusual ability to steer the finances of Puerto Rico — including making cuts in spending, balancing the budget and asserting control over the public pension system, which is essentially insolvent.
The bill also avoids bailing out Puerto Rico’s excessively generous and absurdly underfunded pension system. Payments to pension holders do not get priority over secured debts held by investors.
But the new law is a major disappointment in one big way: It fails to address the economic disaster that is Puerto Rico.
The economy has been in a recession for over a decade, shrinking by about 1% a year. It’s lost about …read more
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