Cantwell: Fair Treatment of Puerto Rico Needed to Solve Problems

Senator Maria Cantwell (D-WA), the senior Democrat on the Senate Energy and Natural Resources Committee, which has jurisdiction over Puerto Rico and other U.S. territories, spoke up on behalf of Puerto Rico before the passage of the recent federal omnibus funding bill that excluded Puerto Rico. She also spoke up after the passage of the bill on December 17th:

Mr. President, I thank the Senator from Florida for coming to the floor and speaking so articulately about the need for help for Puerto Rico. His State is the most impacted State in the United States when it comes to our policy as it relates to Puerto Rico. He is right that there are not many Puerto Ricans in the State of Washington. But as the Ranking Member of the Senate Committee on Energy and Natural Resources, which has jurisdiction for the territories, I can tell you territorial oversight is about giving people who are U.S. citizens fair access to the law.

If we are not going to help people who are U.S. citizens have fair access to the law, I am not sure why we are continuing to say that they are a territory of the United States of America. What we are talking about, and the Senator from Florida understands this, is if you don’t give them fair treatment under the law, just as we do with individual citizens who need to reorganize their debt, businesses who need to reorganize their debt, municipalities that need to reorganize their debt, or even the United States of America in the big bank bailout basically allowing a lot of people to reorganize their debt, then we won’t let the people in Puerto Rico come to a resolution of their debt in bankruptcy. It is a hypocrisy that is unexplainable at the moment. We should get to the bottom of this because we want to give fair treatment to Puerto Rico so they can solve their own problems.

What my colleague mentioned is that a restructuring authority for Puerto Rico costs the U.S. taxpayers zero. Zero dollars. That is to say, we are not proposing, at least on our side of the aisle, that we give them immediate funds to restructure. We are simply saying: Give them the tools of bankruptcy so they can restructure. My colleagues think this is important because we know that the mass exodus from Puerto Rico, which has been about 300,000 people in the last several years, will continue if we don’t give them the tools to reorganize their debt. What that will mean, as the Senator from Florida mentioned, is that people will come in droves to Florida and continue to impact that economy by asking for federal social services that are capped in Puerto Rico. They will come to Florida and ask for those services.

So the United States, by denying Puerto Rico the bankruptcy tools, actually will be impacted economically. Some people have estimated the impact will be as much as $10 to $20 billion over a 10-year period of time. I would say we have a lot of skin in the game to get people to reorganize this debt.

Many newspapers across the United States also believe that we should give Puerto Rico these tools to reorganize. In an editorial recently in the New York Times, which talked about the President’s proposal, it said: ‘‘Crucially, it asks Congress to change the law so that Puerto Rico’s territorial government and municipalities can seek bankruptcy protection.’’ They understood this issue, as did the Washington Post when they wrote: ‘‘. . . letting an impartial bankruptcy judge sort out the competing claims on a failed public entity is the fairest, most efficient approach; without that option, Puerto Rico has no leverage in debt negotiations, and litigation could ensue.’’

So there are newspapers throughout the United States of America that are looking at this issue and saying: Give them the ability to reorganize their debt.

Why is this so important? Because the Puerto Rican government may default on its debt as early as January 1, when nearly $1 billion in payments are due. Many of us here want to see a resolution of this issue now, giving them the tools to avoid that. Once they default, the economic impact to the rest of us and the U.S. taxpayers will be far greater. Why do I say that? Because if you look at the inaction that takes place, U.S. taxpayers contribute $6.4 billion to Puerto Rico’s annual budget, funding these various programs. If you default, that means we will be spending more than $6.4 billion.

I know some of my colleagues want to protect the hedge funds from being a part of the bankruptcy reorganization. But, when you are protecting the hedge funds from being a part of the bankruptcy reorganization, you are adding costs for the U.S. taxpayers. That is something we cannot afford. If Puerto Rico is allowed to restructure their debt, they could make these decisions and save us money as U.S. taxpayers. In the long run, as I said, it would prevent the mass exodus from the island to many other States and provide Puerto Rico with the tools they need.

Yet some in Congress are more comfortable with inaction, which basically is just bad public policy. Why is this? Because 20 to 50 percent of the island’s debt is owned by hedge funds. These hedge funds swoop in to buy cheap Puerto Rican debt and are using their influence here in Washington, DC, to block Puerto Rico from access to bankruptcy protection that is allowed in other places. It is no secret that the solution will require sacrifice by everyone, and that is what we want to see. If  Congress continues to protect these hedge funds and fails to act, it will be at both the expense of the Puerto Rican people, who have already suffered immensely, and of the American taxpayer.

Sitting by idly is not a solution. We should remind our colleagues that Puerto Rico had preexisting bankruptcy authority which was taken away in 1984, mysteriously. Nobody knows why, or how, or any justification for it. They just know that it disappeared. Congress should reinstate that authority that was taken away. As the Governor of Puerto Rico said before the energy committee, quoting another leader: ‘‘Give us the tools, and we will finish the job.’’

Now is the time to act, before we see a greater mass exodus of people. This chart shows the migration between Puerto Rico and the United States. You see that it continues to grow. It has grown 500 percent in the last 10 years. The issue is that now government workers are being cut to three days a week, patients are waiting for months without basic medical care, hospitals are going bankrupt, and the health industry is about to collapse. On the other side of the aisle there is talk about the humanitarian crisis that might occur next year and how they might want to respond to it, but they don’t want to stand up and say to the hedge funds that they also have to take some responsibility in this issue.

Forty-five percent of the population in Puerto Rico is now living in poverty, including 58 percent who are children. Unemployment is in double digits, and it is, if you compare it to all our States, very high in the ranking of States in the United States. As a result, 80,000 people are leaving the island each year as part of a mass migration. So what is the solution? As we said: Restructure their debt; give them the tools to restructure their debt. It costs nothing to the U.S. taxpayer, saves us money in the long run, prevents a mass exodus from the island, and prevents more spending on Federal benefits to people who might migrate to the United States.

We think this ought to be a lot of motivation to sit down and solve this issue today. In fact, now we are hearing from different businesses, and I will submit one letter for the record, in the United States that do business in Puerto Rico and that don’t want to lose their investment because they are so concerned about the level of collapse that could happen in Puerto Rico, and the loss of infrastructure and infrastructure investment.

So why do we need to continue to move forward? Well, inaction, basically, is to say that the hedge funds have won in this game. Twenty to fifty percent of the island’s debt is owned by the hedge funds, and hedge funds are using their influence in Washington to block a Puerto Rico bill from coming to the floor. Failure to act would be at the expense, as I said, of taxpayers and individuals. Just yesterday, a leader who has been supportive of reorganization of a task force in New York that was under a budget crisis said: ‘‘The hedge funds got their way in Congress.’’ That is referring to the fact that we were not able to get, as my colleague from Florida said, this legislation as part of the budget omnibus bill or other bills moving through the process.

So now is the time to act to give Puerto Rico the tools. Now is the time for all of those who have made investments to say ‘‘we all have to come to the table and resolve this issue.’’ The longer we wait, the greater the risk for the United States of America—to say nothing of the issue of a territory that we lay claim to, giving them the ability to solve their problems. I ask my colleagues to come to a commonsense resolution on this issue. Stop protecting these hedge funds and start working for people who are called U.S. citizens.