“Puerto Rico is in the midst of an economic and fiscal crisis, and without Congressional action the situation could become a humanitarian crisis.”
This statement, an opening line from a ten-page White House document titled, Addressing Puerto Rico’s Economic and Fiscal Crisis and Creating a Path to Recovery: Roadmap for Congressional Action, sets the stage for a new White House message released tonight. The document acknowledges that Puerto Rico’s economic troubles are not a sudden change in the territory’s situation and calls on Puerto Rico’s government to keep better records and oversight.
However, it also says that Puerto Rico can’t solve the problem alone. While the document reiterates that Washington is not willing to provide a bailout, and says once again that the Executive Branch will continue to give advice and try to help in unspecified ways, the mandate is clear:
The Administration is committed to continuing to work with Puerto Rico, but Congress must act to resolve this crisis.
Four specific requests are made of Congress:
- Provide chapter 9 bankruptcy protection, and also come up with a way of restructuring all of Puerto Rico’s debt. This method, whatever it is, should apply only to territories, not to States. States, says the document, should not be able to declare bankruptcy.
- Bring Puerto Rico’s accounting “into the 21st century” and make sure that there is some oversight. A joint statement from U.S. Treasury Secretary Jacob J. Lew, National Economic Council Director Jeff Zients, and Health and Human Services Secretary Sylvia Mathews Burwell sent out with the roadmap specifies that “Congress should provide independent fiscal oversight to certify that Puerto Rico adheres to the recovery plan it is implementing in a credible and transparent way.” This section of the roadmap calls for “respectful” oversight.
- Create a long term solution to Puerto Rico’s “historically inadequate”Medicaid treatment. The roadmap acknowledges that Puerto Rico has not been fairly treated when it comes to medical coverage, and insists that this must change. Specifically, Puerto Rico’s Medicaid program is fundamentally different from the Medicaid program that serves Americans in the 50 states and the District of Columbia in that it is capped; U.S. citizens in Puerto Rico are offered fewer benefits; and the federal government contributes less on a per-capita basis in Puerto Rico than in the rest of the nation.
- Extend the Earned Income Tax Credit to Puerto Rico. This action is described in the roadmap as rewarding work and supporting growth, acknowledging that the EITC has had just this effect in the States. Expanding the Child Tax Credit further is also mentioned as an option in this section. This section of the roadmap also says that economic growth is a must; austerity measures that crush Puerto Rico’s economy further will lead only to further movement from the Island to the mainland and will not lead to a stable economy in the future.
“Only Congress can grant access to a federal restructuring mechanism,” the roadmap points out, and “Congress can take action today.”
In a related statement issued by Treasury Secretary Jacob J. Lew, National Economic Council Direcotr Jeff Zients, and Health and Human Services Secretary Sylvia Mathews Burwell, the three top Obama Administration officials explained that “Puerto Rico, and the 3.5 million American citizens who call the island home, are facing a serious crisis that requires immediate congressional action.”
“The Commonwealth has been mired in a decade long recession,” they added, “during which more than 300,000 people left the island, the island’s economy shrank and unemployment soared, and the Commonwealth’s fiscal hole deepened. Puerto Rico has taken emergency actions to address these challenges, but those actions will be exhausted this winter. Puerto Rico has already taken significant steps to address its fiscal crisis, but more action is required.”
“The Administration has been working with the Puerto Rico government to ensure that the Commonwealth is able to access all available, existing federal resources. We have helped Puerto Rico attract job-creating investments, secure new funds to accelerate infrastructure projects, and lower energy costs on the island. These efforts are ongoing, but administrative actions cannot solve the crisis. Only Congress has the authority to provide Puerto Rico with the necessary tools to address its near-term challenges and promote long-term growth.”
Resident Commissioner Pedro Pierluisi (D), Puerto Rico’s sole member of Congress, responded to the proposal immediately following its release.
“I welcome this initiative by the Administration, and I am confident that it will inform the ongoing conversation in Congress about a possible legislative package to empower Puerto Rico by treating it more equitably under federal laws. I am pleased that the Administration supports the extension of the federal earned income tax credit and the full extension of the child tax credit to Puerto Rico, consistent with legislation I introduced in September. I am also gratified that the Administration supports a ‘long-term solution’ to the territory’s woeful treatment under Medicaid, and I note that I put forward a comprehensive solution to the Medicaid crisis in legislation that I filed in June. Puerto Rico also confronts numerous inequalities under Medicare, and I hope Congress and the Administration will take action to address those disparities as well.”
“I thank the Administration for supporting my bill to provide state-like treatment for Puerto Rico under Chapter 9 of the federal bankruptcy code,” Pierluisi added. “The Administration and I agree that there needs to be a fair and orderly legal process for Puerto Rico to restructure a meaningful portion of its debt. As the Administration recognizes, it will be up to Congress to decide whether to provide for such a process through federal legislation and, if it does, to determine the form and extent of that legislation.”
Read the Roadmap for Congressional Action.
Read the related White House Fact Sheet.