The following is the second in a series of posts regarding the bi-partisan effort that led to the enactment of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) as Public Law No: 114-187.
On June 30, 2016 – one day before the U.S. territory of Puerto Rico was due to default on a payment for its crippling debt – President Barrack Obama signed PROMESA into law. The bill passed the House of Representatives on June 9, 2016 with impressive bipartisan support: the vote was 297 for, 127 against, and 11 members not voting. The strong bipartisan support for the legislation to provide oversight and assistance for Puerto Rico continued in the Senate; the bill as passed by the U.S. House was agreed to in the Senate with 68 senators voting in favor, 30 voting in opposition, and 2 senators not voting.
The bipartisan support among Members of Congress for PROMESA was reinforced by statements released from third party organizations and think tanks. The various groups in support of PROMESA had their work cut out for them. Despite a report from the Congressional Budget Office noting that stated enacting PROMESA to restructure the island’s public debt, would have no significant net effect on the federal deficit, “dark-money group[s] spent hundreds of thousands of dollars on ads in Washington D.C. and elsewhere calling the plan a “bailout.”
One group – the Center for Individual Freedom – “spent close to $2 million trying to scare off the authors of [PROMESA]. The ads, which slam the deal as a bailout, support the position of hedge funds that stand to lose billions if Congress allows Puerto Rico to restructure its general obligation debt.”
The earliest support for PROMESA was from Americans for Tax Reform (ATR). ATR is a center-right taxpayer advocacy group that “opposes all tax increases as a matter of principle” and believes that “the government’s power to control one’s life derives from its power to tax. [They] believe that power should be minimized.” Their first statement, released on April 14 discredited claims that PROMESA is a bailout and highlighted the importance of enacting this legislation:
“This legislation is a responsible proposal that provides the tools to address the crisis without bailing out the island, granting the island Chapter 9 bankruptcy, or increasing taxes. PROMESA creates an Oversight Board modeled off the success of the fiscal control board created for the District of Columbia in 1995. … The bottom line is that the Puerto Rico crisis is a failure borne from government inefficiency. PROMESA address this problem in a responsible way through a control board to cut down on waste, instead of through tax increases or a taxpayer funded bailout. Members of Congress should have no hesitation supporting and voting for this bill.”
Conservative groups in support of the legislation continued to reiterate that enacting PROMESA would not equate to a bailout for Puerto Rico. The Center for Freedom and Prosperity credited the bill as a “bipartisan opportunity to prevent a Puerto Rican bailout.” Their statement went on to note that “[t]he bill provides a path out of Puerto Rico’s debt crisis without setting the dangerous precedent that a federal bailout would entail. Congress must now pass PROMESA so that Puerto Rico can begin the process of recovery from its irresponsible spending binge.”
When the House of Representatives voted in favor of PROMESA, Citizens Against Government Waste (CAGW) issued a press release applauding the House. “CAGW works to eliminate waste, fraud, abuse, and mismanagement in government through research and public education activities.” CAGW insisted that without PROMESA, a bailout for Puerto Rico would be inevitable:
“The legislation creates essential mechanisms that thwart a taxpayer bailout of Puerto Rico’s fiscal failures. PROMESA also strengthens the financial oversight board’s ability to audit Puerto Rico’s government and assist the island with the management of public finances. The structure of the seven-member oversight board is based on the precedent established in 1996, when Congress set up a financial control board to oversee the fiscal affairs of the government of the District of Columbia, as well as the control board set up for New York City in 1975. PROMESA is not a bailout. Indeed, without PROMESA, taxpayers will inevitably be forced to bailout Puerto Rico in the near future.”
Strong opposition came from the political arm of the Heritage Foundation – Heritage Action. Heritage Action felt the legislation fell “woefully short on pro-growth reforms” and vehemently opposed any stay on legal action. Heritage Action asserted that “Congress should go back to the drawing board for its response to Puerto Rico.” A coalition of unions also opposed the legislation but for different reasons, ” noting that “[a]ny restructuring package must also protect the accrued pension benefits of Puerto Rican workers and retirees, retain worker protections that apply to all working people in the U.S. including minimum wage and overtime protections, and preserve the democratic rights of the people of Puerto Rico. PROMESA is unacceptable because the bill fails to meet these basic goals.”
Alex Pollack, the president of R Street – a conservative think tank engaged in “policy research and outreach to promote free markets and limited, effective government” wrote that Congress essentially had the choice of PROMESA or doing nothing and triggering “an uncontrolled crisis of cascading defaults in a territory of the United States.” Pollack also acknowledged the need for debt restructuring and called PROMESA the “first step to get under control a vast financial mess.”
Outside support for PROMESA was also evident among more traditionally liberal groups such as the Center for American Progress. On June 14, the Center for American Progress called on the Senate to take-up and pass the bill while acknowledging its imperfections:
“The bill was approved overwhelmingly by the House and is slated to be considered in short order by the Senate. As is often the case with bipartisan legislation in Congress, PROMESA represents a compromise proposal. While it is not perfect—in particular, it fails to address many of the significant underlying factors contributing to the island’s fiscal situation—PROMESA offers a critical first step toward relief and would prevent an otherwise calamitous humanitarian and economic crisis in Puerto Rico.”
Jared Bernstein, a former chief economist to Vice President Joe Biden, wrote on behalf of the Center on Budget and Policy Priorities that PROMESA “offer[ed] the only lasting solution, the one wherein Puerto Rico can come out from under its debt burden and figure out a way to generate real growth.
The statements and press releases referenced are a sampling of the outside support for PROMESA. The following are additional articles of support for the Puerto Rico Oversight, Management, and Economic Stability Act:
- American Enterprise Institute – June 12, 2016
- Americans for Limited Government – June 10, 2016
- Americans for Tax Reform – May 26, 2016 & June 8, 2016
- Conservative Reform Network – May 24, 2016
- National Taxpayers Union – May 25, 2016 & June 8, 2016
- Grover Norquist (ATR President) & Tom Schatz (CAGW President) – May 26, 2016
The support of third party advocacy groups and think tanks provided reassurance to Members of Congress that they were taking the appropriate actions and making the correct decisions to support the American citizens in Puerto Rico.
Related: PROMESA Support: The Media