The U.S. Senate Committee on Energy & Natural Resources held a hearing today on the Puerto Rican economic crisis, the territory’s unsustainable debt and options for Congressional action.
Committee Chair Lisa Murkowski (R-AK) called the hearing to order by reiterating a point made by Senator Orrin Hatch (R-UT) at the Senate Finance Committee hearing held last month: Congress wants to be helpful, but Puerto Rico must provide more verifiable data to inform and guide federal policy making.
Ranking Member Maria Cantwell (D-WA) delivered an opening statement that emphasized the Senate Energy and Natural Resources Committee’s jurisdiction over “measures relating generally to the insular possessions of the United States” and “territorial possessions of the United States.” She further explained that “Congressional authority over Puerto Rico and the other territories stems from the Territory Clause of the Constitution, which says that ‘Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory … belonging to the United States….’”
Cantwell noted that Congress has used its power under the Constitution’s territorial clause in the past. “For example,” she added, “the Constitution of Puerto Rico was authorized and approved (with amendments) by Act of Congress. And, the Organic Acts of Guam and the U.S. Virgin Islands are Federal statutes.”
“All of these acts were reported by the Senate Committee on Interior and Insular Affairs, the earlier incarnation of this very committee. So I think it’s very important to realize that we do have the power to act here. We do have the authority. It was first President Bush, who said in 1992 that federal agencies should ‘treat Puerto Rico administratively as if it were a state’ unless doing so would ‘increase or decrease federal receipts or expenditures or … seriously disrupt’ federal programs. So, I know there are a lot of ancillary debates here about how we help Puerto Rico. But we do have the ability to give them the key tool to restructure under Chapter 9, without costing us anything from a budget perspective. We have the ability to give them that power.”
Following the remarks of the Chair and Ranking Member, the committee heard testimony from a panel of expert witnesses:
- Antonio Weiss, Counselor to the Secretary of the U.S. Department of Treasury;
- The Honorable Alejandro Garcia Padilla, Governor of Puerto Rico;
- The Honorable Pedro Pierluisi, Resident Commissioner for Puerto Rico;
- Sergio Marxuach, Policy Director for the Center for a New Economy; and
- Steven Fetter, Founder & President of Regulation UnFettered
Mr. Weiss began the witness testimony with a description of the Obama Administration plan released yesterday.
Mr. Weiss spoke about Puerto Rico’s current situation as a potential humanitarian crisis as well as a fiscal and economic one. The humanitarian emphasis was later echoed by Vermont Senator and presidential candidate Bernie Sanders, who sent a letter to Treasury Secretary Jack Lew yesterday urging the administration to consider the needs of the people of Puerto Rico when addressing current fiscal problems. The Senator’s line of questioning forcefully distinguished the needs of Puerto Ricans from those of the “vulture funds.”
In his testimony, Mr. Weiss explained that “since 2006, Puerto Rico’s economy has shrunk by more than 10 percent and has shed more than 250,000 jobs. More than 45 percent of the Commonwealth’s residents live in poverty – the highest poverty rate of any state or territory – and its 11.6 percent unemployment rate is more than twice the national average. Median household income in Puerto Rico is less than $19,000, approximately one-third of the U.S. median.”
He noted that more than 300,000 people have left Puerto Rico in the last decade, with a record 84,000 leaving just in 2014. As more and more American citizens leave the island for the mainland, the population in Puerto Rico continues to age and the revenue base shrinks.
Governor Garcia Padilla explained what his administration has done to address current fiscal and economic problems, and Resident Commissioner Pedro Pierluisi (D) outlined the responsibilities of the local and federal governemnts before tying the overall issue back to Puerto Rico’s political status as a U.S. territory:
“[T]he American public and their elected representatives must come to terms with a fundamental fact, which is that the main cause of Puerto Rico’s multi-faceted problems is its undemocratic and unequal political status. As then-Chairman Wyden and then-Ranking Member Murkowski both recognized during their opening statements at this Committee’s August 1, 2013 hearing, a clear majority of voters in Puerto Rico rejected this status in a locally-sponsored referendum in November 2012. 8 My constituents are now being governed under an arrangement to which they do not consent.”
“There will always be some people and politicians who assert, despite overwhelming evidence to the contrary, that Puerto Rico’s consistent underperformance relative to the 50 states over the course of many decades has nothing to do with the unequal treatment that Puerto Rico receives as a territory. There are even people and politicians who claim that Puerto Rico’s status is an advantage rather than a disadvantage, though their voices have mostly gone silent in recent years. These people and politicians can always be counted on to find some reason why now is not the moment to address the issue of status. They are wrong on the merits, and they are on the wrong side of history. The time has come for my constituents to have equality in this union or to have independence outside of it.”
In her line of questioning, Senator Elizabeth Warren (D-MA) asked Mr. Weiss to explain what the administration could do on its own without authorization from Congress. He noted the administration’s interagency effort in response. “I will push Congress,” Sen. Warren said, “but Treasury needs to Act.” She explained forcefully that Treasury has taken a strong leadership role during times of crisis, and that the people of Puerto Rico need help now. She admonished Treasury to be just as creative in coming up with solutions for Puerto Rico as it was for big banks during the earlier national fiscal crisis.
The administration has presented a four-point proposal of actions to assist Puerto Rico through the fiscal crisis:
- Congress should provide tools for Puerto Rico to comprehensively restructure its financial liabilities. This includes Chapter 9 access – even broader than the access included in legislation introduced by Pierluisi. It would help finalize PREPA negotiations, put a stay on litigation, and provide breathing space for Puerto Rico’s government.
- Congress should require that Puerto Rico implement strong fiscal governance and oversight as part of a comprehensive legislative package. It is imperative that steps be taken to ensure that measures put in place to combat the fiscal crisis do not end with a temporary fix that endangers the fiscal longevity of the island.
- Congress must provide a long-term solution to Puerto Rico’s inadequate Medicaid treatment. Puerto Rico’s Medicaid program is fundamentally different from the Medicaid program that serves Americans in the 50 states and the District of Columbia. Medicaid funding in Puerto Rico 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 states.
- Puerto Rico needs measures to boost economic growth. Such examples include extending the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) to Puerto Rico. Currently, Puerto Rico does not have access to the EITC and is treated differently regarding the CTC.
Each of the solutions proposed by the Obama administration, the Garcia Padilla administration, and most of the other witnesses at today’s hearing do not directly address what many, including former Energy & Natural Resources Committee Chair Ron Wyden (D-OR), see as the greatest obstacle facing Puerto Rico in the future: the island’s yet-to-be-settled political status.
Senator Wyden and Mr. Marxuach noted that the current ambiguous “commonwealth” status makes it difficult for Puerto Rico to enact policies to grow the island’s economy. Mr. Marxuach explained that under Puerto Rico’s territorial status, its access to fiscal policy toools is limited, adding that federal law permits discrimnation against Puerto Rico in federal programs provided that there is a rational basis for doing so. The underlying issue is a long term one, he added: Puerto Rico’s political status.
Senator Wyden urged Governor Garcia Padilla to make use of funds appropriated for a federally-sponsored plebiscite on Puerto Rico’s status.
Chairwoman Murkowski agreed with Senator Wyden and noted that the committee and Congress as a whole should be looking to longer-term solutions. As the only member of the Senate born in a territory, Senator Murkowski said that she pays keen attention to the issue of status and reiterated the importance of settling Puerto Rico’s political status.
The Chairwoman ended the hearing by recognizing that the administration has a role to play. “Even in crisis,” she explained, “Congress takes a while to work its magic.”
See a video recording of the hearing here.