Wasserman Schultz vows to press for Puerto Rico debt relief

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Washington, DC, January 25, 2016 | comments

MCCLATCHY WASHINGTON BUREAU

Wasserman Schultz vows to press for Puerto Rico debt relief

By James Rosen

Rep. Debbie Wasserman Schultz pledged Friday to launch a renewed push for legislation that would provide a partial bailout for Puerto Rico's $72 million debt, part of an economic crisis that has prompted tens of thousands of island residents to flee to Florida and other states.

Wasserman Schultz, a Florida representative who is also chairwoman of the Democratic National Committee, made the promise in response to a plea from Roberto Prats, a Puerto Rican lawyer, during a conference call with other DNC leaders.

Wasserman Schultz said she would help pressure House Speaker Paul Ryan, R-Wis., to act on a bill to restructure Puerto Rico's debt and give the U.S. territory other financial relief.

"I want you to know how committed House Democrats are to making sure we hold the speaker's feet to the fire and to making sure that by the end of March we pass legislation to help Puerto Rico," the sixth-term lawmaker told Prats.

Ryan and other GOP leaders in the House and Senate have shown little willingness to aid the island, a majority of whose voters are Democrats. As residents of an American territory, they can vote in presidential primaries but not in the general election. Like the District of Columbia and other U.S. territories, Puerto Rico elects an at-large delegate to Congress who can craft and sponsor legislation, hold committee seats and perform other functions, but cannot participate in roll-call votes.

More than 1 million Puerto Ricans live in Florida, making them the state's largest ethnic group after Cubans and forming the biggest Puerto Rican community in the United States outside New York.

Puerto Rico's swollen debt, driven by benefits for the rising number of jobless residents and by other increased welfare payments, has prompted nearly 300,000 people to leave the island since 2012, with tens of thousands moving to Florida.

A measure to help Puerto Rico, crafted by Rep. Pedro R. Pierluisi, Puerto Rico's congressional delegate, has languished before a House subcommittee since its introduction last February.

The bill has 37 co-sponsors, all, like Pierluisi, Democrats. Five House members from Florida Wasserman Schultz, Ted Deutch, Alan Grayson, Patrick Murphy and Lois Frankel are among the supporters.

In August, Puerto Rico paid only $628,000 on a $58 million debt bill, defaulting for the first time in the commonwealth's history and sending shock waves through Wall Street. Much of its debt is held by American banks and other institutional bondholders.

Thirty-four U.S. hedge-fund managers are pressing for Puerto Rico to follow the conclusions of a study, released last June by former International Monetary Fund economists, that blamed the debt crisis on spending on public education and recommending that Puerto Rico close schools and fire teachers. It also proposed other spending cuts as part of broader austerity measures.

The report drew a sharp rebuke from Luis Gallardo, a city council member from Aguas Buenas, a town of 28,000 in Puerto Rico's central mountains.

"These (type of) proposals have been a disaster for Latin America and would be so for Puerto Rico," he said. "Sure, Puerto Rico could pay its debt, but at what cost? We are literally cutting off our own limbs just to stay afloat."

During a visit Wednesday to the Puerto Rican capital of San Juan, Treasury Secretary Jacob Lew urged Congress to pass the legislation.

"The people of Puerto Rico are sacrificing, but unless that sacrifice is shared by creditors in an orderly restructuring, there is no path out of insolvency and back to growth," Lew said.

Retired U.S. Bankruptcy Judge Steven Rhodes, who in November 2014 approved a mammoth Detroit settlement in the largest municipal bankruptcy in American history, is advising the Puerto Rican government on handling its crisis.

Among Republican presidential candidates, the Puerto Rican debt-relief bill has divided Sen. Marco Rubio of Florida and former Gov. Jeb Bush.

In a Spanish-language interview last July with Telemundo, Bush said the Detroit settlement could serve as a model for Puerto Rico but that Congress must intervene, because, unlike Detroit, the island does not have full legal jurisdiction to act on its own.

"I believe that since they're a territory where U.S. citizens live, they should receive the respect first for self-determination, and then we should assist them as much as we can in their economic crisis," Bush said. "The manner that maybe we can do this (in) is maybe let the government renegotiate its debt and, besides that, change the social contract."

Bush added: "Just like Detroit had that process, maybe Puerto Rico will also need to do the same thing, but it's not allowed by federal law, so the Congress must act."

Rubio, a Cuban-American, took a harder stance during a visit to Puerto Rico in September.

"I believe the Puerto Rico government has the ability to solve its own issues," he said, also speaking in Spanish. "What you need is new political leadership that has the courage and willingness to do the right thing and embrace needed reforms."

During a Senate Finance Committee hearing in September, Republican senators blamed Puerto Rico's debt problem on long-term fiscal mismanagement.

"Puerto Rico's debt crisis didn't happen overnight," said Sen. Charles Grassley, an Iowa Republican who chairs the Senate Judiciary Committee.

Sen. Chuck Schumer of New York, the No. 3 Senate Democrat, accused his GOP peers of dragging their feet.

"Frankly, I've been disappointed by the lack of urgency by many of my colleagues," he said. "I've heard a lot of excuses."

Schumer is the main sponsor of a Senate version of the House bill. He tried last month to get his measure passed by voice vote, but Sen. Orrin Hatch, a Utah Republican and Senate Finance Committee chairman, blocked the move.

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