As a member of the House Natural Resources Committee with jurisdiction over U.S. territories, I’ve been working hard for several months to find a solution to the fiscal crisis in the Commonwealth of Puerto Rico.
It’s largely a self-made problem due to decades of government mismanagement and overspending.
My No. 1 goal is protecting Idaho, where state and local governments balance their budgets – even in the toughest of times.
Liberal excesses in Puerto Rico risk destabilizing bond markets. This is where Idaho and its local governments go for short-term and long-term borrowing. If Puerto Rico fails to restore its creditworthiness, the result would disrupt the ability of local and state governments across the country to borrow at low rates favorable to taxpayers.
That is why I joined the 29-10 vote in the Committee this week in favor of H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act. The bill establishes fiscal reforms without spending a single dollar in U.S. taxpayer money to relieve Puerto Rico’s debt.
The bill prevents taxpayers from bailing out a government that spent recklessly and provides a conservative solution to force Puerto Rico to spend responsibly. The bill also avoids setting a horrible precedent that could tempt free-spending states to walk away from their obligations by behaving irresponsibly.
Early this month, Puerto Rico defaulted on a $400 million debt payment. In July, another $2 billion comes due. Congressional action is necessary because Chapter 9 reorganization does not apply to Puerto Rico and the island’s politicians have failed to face fiscal reality.
H.R. 5278 creates a seven-member Oversight Board to oversee debt restructuring and conduct financial audits. The board would require sustainable government budgets, establish fiscal plans to achieve needed reforms and have power to override laws, regulations and executive orders that conflict with the fiscal plans. Republican appointees would have a 4-3 majority over Democrats on the board.
The bill was the result of long and difficult negotiations. It includes changes I demanded to protect the rights of creditors and stave off a taxpayer bailout.
My work blocked a request by the White House to prioritize Puerto Rican pension funds over other secured creditors, a move that would destabilize bond markets. I also secured language prohibiting unlawful transfers of funds or property and guaranteeing that the fiscal plans respect priorities and liens as guaranteed by the territorial Constitution.
The bill allows creditors and debtors to work on voluntarily restructuring. If negotiations fail, the board could file debt restructuring petitions in federal court. The Oversight Board’s authority would expire after the Puerto Rican government has balanced budgets for four consecutive years and has reestablished access to credit.
Many interest groups tried to kill the bill in hopes of sparking a catastrophe in Puerto Rico which would have led to a taxpayer bailout. Contrary to the misleading ads and information propagated by these groups, this bill provides a conservative path to restore stability and revitalize Puerto Rico’s economy without costing the people of Idaho and the American taxpayer.
Meanwhile, presidential candidate Bernie Sanders, an avowed socialist, is leading the fight against the bill because it lacks bailout money and demands fiscal discipline. Other liberals seeking to weaken the bill include Rep. Luis Gutierrez, D-Ill., and Sen. Bob Menendez, D-N.J.
In an editorial this week, the Wall Street Journal praisedCongressional Republicans for “using conservative principles to solve an urgent problem caused by progressive government” and said “the overall bill steers the commonwealth in the direction of free-market reforms after years of welfare-state politics.”
Finally, we must learn from this experience. Congress and presidents of both parties have let our national debt reach an unsustainable $19 trillion. That’s only been possible because the U.S. government has something Puerto Rico doesn’t – the authority to print money and borrow endlessly.
My hope is this crisis will be a lesson that inspires Congress and our next president to restore fiscal sanity for the entire country.