After more than a month of wrangling, House Republicans unveiled the latest version of a bill that seeks to rescue Puerto Rico from its debt crisis, but its path forward remains unclear.
The new language rolled out on Wednesday tries to allay concerns from Democrats, Republicans, the Obama administration and creditors, all raised amid the collapse of an earlier version of the legislation last month.
It was met with praise from party leaders on both sides of the aisle. Speaker Paul D. Ryan, R-Wis., called it, "the most responsible solution to the crisis." His Democratic counterpart, House Minority Leader Nancy Pelosi called it, "a restructuring process that can work."
White House spokesman Joshua Earnest said the measure is an "important first step."
But with a massive lobbying effort underway to undermine any intervention as a "bailout," and many House Republicans concerned that the measure would invite Puerto Rico to turn to Congress in future crises, the bill's passage in the House is far from guaranteed.
Its sponsors and advocates attempted to head off such concerns.
“Years of disastrous polices have completely wrecked Puerto Rico’s economy,” said Sean P. Duffy , R-Wis., the sponsor of the bill, adding that its residents face “a humanitarian crisis.” “That’s why we must allow for a responsible restructuring for Puerto Rico’s debt, and do it without using Wisconsin taxpayer dollars for a bailout,” Duffy added.
Significant changes include how the U.S. territory can restructure its debt outside of federal court, language on the hierarchy of the debts, how a fiscal oversight board will be appointed, under what circumstances the island could lower the federal minimum wage, and the elimination of language that could transfer a portion of the island of Vieques to Puerto Rico from the U.S. government. Left to the side was a big Democratic priority: giving public pensions some priority over debt payments.
[ Puerto Rico Bill Delayed Again ] A markup next week is a possibility, though nothing has been scheduled. Timing is critical: On May 2, the territory defaulted on its debt for the third time since August, skipping $367 million in payments. A payment of $2 billion looms July 1 — a date some in the bond market eye with trepidation, as $800 million of that is in general obligation bonds. The Puerto Rico government is constitutionally required to pay those debts ahead of all other spending, but it says it can’t.
Republicans crafting the bill have been attempting to win a messaging war against some lobbying groups such as the Center for Individual Freedom, whose supporters are allowed to remain secret under rules governing political action committees.
That group has been running television ads calling the bill a “bailout,” despite the fact that U.S. taxpayer dollars would not be used. In addition, many House Republicans have worried about whether the measure will be strong enough to keep Puerto Rico from coming back later for help.
The measure has two key provisions: It would establish a seven-member fiscal control or “oversight” board with wide-reaching powers on the island’s finances – similar to one established in Washington in the 1990s. The board would be appointed by the president, with major input from Congress.
It would also give the U.S. territory of 3.5 million residents the ability to restructure its $72 billion of debt in federal court. Puerto Rico has been blocked from seeking municipal bankruptcy, known as Chapter 9, following changes Congress made to a 1984 law. Before that, though, the territory would need to engage in negotiations outside of court.
The crafting of the bill is remarkable for typically gridlocked Washington – Republicans, Democrats and the administration say that participants have negotiated in good faith, despite big differences.
[ Crises Mount, House Still Won't Act ] The ranking member on Natural Resources, Rep. Raúl M. Grijalva , D-Ariz., quipped last week: “I’m going to have stitches on this tongue when this is over — from biting it.”
A spokeswoman for Grijalva said they were still reviewing the bill and deciding “what our next steps are.”
Conservatives and Democrats alike have continued to cast a wary eye on the legislation, and former Rep. Connie Mack, a Florida Republican, has been lobbying members on behalf of creditors to vote against the bill.
The island’s non-voting congressman, Pedro R. Pierluisi , has been heavily involved in negotiating the bill, and while he called the latest version “not perfect” and did not endorse it, he nevertheless had measured praise for it.
“It is clear we are moving in the right direction,” he said in a statement .
[ Puerto Rico's Debt Crisis Could Lead to Catastrophe ] Puerto Rico’s fiscal situation has spiraled out of control in recent years. It has been in a recession for much of the past decade, and it has a 12 percent unemployment rate and a 46.2 percent poverty rate. Forty-seven percent of its 3.5 million residents receive Medicaid or other medical assistance.
Unsurprisingly, the island has lost 334,000 residents since 2000, a 9 percent decline, according to the Pew Research Center.