Congressional Aid Could Help Puerto Rico Create Sustainable Economy
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And now to the island's finances. The House today passed a $36-and-a-half billion aid package, much of it intended for Puerto Rico. And that includes a nearly $5 billion loan to help the island's government pay its bills while it works to get its economy going again. That is a loan, so it adds to a public debt there of over 70 billion and counting. NPR's Greg Allen reports that many are now calling on Congress to help the island eliminate its massive debt.
GREG ALLEN, BYLINE: President Trump was one of the first to suggest the federal government should step in and help the island with its debt. In his words, wipe that out. Others in the administration quickly walked back his comments. But in the House and Senate, many Democrats believe the bankruptcy process Congress set up for Puerto Rico last year is no longer workable for an economy devastated by Hurricane Maria. Here's Democratic Senator Bill Nelson, who represents more than a million Puerto Ricans living in Florida.
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BILL NELSON: Nobody expected a Category 5 hurricane. Now it's upside down in an apple cart. The United States government is going to have to help Puerto Rico rebuild from scratch.
ALLEN: Maria weakened slightly before hitting Puerto Rico as a Category 4 hurricane. Among Republicans and Democrats, there's wide recognition that Puerto Rico needs a lot of help from the federal government. In addition to the short-term cash infusion and relief spending, federal agencies are working to restore the island's infrastructure, including its tattered power grid. But on NBC's "Meet The Press," White House Budget Director Mick Mulvaney says Congress addressed Puerto Rico's debt problems when it passed something called PROMESA.
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MICK MULVANEY: And the PROMESA process, which is a bill that House passed two years ago, is going to have to figure out a way to relieve Puerto Rico of that debt. That does not mean that we're going to wave a magic wand and wipe out the debt, which is what many people interpreted the president to say. And it also doesn't mean we're going to bail them out because we're not.
ALLEN: PROMESA created a financial oversight board for the island and a process for renegotiating its $73 billion public debt. That process was well underway when Hurricane Maria hit the island. After the storm, the oversight board said spending cuts, including furloughs of government workers, would be put off until next year. Meanwhile, a federal judge is overseeing complex bankruptcy proceedings as Puerto Rico works to renegotiate its debt with creditors.
Brad Setser, an Obama administration Treasury official now with the Council on Foreign Relations, doesn't believe Congress needs to revisit PROMESA. With Puerto Rico's economy and infrastructure in ruins, Setser says creditors are likely now to take big losses.
BRAD SETSER: Projections for what Puerto Rico can pay going forward need to be adjusting. The courts and the creditors will all need to work together to come up with a restructuring. A lot of the debt at the end of the bankruptcy process will be almost wiped out in my view.
ALLEN: Cate Long says most of Puerto Rico's bonds - three quarters of them - are held by individual investors, many who live on the island. Long as a former financial reporter who runs the research service Puerto Rico Clearinghouse. She says despite the devastation, recovery from Maria will create an economic boost, and she believes it will leave Puerto Rico in a better position to pay down its debt.
CATE LONG: Because, one, you're going to have all this federal money from FEMA and then direct allocations from Congress come in to rebuild roads and rebuild the ports and the schools and the electric utilities and create jobs. And then the question is - in my view is, can we sustain that?
ALLEN: Over the last decade while the island's economy has been mired in a recession, nearly a half million people left Puerto Rico for states like Florida, New York and Texas. Long and Setser say that's where Congress can have the biggest impact now, helping Puerto Rico create a sustainable economy that gives residents a reason to stay on the island. Greg Allen, NPR News.
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