Commentary: Bankruptcy Does Not Absolve Congress of Responsibility to Puerto Rico

As Puerto Rico filed the largest municipal bond bankruptcy in U.S. history last week, many believe that all Congress needs to do is take a step back and let the process work itself out. Others are also under the false impression that merely allowing the Financial Control Board set up under the Puerto Rico Oversight, Management, and Economic Stability Act will provide the necessary independence and structural reforms for the economy to magically bounce back after more than a decade of negative growth. Unfortunately, nothing could be further from the truth, according to a commentary in The Hill yesterday. The reality is that unlike other major debt-restructuring cases in the U.S. and worldwide, Puerto Rico’s 10-year-plus economic depression is directly correlated to congressional policies that harmed the Commonwealth’s economy. It was Congress and the ruling political party in Puerto Rico at the time that decided to phase out Section 936 of the Internal Revenue Code, a decision that provoked the loss of 75,000 manufacturing jobs over the following decade. The inability to foster alternative economic strategies to mitigate the loss of federal tax incentives, and ill-advised spending decisions by the island’s politicians, aggravated the situation. Therefore, according to the commentary, reasonable and responsible remedies need to be put in place to correct this damage. Helping Puerto Rico now would save money to states and the federal government. Puerto Ricans, as U.S. citizens by birth, are moving at an accelerated pace to live in the states. If economic conditions do not improve soon, this trend is projected to increase even further, continuing to erode the tax base of the Commonwealth and leaving behind an aging population without the workforce it needs to grow.