Mass Exodus From Puerto Rico Feared

[Happyhorn52]

Of course it didn't help that the Puerto Rico Electric Power Authority (PREP had $9 billion in debt and was bankrupt before the storms.

https://www.thestar.com/news/world/2017/09/21/puerto-ricos-electric-company-was-already-9-billion-in-debt-before-hurricanes-hit.html

Edited October 14, 2017 by Happyhorn52

[Castaway]

Puerto Rico's massive problems with paying its debts has become part of its newer and larger problem.

Jul. 22, 2015,

How do we solve Puerto Rico's debt crisis? As Americans — both Puerto Ricans and citizens of the 50 U.S. states and the District — watch as Greece stumbles ever deeper into economic catastrophe, many of us want to know what our government plans to do about the Puerto Rican debt crisis, which, whether one likes it or not, is America's problem.

A "bailout" is simply unacceptable to U.S. taxpayers. But a solution that provides fairness to creditors as well as debtors is at hand, if Congress is prepared to deploy its readily available constitutional powers. The Commonwealth of Puerto Rico should be authorized to restructure all its debts in a federal bankruptcy court.

On June 29, the governor of Puerto Rico announced that $72 billion of the commonwealth's debt was "unpayable." This debt burden amounts to more than $20,000 for every man, woman and child — or roughly 70 percent of the commonwealth's per-capita gross domestic product. It is thus no exaggeration to characterize this as the most drastic fiscal crisis in Puerto Rico's history. This crisis threatens to inflict grave harm on the 3.5 million U.S. citizens of Puerto Rico, but also on the U.S. economy at large.

So why not let Puerto Rico declare bankruptcy? There are three main objections to this plan. All seem reasonable but are easily countered.

First, there is the constitutional argument. The Bankruptcy Code does not permit states to declare bankruptcy, in part, because subjecting them to federal bankruptcy or to suits from creditors arguably runs afoul of the 10th and 11th amendments.

Puerto Rico, however, is a territory, and the Constitution gives Congress the power to "make all needful Rules and Regulations" respecting the territories. Congress, therefore, has authority to extend the provisions of the Bankruptcy Code to Puerto Rico, and these provisions would have primacy under the Constitution's Supremacy Clause.

Second, there is the "moral hazard" argument. Why should we reward Puerto Rico and its residents for living beyond their means? To be sure, Puerto Rico has contributed to its problems by borrowing profligately to fund its bloated public payrolls. And Congress should consider imposing public-sector reform as part of any debt-restructuring legislation. In some ways, Puerto Rico is here the victim of its territorial status: Puerto Rico is part of the United States, and so it has no monetary policy of its own and is thus limited in how it can respond to a debt crisis.

The best response to the "moral hazard" argument, however, is that the bankruptcy law enshrines our pragmatic recognition that a debt burden can become too crushing to handle. Although it is preferable for people, corporations and cities to make good on their obligations, in some cases this becomes practically impossible, to the detriment of creditors as well as debtors. The purpose of bankruptcy is to allow debtors and creditors to enter into an orderly and binding system of adjudication, where such debts can be restructured.

Finally, there is the concern, shared by many Puerto Ricans, that treating Puerto Rico differently from the states is inconsistent with future efforts to achieve statehood. In short, if states are not permitted to declare bankruptcy, then Puerto Rico should not be permitted to do so either.

In Puerto Rico, this concern is motivated by profoundly pro-American sentiments and a yearning for full equality within the American political family. But the simple reality is that Puerto Rico is in desperate trouble now, and it is a territory now. Nothing that happens today with respect to the current crisis should affect any eventual movement toward statehood, nor necessarily affect how states are treated in bankruptcy. In attempting to resolve this serious crisis, Congress should therefore be encouraged to consider the full range of its legal options.

A clear-eyed view of the crisis reveals that the best solution to this difficult problem is to allow Puerto Rico and its creditors to restructure all these debts through the U.S. Bankruptcy Code. This step would both extend the protections of bankruptcy to all of Puerto Rico's creditors and give the U.S. citizens of Puerto Rico their best chance to move beyond this crisis and toward a better future. 

http://www.businessinsider.com/3-main-reasons-why-puerto-rico-cant-declare-bankruptcy-2015-7

[Happyhorn52]

The Elephant in the Room

For starters, of the 900,000 people who have jobs in Puerto Rico, roughly 300,000 work for government. The latest budget drives home the fact that the island’s fiscal problems are far from over.

For example, the governor has pointed out that Puerto Ricans enjoy 30 days of paid vacation every year, 18 sick days, and 14 paid holidays. That amounts to more than two months of annual paid leave for every employee. That is great for employees, but bad for business, which in turn, is bad for jobs.

https://panampost.com/frank-worley-lopez/2015/07/29/cut-the-government-workforce-or-wither-puerto-rico/

 

[Tukaram (Tim)]

On 10/14/2017 at 12:58 AM, Jake said:

Even though "Puerto Rico is an island. Surrounded by water. Big water. Ocean water", the travesty of this whole mess should also be characterized by the actions from the white house (not capitalized).

I find it interesting that when Japan got hit by an earthquake and tsunami we got the Navy mobilized and there very quickly.  They have an even biglier ocean separating us ha ha...  It is all about priorities and compassion.   We treat PR like a bastard step-child. If they have an option to go to the mainland, I certainly can't blame them for doing it.