Puerto Rico is in trouble. And if it stays on this path, American taxpayers will be in trouble too. But if we act now, we can prevent a bailout and end the crisis.
Decades of fiscal mismanagement have created a nightmare scenario where this U.S. territory is in way over its head — to the tune of $118 billion dollars in the form of bonds and unfunded pension liabilities. The Puerto Rican government is currently defaulting on these debt obligations, which has serious consequences for the island. Many hospitals and schools have shuttered already. What's next? Blackouts and sewage system failures. This is happening now to an already impoverished people — people who are U.S. citizens who pay taxes and fight alongside us in our wars. If we want to avert calamity and prevent a taxpayer bailout of the island, we must act now.
It's up to Congress to address this crisis. The Constitution demands this, as it gave Congress the power to "make all needful rules and regulations respecting the territory or other property belonging to the U.S." The stakes are high. As total default nears, the economic carnage won't be contained on the island. The U.S. bond market is intertwined with the fate of Puerto Rico. Of Puerto Rico's debt, 15 percent is held by middle-class Americans. These are folks trying to save for retirement, and we owe it to them to have these obligations addressed in a fair, systematic way.
That's why Congress is acting today on H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). This bipartisan legislation will help prevent a taxpayer bailout, bring order to the chaos, and put Puerto Rico on a path to real growth and recovery. How? It gives the territory the ability to restructure its debt with creditors in an orderly way and installs an oversight board to oversee the debt restructuring process and make lasting reforms on the island.
The oversight board, appointed by Congress and the president, will have the authority to audit the government's financial statements, inserting structure and transparency in the debt restructuring process. Right now, this restructuring process is the best chance for creditors, which range from U.S. states to individual bondholders, to get paid what they are owed.
These provisions are strictly territory-specific, which prevents a precedent for states. The board will also have the ability to enforce balanced budgets and make lasting reforms if the Puerto Rican government fails to do so. This ensures that Puerto Rico will not be able to continue its failed policies of reckless spending and irresponsible fiscal management that led to this crisis in the first place. Finally, PROMESA includes policies that enforce the rule of law and promote economic growth on the island, like providing Puerto Rico with flexibility on the youth minimum wage so businesses can hire more young people.
You may have seen television ads over the past few months calling PROMESA a taxpayer bailout. This is simply and objectively false. Not a single taxpayer dollar goes to Puerto Rico. Last week, the Congressional Budget Office confirmed this fact: PROMESA wouldn't add a single dollar to the deficit. Not only is PROMESA not a bailout, it actually prevents a taxpayer bailout of the island. And special interests behind these ads know this. They want any legislation that prevents a bailout to fail — so they can reap the benefits of a real taxpayer bailout that will be called for if Congress fails to act.
Advocates of conservative, limited government policies — who oppose taxpayer bailouts on principle — have rallied behind this legislation. As Americans for Tax Reform said, "PROMESA contains no federal bailout and does not leave taxpayers on the hook. ... Any suggestions that this legislation contains a bailout are completely false." The Center for Limited Government applauded the fact that "[p]rotecting taxpayers is job one of this legislation." And The Wall Street Journal editorial board expressed its support saying, "[t]he Republican Congress is using conservative principles to solve an urgent problem caused by progressive government. With some fortitude and a little luck, the Commonwealth of Puerto Rico might even be able to grow again."
Let's not forget: Congress has a Constitutional and fiscal obligation to address the debt crisis and stop the Puerto Rican government's reckless behavior. But American taxpayers certainly shouldn't suffer the consequences for the Puerto Rican government's bad behavior. If Congress fails to pass PROMESA, Puerto Rico's debt crisis will be escalated to a total humanitarian crisis, and the American taxpayer may very well be forced to foot the bill. PROMESA is the best chance for creditors to get paid, for Puerto Rico to get on the right track, and — most importantly — for American taxpayers to be protected.
Speaker of the House Paul Ryan represents Wisconsin's 1st congressional district. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.