Treasury Notes

 Congress Must Act Before July 1 to Help Puerto Rico

By: Daniel Watson

Today, Secretary Lew sent the following letter to Senate leadership regarding the debt crisis in Puerto Rico:
June 27, 2016
The Honorable Mitch McConnell
Majority Leader
United States Senate
Washington, DC  20510
Dear Mr. Leader:
Puerto Rico is in crisis, and its only hope for recovery and growth is legislation that authorizes the tools necessary for better fiscal management and a sustainable level of debt.  Early in June, the House passed a compromise bill, with an overwhelming bipartisan vote, that will give Puerto Rico the tools to recover without any federal spending.  The Senate should take up the matter immediately.  Delay will only jeopardize the ability of Congress to conclude its work before July 1, a critical deadline Puerto Rico’s leadership has publicly highlighted for months.
On July 1—only four days from now—the crisis in Puerto Rico will ratchet up to an even higher level.  Puerto Rico has $2 billion in debt payments coming due that day, including payments on constitutionally prioritized debt on which Puerto Rico has not previously defaulted.  In the event of default, and if creditor lawsuits are successful, a judge could immediately order Puerto Rico to pay creditors over essential services such as health, education, and public safety.  This could force Puerto Rico to lay off police officers, shut down public transit, or close a hospital.  Even a retroactive stay on litigation passed by Congress a few days later would not reverse such a court order.  This is one of many reasons Congress must act before July 1.  Creditors are hoping to gain the protection of legal judgments as quickly as possible, and this could impair Puerto Rico’s chances of getting on a path to stability and eventual growth.
The people of Puerto Rico are already suffering, as I saw firsthand on my most recent visit there.  About 80 percent of businesses have closed in the Plaza de Diego, once the heart of San Juan’s business district.  Doctors at the island’s only neonatal intensive care unit described how they can order dialysis treatment for premature newborns only if they pay cash-on-demand daily for lifesaving drugs.  While we do not know the full ramifications if Congress fails to act before the end of the month, we know for certain that it is the 3.5 million American citizens who live in Puerto Rico who will be further harmed. 
Congress must do more in the future to address long-term economic growth and Medicaid inequalities in Puerto Rico, but doing nothing now to end the debt crisis will result in a chaotic, disorderly unwinding with widespread consequences.  Some well-funded creditors are working hard to delay legislative action this week, even if it comes at the expense of the Puerto Rican people.  I urge Republicans and Democrats to come together in the Senate as you have before to help our fellow citizens, and get a bipartisan bill to the President’s desk before July 1.
                                                                        Jacob J. Lew
Identical letter sent to:
            The Honorable Harry Reid
Daniel Watson is a Spokesperson at the U.S. Department of Treasury.
Posted in:  Category 1
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