Puerto Rico, an island U.S. territory facing a sea of red ink, has become an unlikely flashpoint in Congress’ end-of-year scramble to fund the government for fiscal year 2016.
Democrats fumed Thursday, saying it is unconscionable that Congress failed to include language in the year-end spending bill allowing Puerto Rico to declare bankruptcy and restructure its debt.
“They don’t need a massive check from the taxpayers,” said Senate Minority Leader Harry Reid, Nevada Democrat. “This is about giving Puerto Rico and their leaders the same tools that every state has, the same tools that are currently available in every state.”
Analysts say Puerto Rico’s woes are results of years of overborrowing and spending and the steady exit of professionals and other workers who could help turn around the island’s fortunes. The territory will struggle to make a $1 billion bond payment Jan. 1, meaning it faces across-the-board service cuts and possible default.
Democrats demanded that the crisis be addressed in the $1.15 trillion catchall spending deal that negotiators reached this week, but Republicans balked. The bill is on track for passage Friday — sans the help for Puerto Rico.
Lawmakers did, however, increase hospital reimbursement rates under Medicare, so the territory is on more equal footing with the 50 states.
Rep. Luis V. Gutierrez, an Illinois Democrat whose parents migrated from the island to Chicago in the 1950s, railed against the spending bill in English and Spanish from the House floor. He said he would not vote for it “because it doesn’t give the people of Puerto Rico some hope for a better future.”
“This is a dark hour,” said Rep. Nydia M. Velazquez, New York Democrat and the first Puerto Rican woman elected to Congress.
Cities and local governments on the mainland can use Chapter 9 bankruptcy to shield themselves from creditors, but territories such as Puerto Rico cannot.
“That is what we wanted — the opportunity for Puerto Rico to do restructuring to declare bankruptcy. It doesn’t cost the American people one single penny, one thin dime,” said House Minority Leader Nancy Pelosi, California Democrat.
Republican leaders say extending that right would set a dangerous precedent and that Congress has not seen all of Puerto Rico’s financial statements.
Speaker Paul D. Ryan, Wisconsin Republican, ordered the relevant House committee to work with the Puerto Rican government to devise a “responsible solution” by March 31.
“Puerto Rico’s fiscal crisis is a problem that is not going away anytime soon,” Mr. Ryan said.
The White House said Thursday that it would work with Republicans on a package that allows Puerto Rico to restructure its debts while imposing fiscal oversight, providing tax relief and reforming Medicaid in a way that relieves pressure from the territory’s budget.
“We believe that would be a common-sense package that would benefit the people of Puerto Rico and allow that government to dig out of the deep hole that they’re facing right now,” press secretary Josh Earnest said.
The issue is becoming a political football ahead of a pivotal election year as the parties vie for crucial Hispanic votes in Florida and other swing states.
“Unfortunately, the Republicans refused to work with us to address Puerto Rico’s massive debt in a meaningful way,” Mr. Reid said. “Instead of seizing the last chance Congress has this year to do the right thing for Puerto Ricans, they turned their back on 3.5 million citizens of the United States.”
Alfonso Aguilar, executive director of the Latino Partnership for Conservative Principles, a Washington-based advocacy group, said Republicans need to have answers but it shouldn’t be to just accept Puerto Rico’s demands.
“I have to say it is very unfair for Puerto Rico to just assume the U.S. government is going to step in and solve the mess that they created,” said Mr. Aguilar, who grew up in Puerto Rico and worked in the George W. Bush administration.
He said the island government could benefit from the oversight of a financial control board, though it should be a collaborative panel that attracts “buy-in” from Puerto Ricans.
In the meantime, Mr. Aguilar said, Republicans need to “wake up” to the political threat the issue poses and that Democrats could use it effectively next year.
“Democrats want an issue,” he said, “not a solution.”
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