WASHINGTON – Presidential candidate Sen. Bernie Sanders, I-Vt., has told Treasury Secretary Jack Lew that any debt in Puerto Rico that was issued in violation of the territory’s constitution “must be immediately set aside.”
Meanwhile, key House and Senate Republicans criticized the Treasury Department’s proposals to provide help to Puerto Rico, suggesting they won’t be acting on them any time soon, if at all.
Sanders raised the debt issue with Lew in a letter sent to him on Wednesday. In the letter, he urged the administration to take four steps regarding Puerto Rico.
The first is to convene a meeting as soon as possible with Puerto Rico officials and stakeholders, including major creditors, “to work out a debt repayment plan that is fair to all sides.” Sanders added that Puerto Rico does not need more austerity, saying, “It is impossible to get blood out of a stone.”
“Second, before any debt restructuring is agreed to, there needs to be an independent and transparent audit of Puerto Rico’s debt and the results need to be made public -- consistent with recent legislation that was signed into law in Puerto Rico,” Sanders said, adding, “Importantly, if any debt was issued to creditors in violation of Puerto Rico’s constitution, it must be immediately set aside.”
Aides to Sanders were unable to clarify what “set aside” means.
The Senator also said Puerto Rico should be afforded the same bankruptcy protections as municipalities and utilities in the states and that the federal government should provide Puerto Ricans with the same Medicaid and Medicare reimbursement rates as U.S. citizens.
Sanders made several of these points at a hearing on Puerto Rico that was held on Thursday by the Senate Energy and Natural Resources Committee, of which he is a member. He asked witnesses, including Puerto Rico Gov. Alejandro Garcia Padilla and Resident Commissioner Pedro Pierluisi, D-P.R., a nonvoting member of Congress, whether some debt in Puerto Rico may have been issued in violation of the constitution, and if that is the case, whether it should be repaid.
A spokesman for Pierluisi said on Friday that Pierluisi, in responding to Sanders at the hearing, "was making an uncontroversial point, namely that he believes there are legal opinions issued by the territory’s Attorney General that debt service on certain Puerto Rico bonds do not count towards the debt service limit provision of the Puerto Rico Constitution. The Congressman was not stating or suggesting that there has been debt issued in Puerto Rico in violation of the Constitution. Such a determination, if it needs to be made, would ultimately be made by the Puerto Rico courts.”
Meanwhile, Reps. Bob Goodlatte, R-Va., chairman of the House Judiciary Committee, and Tom Marino, R-Pa., chairman of one of the committee’s panels, said Thursday that some of Treasury’s proposals, including the one to allow the entire territory of Puerto Rico to receive Chapter 9 bankruptcy protection “raise serious concerns.” They said they will continue to study the proposals.
Senate Judiciary Committee chairman Chuck Grassley, R-Iowa, said Friday: “If the situation is as bad as the Puerto Rican government and the administration claim, despite the lack of independent and audited financial data, simply restructuring debt and throwing taxpayer money at the island, without any mechanism to ensure the creation and implementation of structural and fiscal reform, fails to resolve the underlying problems in Puerto Rico that’s required to create economic growth.”
Grassley said Puerto Rico, “For the better part of a decade, hasn’t demonstrated that it’s willing to make the hard, and sometimes unpopular, decisions to match government spending to revenues to avoid a debt crisis.” The administration’s proposal “seems to take a leap of faith that the island will suddenly implement meaningful reform and strong fiscal discipline,” he said.
Senate Finance Committee chairman Orrin Hatch, R-Utah, said Friday that the administration’s “so-called road map’ offers nothing new in their analysis of Puerto Rico’s financial and economic challenges and fails to provide the budget and financial data that represents truly independent and audited numbers.”
He said before Congress “provides a thoughtful approach to Puerto Rico’s debt crisis, we must first thoroughly examine its financial health,” including “details on the territory manages its tax and entitlement programs.”
