The pipe dream days of easy money and endless credit are coming to an end in the United States, and the first place that is becoming evident is in a U.S. territory, Puerto Rico.
The Caribbean nation has been in economic dire straights for some time, but U.S. Treasury Secretary Jack Lew recently announced in a dire letter to Congress that the Puerto Rican economy was in collapse – two weeks after the government there defaulted on its debt.
In his letter, as reported by Agence France-Presse, Lew pleaded with lawmakers to pass bankruptcy legislation – likely just a bailout plan, more than anything – to deal with the possession’s $70 billion debt as well as the effects of 10 years’ worth of recession.
“Although there are many ways this crisis could escalate further, it is clear that Puerto Rico is already in the midst of an economic collapse,” Lew said in a letter addressed specifically to House Speaker Paul Ryan, R-Wis.
“In order to assist the 3.5 million Americans living in Puerto Rico, Congress must pass legislation for the president to sign into law before the end of March.”
He said that the country’s broke government is essentially robbing Peter to pay Paul – moving funds away from one creditor to give them to another, while ceasing all payments on some of its notes.
After skipping a $37 million debt payment in early January, then moving an additional $163 million from an escrow account to service government debt, Puerto Rico’s creditors went to court with a suit that ups the ante.
As AFP noted further:
Meanwhile, Lew said, the island’s government is cutting back spending and raiding pension and other assets to keep going, exacerbating both its financial and economic problems.
“The worsening fiscal and economic situation means real suffering for the people of Puerto Rico: basic healthcare, legal, and education services have been impaired,” said the Treasury chief.
“To address the crisis, Puerto Rico needs federal legislation that pairs an orderly process to restructure its debts with strong, independent fiscal oversight to remedy its history of fiscal mismanagement.”
Lew traveled to the island in January to discuss the dire economic situation with top Puerto Rican government officials. He warned in his letter, however, that without legislation the U.S. government has very few options to deal with the crisis.
“Only Congress can enact the legislative measures necessary to fully resolve this problem…. It is time for Congress to act to provide order to a chaotic and worsening situation,” he wrote.
Speaking of fiscal mismanagement, Breitbart News reported in December that the Puerto Rican government handed out some $120 million in bonuses to government employees, likely because the government believes U.S. taxpayers were about to bail the island out.
But then again, paying Christmas bonuses to government employees is the law in Puerto Rico – which helps to explain how the country got to be so broke in the first place.
As for the bailout, Breitbart News noted that House Minority Leader Nancy Pelosi, D-Calif., has already introduced legislation that would block the island’s creditors from taking any legal action to collect what they are owed. The news site also noted that the White House has floated its own plan to give Puerto Rico access to bankruptcy courts.
That Congress and the Obama Administration would attempt to portray themselves as economic gurus is laughable, considering that the U.S. national debt under Obama has soared to nearly $20 trillion, rising more than $8.3 trillion in the president’s first seven years, CNS News reported. That’s more than $70,600 per U.S. household.
For Lew, Ryan, Pelosi and Obama to insist that any Puerto Rican fiscal deal include a special panel to “oversee financial reforms” is the height of hypocrisy.
One day, when the U.S. dollar is no longer the world’s reserve currency and Lew’s Treasury Dept. cannot simply print the U.S. government out of fiscal danger, the debt will come crashing down on our progeny, and they’ll be lucky if the country recovers in their lifetimes.