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A Congressional Bailout for Broke Puerto Rico?

Democratic lawmakers are advocating for Congress to take action on Puerto Rico’s debt crisis.

Rep. Luis Gutiérrez (D-Ill.) said Congress is “responsible for everything that happens” on the island.

“We should restore the ability of the government in Puerto Rico to access the bankruptcy laws – something that for 60 years was what was possible – they should simply restore what was originally there,” Gutiérrez told PJM after a “National Day of Action for Puerto Rico” event on Capitol Hill.

“Secondly, people pay exactly what anybody else in any of the 50 states pay on FICA [Federal Insurance Contributions Act] taxes – why are they receiving so much less when it comes to the coverage of Medicare in Puerto Rico?” he added.

Rep. Raúl Grijalva (D-Ariz.) said Congress should allow Puerto Rico to restructure and stabilize its debt situation.

“You could allow it to go into bankruptcy court where that court could restructure. It’s not a question of not paying. It’s the crisis of having a due date come upon us,” he said.

Sen. Richard Blumenthal (D-Conn.) also said Puerto Rico’s municipalities and governmental entities should be granted access to a court that could proceed with an “orderly disposition” of its debts.

“Otherwise you will have a chaotic endless series of lawsuits and litigation that will simply make the lawyers rich,” he told PJM.

Former Puerto Rico Gov. Luis Fortuño, a Republican, has said a “dramatic change in public policy” under his successor has worsened the island’s financial situation. During his term, Fortuño said he was close to balancing the budget after eliminating more than two-thirds of the deficit.

Rep. Alan Grayson (D-Fla.) disagrees with Fortuño, arguing that lowering the deficit in Puerto Rico does not help resolve the island’s economic problems.

“I don’t think reducing the deficit right now would have any positive economic effect at all. Puerto Rico has double-digit unemployment. Reducing the deficit would further drain demand from the economy,” Grayson said.

“The problem that Puerto Rico faces right now because of massive unemployment is a lack of demand, whether it’s consumer demand, investment demand, government demand, whatever it might be. It’s simple economics. Reducing government demand will make that problem worse, not better,” he added.

Rep. Raúl Labrador (R-Idaho) said bankruptcy is not a plan but only a step toward resolving the debt crisis. Labrador challenged the Puerto Rican government to enact a fiscally responsible plan as a prerequisite for congressional action.

“The people of Puerto Rico need to decide what they are going to do about the fiscal crisis. Unfortunately, they were on a good trajectory when Luis Fortuño was the governor of Puerto Rico. They had a good trajectory of fiscal responsibility. He was a conservative governor and that was rejected by the voters of Puerto Rico,” Labrador said.

“The people of Puerto Rico, specifically the current government, need to come to Congress with a plan of fiscal responsibility, and until they do that I don’t think we are going to be passing any kind of legislation,” he added.

The spending bill debated this week in Congress does not include financial assistance for Puerto Rico.