Lawmakers have missed one deadline to prevent Puerto Rico from defaulting on its debt, and they’re trying to figure out how to build support for legislation that could prevent a second missed payment.
Republicans are seeking to produce a revised bill as early as Wednesday, while U.S. Treasury Secretary Jacob J. Lew is heading to the commonwealth Monday to keep up the pressure for Congress to act.
All sides are under pressure after a week-long congressional recess, punctuated by Puerto Rico’s default a week ago on most of a $422 million debt payment. Puerto Rico is in an economic recession that’s poised to worsen as residents continue to leave, threatening to deepen the fiscal crisis that’s pushing the island to default on a growing share of its $70 billion of debt.
House Natural Resources Committee Chairman Rob Bishop of Utah plans to craft the Republican legislation that would create a federal oversight board to help manage the island and supervise a debt restructuring, according to a committee aide who asked for anonymity to discuss the matter. It will be similar to an earlier version that ran into snags, the aide said, adding that the measure could be advanced by the panel as early as next week.
The top Democrat on the panel, Raul Grijalva of Arizona, said he’s not sure Republicans will be able to agree on legislation by Wednesday. He and other Democrats have begun to link the impact of the debt crunch to the strain on public services for an island grappling with a health crisis brought on by the mosquito-borne Zika virus.
Lew, in his one-day visit, intends to highlight “how the debt crisis has already harmed the health, safety and welfare” on the island, according to a statement.
The next deadline in Puerto Rico’s $70 billion debt crisis is July 1, when a $2 billion payment is due, including $805 million for the island’s general-obligation bonds, which are seen as its most sacrosanct debt.
It's that "federal oversight board" that's the problem, effectively ceding control of the island directly over to Congress, controlled by the GOP. The other problem is of course making the people of Puerto Rico cough up $74 billion that they don't have in order to full pay off the creditors, because no Republican up for re-election in November is going to want to "bail out" Puerto Rico, not when they're all lining up behind Trump and his mass deportation scheme.
The problem is a municipal bond default that size is going to hurt other states, counties and cities in the US if bond market gurus think that the US Treasury might stiff them, too. That's kinda bad for things all over, and the GOP knows it.
If that July 1 deadline goes by without a payment, it could seriously hurt the economy in an election year, and not even the GOP wants that albatross around its neck (they have too many large and heavy metal birds to deal with already).
We'll see what happens but I'm tending to think the GOP will get off their ass and take whatever deal Jack Lew can work out.