It was just in the nick of time, but Puerto Rico can breathe a sigh of relief that their inability to meet their debt payment, due this Friday, will not send the island territory into chaos.
Puerto Rico is in a decade-long recession and has $70 billion in debt. A $2 billion payment to creditors is due Friday. Thousands have fled the island and moved to the U.S. mainland as businesses have closed, schools have struggled with limited electricity and hospitals have asked for cash payment in advance for some medication.
In April, this crisis was brought to our attention thanks to John Oliver who has a great way of explaining complex problems with his unique brand of humor. Millions of Puerto Ricans are suffering from the island's confluence of corporate greed and bureaucratic mismanagement. Last Week Tonight exposed the precarious circumstances created by Puerto Rico’s status as a U.S. territory, rather than a fully incorporated state, and highlighted the importance of helping Puerto Rico restructure its debt. The multiple Tony Award winning creator of Hamilton, Lin Manuel Miranda even gave an impassioned plea on behalf of the island where his parents were born, offering Congress free Hamilton tickets to boot.
Led by members of both parties in the Senate, the bill passed by a 68-30 margin today.
In a rare case of bipartisanship in an election year, the package had the support of Obama and top Republican and Democratic leaders in the House and Senate.
Sen. Minority Leader Harry Reid, D-Nevada, backed the bill because of the "humanitarian disaster" facing Puerto Rico, in which funds are drying up for public safety, hospitals and schools.
But Reid said the bill is "far from perfect" because of provisions such as one allowing employers to pay first-time workers below minimum wage. He also criticized McConnell for not allowing votes on proposed amendments.
The legislation — called the Puerto Rico Oversight, Management and Economic Stability Act, or PROMESA — establishes a board to oversee the U.S. territory's finances, including an orderly debt restructuring process and annual budgeting.
A borrowing binge, population loss, sky-high taxes and burdensome bureaucracy have conspired to plunge Puerto Rico into an economic crisis. A failure to pay secured debts due Friday likely would have spawned a legal brawl between major financial creditors and the U.S. territory's government.
But not all the members of the Senate agreed, with both Democratic and GOP opponents.
Among the opponents of the restructuring included Chuck Grassley (R-IA), Bob Menendez (D-FL) and Bernie Sanders (I-VT)
Democratic Sen. Bob Menendez of New Jersey monopolized the Senate floor for more than four hours Tuesday evening, arguing that the bill adopts a colonial approach. He said ordinary Puerto Ricans would have little say over the control board and the package favors hedge-fund creditors over island pensioners.
Sen. Bernie Sanders, I-Vt., agreed with Menendez.
"In my view we need austerity not for the people of Puerto Rico, but for the billionaire Wall Street hedge fund managers who have exacerbated the crisis on the island,” Sanders said on the floor.
The legislation is needed because Puerto Rico cannot declare bankruptcy under federal law. Mainland municipalities and their utilities can, while municipalities and utilities in Puerto Rico cannot.
The Governor of Puerto Rico, Gov. Alejandro Garcia Padilla, backed the bill but said the U.S. territory needs to shed about $14 billion off the total debt to be able to pay this off, eventually. There's a lot more to be worked out, but this is a welcome break for Puerto Rico.
In any case, our most prolific Tony Award winning creator will be breathing a sigh of relief tonight.
