The Republican Study Committee (RSC) endorsed the need for pro-growth economic reforms as the key to solving the crisis in Puerto Rico rather than bankruptcy via Chapter 9 or forcibly restructuring the Commonwealth’s debts. The RSC, made up of conservative Republicans in Congress, voted by more than two-thirds to endorse the position favoring key economic reforms over bankruptcy. The RSC is an influential group seen as having a strong working relationship with the GOP leadership in Congress.
The RSC released an official statement regarding its position on reforms over bankruptcy for Puerto Rico, as follows:
“The RSC opposes granting access to Chapter 9 bankruptcy for Puerto Rico or access to similar forced restructuring of debt. The RSC does support enacting pro-growth reforms that would alleviate the burden that current federal policies place on the territory.”
The debate over how to solve the economic and financial crisis in Puerto Rico rages in Congress, as The Obama Administration and the government of Puerto Rico have requested restructuring of debts and Chapter 9 bankruptcy protection for the Commonwealth while many Republicans, including those in the RSC, favor economic reforms to solve the crisis in Puerto Rico.
“Puerto Rico’s mounting fiscal problems are the result of poor management and unsustainable policies enacted by local government and compounded by ill-conceived federal policies that hamstring the island’s economy,” RSC Chairman Bill Flores (R-TX) said in a statement. “A direct taxpayer-funded bailout would not only cost Americans tens of billions of dollars, it would fail to address the root drivers of Puerto Rico’s debt. Additionally, while some have proposed settling the $73 billion government debt by granting the island access to Chapter 9 bankruptcy or forcing the debt to be restructured, Congress must not do so. Changing the rules mid-game would be unfair to Puerto Rico’s creditors who entered into these arrangements with agreed upon terms and would delegitimize future transactions. Instead, Congress should consider pro-growth reforms that will spur economic development and investment in Puerto Rico.”
The economy of Puerto Rico is held back by excessive regulations, inefficient state-run enterprises and corruption and cronyism, and the continuation of that system without reforms will only lead to more debt and economic failure. Reforming their economic and financial systems will lead to growth and prosperity and prevent a future crisis like that which they face now. It is clear, as the RSC has made clear in their statement on this debate, that bankruptcy is not the answer, and reform and prosperity will ensure a strong future for Puerto Rico.
The Obama Administration has stumbled in its involvement in this issue, as its point man on the crisis in Puerto Rico, former investment banker Antonio Weiss, was sent to brief Congress on the crisis in the Commonwealth, and faces conflict of interest charges. Weiss’s role has been questioned, when he was nominated for the number three position at the Treasury Department, and Sen. Elizabeth Warren (D-MA) opposed his nomination for conflicts of interest. The interests of Lazard in the debts of Puerto Rico are a reason many believe Weiss should recuse himself from any involvement in the debate over solving the crisis facing the Commonwealth.
The debate over solving the Puerto Rico crisis is a key test of whether Republicans still advocate reform and prosperity over the bankruptcy and bailout approach. The RSC has taken a strong stance in favor of precisely what is the right remedy for the crisis in the Commonwealth, economic and financial reforms that will address the root cause of the crisis rather than enabling and condoning what’s wrong in Puerto Rico by giving them bankruptcy protection. Promoting success and prosperity, rather than rewarding failure and fiscal irresponsibility, is precisely what the RSC stands for, and it demonstrates their support for strong reforms.