House Republicans on Wednesday struggled to rally support for a board to help Puerto Rico deal with its $70 billion debt while steering clear of perceptions of colonialism.
Obama administration officials warned at a hearing Wednesday that the island is facing total financial collapse if Congress doesn’t step in. Republicans agree on the urgency of the matter, but have faced opposition from both liberals and conservatives as they try to put legislation together that would help the U.S. territory recover from a decade of financial woes.
Legislation released by the House Natural Resources Committee this week would create a control board with the power to audit the Puerto Rican government and put financial plans in place. It would allow the board to facilitate some court-ordered debt restructuring, though it does not give the island the broad bankruptcy authority that territorial officials had sought. It would not spend money to bail out the territory.
“Because the situation has gotten so dire, broad reforms are required now,” said Committee Chairman Rob Bishop, a Utah Republican.
In drafting the proposal, GOP lawmakers have tried to satisfy Puerto Rico’s government, creditors and conservative members of their caucus. Democrats and Puerto Rican officials have worried that the new board would have too much power, prompting echoes of colonialism. At the same time, some conservatives have objected to the debt restructuring.
The committee is expected to vote on the bill today. Hoping to bring fellow Republicans aboard, Speaker Paul Ryan, a Wisconsin Republican, quickly endorsed it.
“Congress has a constitutional and financial responsibility to bring order to the chaos that is unfolding in the U.S. territory,” Ryan said.
Committee Republicans said a strong control board is necessary to get the island’s economy back on track. But they said when introducing the latest draft that they were aiming to avoid a colonialist approach.
The committee consulted with Anthony Williams, who as District of Columbia mayor worked with a similar control board in the late 1990s. At the hearing, Williams said “many of the principles that made D.C.’s board successful are also key elements of the Puerto Rican oversight legislation.”
An earlier draft introduced by the committee in March met objections from all sides.
The new version would increase the size of the control board from five to seven seats, with the two added members picked by the minority party in the House and Senate — a clear enticement to Democrats who have opposed the bill. House Democratic leader Nancy Pelosi of California said the earlier version of the bill would exert “undue and undemocratic control” over the territory.
Late Tuesday, Pelosi said still more work needs to be done “to improve the makeup and scope of the board.”
In an attempt to satisfy conservatives, the new draft would give creditors more of a say on debt plans, allowing them a preliminary vote on whether they wanted to voluntarily restructure debt.
The House Republican Study Committee, a group of around 170 conservatives, had expressed concerns about the debt restructuring provisions in the first draft, throwing the bill’s future in doubt. Texas Rep. Bill Flores, the group’s leader, said members “are encouraged that there appear to be some improvements.”
Still, several Republicans on the panel expressed concern at the hearing about the debt restructuring, making the outcome of Thursday’s committee vote unclear.
“I believe we’re going down a slippery slope here,” said Rep. Jeff Duncan, R-S.C.
Pedro Pierluisi, Puerto Rico’s nonvoting representative in Congress, praised Bishop and the sponsor of the bill, Rep. Sean Duffy, R-Wis., for eliminating language that would have allowed the board to issue some rules and regulations as if it were the territory’s government.
Puerto Rico has been mired in economic stagnation for a decade. The financial problems worsened as a result of setbacks in the wider U.S. economy, and government spending in Puerto Rico continued unchecked as borrowing covered increasing deficits.
Treasury Department official Antonio Weiss said prompt action was needed because Puerto Rico is in distress. But he said the administration is concerned that allowing creditors to vote on debt restructuring could delay the process.
White House Press Secretary Josh Earnest said the administration is confident a solution can be reached, but added that the creditors “are almost by definition rich and powerful people who have a clear financial interest in getting a deal that reflects their financial interest and not the interest of the 3.5 million people living in Puerto Rico.”
Earnest added, “Overcoming that dynamic is something that will be challenging for Congress to do.”