J. Robert McClure, president and CEO of the James Madison Institute, published a columnin the Orlando Sentinel this morning in favor of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). Calling PROMESA a “responsible action to aid in the economic growth, strategic development and future success of Puerto Rico,” McClure also notes thatthe legislation “has a chance to thread the needle between providing much-needed assistance for the commonwealth, respecting the rule of law, and offering a path forward to mitigate the possibility of future mismanagement.”
The James Madison Institute is the latest of several conservative organizations to take a position on PROMESA. The Council for Citizens Against Government Waste (CCAGW) has also urged support for the legislation,noting that the bill “creates an essential mechanism to thwart a taxpayer bailout of Puerto Rico’s fiscal failures.” CCAGW will consider all votes pertaining to PROMESAin the group’s2016 Congressional Ratingsof Members.
Americans for Tax Reform (ATR) endorsed PROMESAin a statement on April 14th, calling it “a responsible proposal that provides the tools to address the crisis without bailing out the island, granting the island Chapter 9 bankruptcy, or increasing taxes.”
Americans for Limited Governmenttook on the “bailout” accusation that has been leveled at the proposal in its endorsement of PROMESA. President Rick Manning explained that“[i]f taxpayers are protected and creditors get a real haircut when there are no funds to pay the debts, then by definition it is not a bailout.”
The editors of theNational Reviewsimilarly support PROMESA. “Due to an anomaly in federal law,” they point out, “the bankruptcy protections that apply to the subdivisions of the 50 states do not apply in Puerto Rico. If orderly procedures are not instituted to determine how much of a haircut various creditors will take, we run the risk of a humanitarian crisis on the island or a taxpayer bailout — or the first of these followed by the second.”
TheNational Reviewlists four high priority provisions it is endorsingin the still-evolving legislation:
“Bankruptcy protection should be enacted, to ensure that creditors rather than taxpayers take the hit from the island’s insolvency.” This has been a central point in arguments for PROMESA as well as the multiple previous bills seeking to give Puerto Rico an orderly way to restructure debts.
Fiscal reform, including cuts in government pensions, should be enacted.
“The island needs to change its anti-growth policies.” Here, the editors are calling for less regulation and privatization of many public entities.
Finally, the National Review also wants to see alower minimum wage and exemption from the Jones Act.
The editors of theNational Reviewdon’t see all these ideas in PROMESA (the Jones Act, for example, is not dealt with in the legislation), but they believe that “a perfect bill will not get President Obama’s signature, and the imperative here should be to enact a law that reduces the likelihood of a bailout. The House Republican bill does that.”
TheConservative Reviewhas run two opposing opinion pieces on PROMESA. On April 15, Stephen Moorewrotethat “Republican leaders like Senator John Cornyn of Texas makes the persuasive case that acting swiftly through the control board will contain the crisis and negate the need for tens of billions of federal bailout money in the future.” Mr. Moore also considers the concerns of bondholders, explaining that “[e]very class of bondholder will take a haircut under this solution. . . . The market knows Puerto Rico cannot fully repay its obligations.” He concludes, however, that “[t]his is the price that creditors must pay for purchasing these bonds in the first place. Hopefully the bond market will finally start to realize that government bonds are NOT risk-free.”
The competing position posted on the Conservative Review, written by John Gray on April 1, defends creditors, noting: “Congress’ interest in changing the rules of the game on those who have lent money to Puerto Rico is nothing less than a bailout for Puerto Rico at the expense of creditors.”
The two Conservative Review columnists also have different perspectives on how federal policy should impact and influence Puerto Rico. “My position has always been for Washington to merely stay out of Puerto Rico’s affairs,” notes Gray, a path that would be difficult givenPuerto Rico’s status as a U.S. territory, subject to all federal laws. Stephen Moore offers another approach: “Given the gravity of the crisis and the special territorial status of Puerto Rico,” hesays, “why not make the whole island an enterprise zone with low tax rates, regulatory relief, and exemption from other federal laws that inhibit growth?”