The numbers are simply awful. Including the $72 billion the island owes its debtors and the $43 billion it owes to its pensioners, the total is more than 110 percent of the territory’s total economic output in a year.
Puerto Rico is getting a HUGE bailout from the US government on the backs of the American taxpayers…You will not believe the total BS in this bailout that everyone in the Obama administration kept saying it wasn’t a bailout. Nancy Pelosi is one of many I recall who promised this would not be on the backs of the taxpayers….she lied.
Is anyone surprised that Jack Lew and Sylvia Burwell both are going full force to give 54,000 the earned income tax credit which is basically a handout…Unreal!
In a free market, everyone would take a serious hit: The bondholders (mostly municipal bond funds in the United States) would be forced to write off most of their Puerto Rico bonds, the pensioners would have their expectations cut drastically, and government spending would be severely cut back.
But neither Puerto Rico nor the board is likely to do any such thing, simply because of the various political and financial interests involved. For example, investment funds such as insider John Paulson’s Paulson and Company, David Tepper’s Appaloosa Management, Marathon Asset Management, Blue Mountain Capital, and Monarch Alternative Capital each swooped in and took substantial positions in Puerto Rico’s debt just days after the rating agencies dropped their ratings to junk. Now they hold hundreds of millions in bonds, selling at massive discounts against their face value and have little interest in negotiating anything.
What’s more likely is that they will bring pressure on the board members to go to investors’ “last resort,” the American taxpayer. After all, the island’s pensioners are already poor and have been forced to pay ever higher taxes as the government tried to right itself. And a government reorganization, eliminating overpaid bureaucrats and setting up a badly needed system of meritocracy to weed out incompetents, is simply not going to happen.
The pressure to pass the buck to the American taxpayer has already begun. Obama officials Jack Lew (secretary of the treasury) and Sylvia Burwell (secretary of health and human services) sent a letter to the oversight board last week with its “suggestions”:
Reforms should include removing the cap on Puerto Rico’s Medicaid program and gradually increasing the federal support Puerto Rico receives through the federal Medicaid match.
The letter also included “adopting” an earned income tax credit — essentially a welfare check to the poor — in order to “pull 54,000 Puerto Ricans out of poverty.”
It’s much easier to pass the buck to the only place that still has the capacity to bail the island out: the U.S. taxpayer. Following that bailout, those vulture funds will then see their bonds return to face value and sell them, reaping enormous profits from the misery being inflicted on the residents of the United States’ island territory.
Read more: The New American