Blumenthal, Lead Author of Puerto Rico Chapter 9 Uniformity Act, Demands Congress Act to Stem Puerto Rico’s Growing Fiscal Crisis

At Senate Judiciary Committee hearing, Blumenthal urged Congress to immediately act on moral and financial obligation to 3.5 million Americans in Puerto Rico and avert catastrophic debt default

“This crisis demands action. Many of us remember the headline that appeared in the newspapers not so long ago in American history that was, in effect, Congress to New York: Drop Dead. Congress cannot tell Puerto Rico to drop dead financially, any more than it could New York or any other state represented by my colleagues here today. What Puerto Rico needs is very simply the authority to address and deal with its financial problems, an authority it lacks simply by a quirk of history.” 

Watch Blumenthal’s opening remarks here.

(Washington, DC) – Today at the Senate Committee on the Judiciary hearing on Puerto Rico’s growing fiscal problems, Senator Richard Blumenthal (D-Conn.) urged his colleagues to immediately take action to prevent a fiscal catastrophe in Puerto Rico and provide the Commonwealth the authority to restructure its current, unpayable debt of more than $354 million. This summer, Blumenthal introduced the Puerto Rico Chapter 9 Uniformity Act which would address the growing fiscal crisis by granting Puerto Rico the authority to allow its municipalities and public utilities to restructure their debts under the supervision of a bankruptcy court, authority which is already currently granted to all U.S. states.

In his opening remarks, Blumenthal stated, “What Congress does or fails to do with respect to Puerto Rico will have indeed a massive impact – not only on those 3.5 million fellow Americans but throughout the financial markets in the United States and possibly even around the world, and it will send a profoundly significant message about the federal government’s moral responsibility, well beyond our financial obligation, our moral responsibility to look out for fellow Americans regardless of where they live.”

“…this crisis demands action. Many of us remember the headline that appeared in the newspapers not so long ago in American history that was, in effect, Congress to New York: Drop Dead. Congress cannot tell Puerto Rico to drop dead financially, any more than it could New York or any other state represented by my colleagues here today. What Puerto Rico needs is very simply the authority to address and deal with its financial problems, an authority it lacks simply by a quirk of history.”

Video of Blumenthal’s opening remarks can be seen here, with full transcript below:

Thank you, Mr. Chairman, I particularly want to thank you for having this hearing and other colleagues on the committee for your contributions this morning, and over the past months, most especially Senator Hatch, as Chairman of the Finance Committee, I know has been working diligently. And I want to welcome our two first witnesses who have really dedicated themselves to addressing and solving these problems which are so intractable and difficult, so that our fellow Americans – and they are our fellow Americans in Puerto Rico – 3.5 million United States citizens can be saved from the financial and humanitarian catastrophe and calamity that threatens them and really our entire country, because we will all be affected by the catastrophe that threatens here.

What Congress does or fails to do with respect to Puerto Rico will have indeed a massive impact – not only on those 3.5 million fellow Americans but throughout the financial markets in the United States and possibly even around the world, and it will send a profoundly significant message about the federal government’s moral responsibility, well beyond our financial obligation, our moral responsibility to look out for fellow Americans regardless of where they live.

There has been a lot of discussion about how we got here. We should always learn from history so we don’t repeat it. But right now, this crisis demands action. Many of us remember the headline that appeared in the newspapers not so long ago in American history that was, in effect, Congress to New York: Drop Dead. Congress cannot tell Puerto Rico to drop dead financially, any more than it could New York or any other state represented by my colleagues here today. What Puerto Rico needs is very simply the authority to address and deal with its financial problems, an authority it lacks simply by a quirk of history.

Reasonable people may disagree about the details of the current situation, but one thing should be clear: this situation is unsustainable, the status quo is unacceptable. And we need to come together, regardless of party and geography, to fashion and craft a solution that enables Puerto Rico to restructure its debts under the auspices of a court.

Working with my colleagues like Senators Schumer, and I want to thank him for his leadership as well, Senator Menendez, Senator Gillibrand and Nelson, I’ve put forward a plan for moving forward. The plan begins by recognizing—as one of the Republican witnesses at this hearing has said—that debts that cannot be repaid will not be repaid. Debts that can’t be paid back, will not be paid back.

Puerto Rico can and must reform itself, but no amount of long-term reform will address the short-term reality that Puerto Rico cannot pay its current debts when due. That is the definition of insolvency, both in law and practical reality. The only question is whether this reality results in a messy and chaotic default—with nobody winning except the legions of creditors’ attorneys who will spend years – countless billable hours – fighting each other, as we have seen for more than a decade in the case of Argentina – the alternative is an orderly restructuring, which serves the public interest, as well as the interests of our fellow Americans in Puerto Rico. If we prefer an orderly, rational, deliberative, productive process, Congress must act.

Puerto Rico also needs and deserves equal treatment under the Earned Income Tax Credit, the Child Tax Credit, and the federal health care programs. Not only will equal treatment alleviate suffering among Puerto Rico’s people, it will reduce pressure on the Puerto Rican government and free up resources to resolve the island’s fiscal crisis.

Others have different ideas about how to help Puerto Rico, and I appreciate those ideas and my colleagues who have offered them on both sides of the aisle. I am open to any proposal that will actually solve the problem. What is essential is that we act—and we must act before it is too late.

I want to close by making one thing really completely clear here. Congress generally and this Committee in particular are at a crossroads – Puerto Rico is at a crossroads, but America is at a crossroads in addressing the needs of 3.5 million Americans and our financial markets and our moral obligations. Eight percent of Puerto Ricans have fled the island since 2006 as a result of diminished economic opportunity. 84,000 Puerto Ricans came to the mainland last year alone. Those are numbers you see after an armed conflict or a disaster – they are a mark of tragedy on an island that deserves better.

And if Congress fails to act the situation could become much worse. Just today, Puerto Rico has narrowly averted a complete default that could have hobbled its government – including its ability to provide education, law enforcement, health care, and other essential services. It avoided this default only by resorting to unsustainable financial gymnastics. Let’s be very blunt and real – those financial gymnastics cannot be sustained or continued indefinitely. The financial somersaults and headstands must end. The prospect of a humanitarian catastrophe within United States territory is very real, and it is very immediate.

Congress can act to prevent this catastrophe, or it can choose not to do so. If we fail to act, the responsibility is ours.

I know that members of this Committee will address rather than shirk that responsibility, and I look forward to working with all of my colleagues in the coming days. Thank you, Mr. Chairman.

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