Right Hooks

Puerto Rico Wants a Pass on $72 Billion Debt

Dan Gilmore · Jun. 30, 2015

“Death spiral” — that’s how Puerto Rico Governor Alejandro García Padilla describes the commonwealth’s debt. Over the last few years, the island racked up a debt of $72 billion, or 3.5 times the amount that bankrupted Detroit. Padilla, who once vowed to repay the loans accrued by his and past administrations, now says it’s impossible and creditors should “share the sacrifices.” Problem is, Puerto Rico has been a popular place for retirees to invest because the commonwealth’s bonds are tax-free. The problem becomes stickier, as Puerto Rico cannot file for Chapter 9 bankruptcy. The island used to be an economic powerhouse, filled with manufacturing and a vibrant port. But Deepak Lamba-Nieves, research director for the think tank Center for a New Economy, said in 2013, “You cannot pay daily expenses with your credit card, and that’s what Puerto Rico has been doing for years. We borrowed just to keep the lights on.” Padilla doesn’t appear ready to make the difficult cuts, firing government workers, tightening Puerto Rico’s belt and getting serious about the debt. Like Detroit, Puerto Rico was destroyed by liberal politicians and their failed economic theories. Now, some will say the only way to save the commonwealth is with a bailout. Barack Obama says he won’t do so, but don’t be surprised if he proposes to “fix” the problem by floating Puerto Rico statehood again — in order to firm up some Latino support. While the offer is hollow, a narcissist like Obama would certainly be pleased with a legacy of altering the American flag.

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