Originally published November 5 2015
After bankrupt U.S. bails out Puerto Rico, who will bail out the U.S.?
by J. D. Heyes
(NaturalNews) Citizens of Puerto Rico have consistently voted against becoming the 51st state, but for some reason, President Barack Obama thinks Americans ought to treat them like one anyway.
As reported by The Wall Street Journal, the administration responsible for building the most debt in U.S. history now wants the American taxpayer further burdened by bailing out a cash-strapped Puerto Rico.
The paper reported:
The White House made its most forceful call for federal intervention in Puerto Rico's debt crisis on Wednesday, outlining legislation to restructure more of the $72 billion in debt issued by the commonwealth.
The Obama administration's proposal goes beyond legislation already introduced in Congress, which would allow for restructuring debt issued by municipal entities but not the obligations of the commonwealth itself. While Democrats have supported the existing legislation, it hasn't gained traction among Republicans.
Worsen U.S. debt to take care of Puerto Rican debtThe most recent version of the White House plan involves creating a new restructuring plan that goes further than existing financial tools available even to U.S. cities and states by permitting the Caribbean island's central government access to court-managed restructuring processes.
However, some investors are raising red flags, noting that those measures would likely open a path for states with major fiscal problems, like Obama's home state of Illinois, to apply for the same process. This means that taxpayers would be on the hook for billions more, bailing out states whose leaders they never voted for who instituted policies that led to financial woes. Meanwhile, the White House said that the processes should only be available to U.S. territories.
Administration officials have said that Puerto Rico will have exhausted all emergency measures taken thus far to remain solvent by this winter.
"As currently structured, Puerto Rico's debt load is unsustainable," the White House said in a ten-page legislative outline released a few days ago. If there is no congressional action, then the island faces "a long and difficult recovery that could have harmful consequences for the residents of the island and beyond," the statement added.
The WSJ said that the Treasury Department was not considering any financial guarantees of Puerto Rico's debt; the recent White House proposal does not contain any such bailout assistance... yet.
The island's governor, Alejandro Garcia Padilla, released a statement in which he said he backed the White House's proposals and would look closely at any federal control board to make sure it "complies with the democratic principles underlying our relationship with the United States."
In June, Garcia Padilla said the island's debt could not be repaid, but investors and government officials have made no progress in voluntary debt reduction talks since then. The growing involvement of the federal government makes it more likely that bond investors will lose money one way or another, just like taxpayers.
"Haircut city," John Mousseau, director of fixed income at Sarasota-based Cumberland Advisors, told WSJ. "The good news is that the government is getting involved."
Our financial destruction is assuredNo, not really.
Regarding financial unsustainability, Reuters reported in August that while there have been some recent reductions in the level of annual deficits due in large part to increased federal revenues (taxes and fees), the Congressional Budget Office has repeatedly forecast that the U.S. national debt – which grows larger every single year – is unsustainable.
However, that isn't stopping Obama from pushing for more U.S. debt in order to help a non-state pay its debt off.
The solution to the nation's debt problem isn't really that difficult, but at the same time, it will be virtually impossible to implement. The answer is to stop spending more money than the government takes in. That will involve dramatic reforms to entitlement programs such as Medicare, Medicaid, Social Security and welfare; any real plan to do this has historically drawn massive opposition from political leaders and the constituents of those programs.
In other words, the nation's financial destruction, at least under the current political environment, is assured. It's just a matter of time.
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