New Congress, same issues for Puerto Rico

Last week, 34 members of Congress, all Democrats, signed a letter calling on the Financial Oversight and Management Board (FOMB) to rethink its policies and practices with regards to the restructuring of Puerto Rico’s debt and to align them with PROMESA’s mission. That mission is to ensure funding of essential public services, provide for a debt burden that is sustainable and allow for investments necessary to promote growth.

The purpose of the letter, fundamentally, is to put the FOMB on notice that its austerity measures as reflected in current Fiscal Plan for Puerto Rico are causing undue hardship on the general population, while at the same time aggressively pursuing payment for its creditors and incurring in operational costs upwards of $1.5 billion in a five year period. This characterization of the FOMB is, according to one’s political persuasion, debatable.

{mossecondads}The FOMB current members three-year designation ends in summer 2019, at which time they may be renominated or replaced. Under PROMESA, the members of the two of the board members are selected by the majority of the House, one is selected by the minority of the House, two are selected by the majority of the Senate, one selected by the minority of the Senate, and one selected by the president.

This selection process is currently being constitutionally challenged before the Federal Appeals Court for the First Circuit, for running afoul of the appointment clause. It is expected that the composition of the FOMB will change to reflect the growing apprehension — both by Republicans and Democrats, although for different reasons — that Puerto Rico could be facing a political and economic dead end.

The congressional letter referred to is a partial, partisan, account of the performance of the FOMB, which studiously avoids the larger political questions that need to be addressed by Congress.

Incoming Chairman of the House Natural Resources Committee Rep. Raúl Grijalva (D-Ariz.), which has jurisdiction over Puerto Rico, has publicly stated that his focus will be on economic development, not on the political status issue. This statement conveniently sidesteps the fact that the economic development of Puerto Rico is inextricably tied to its political future.

For purposes of argument, let us assume that the FOMB achieves its mission as delineated by the 34 members of Congress. What then? Is Puerto Rico to continue as a territory for the benefit of capital investors, while the islands populations continues to rapidly age, and to lose its working and professional population to emigration? Recent studies place the Puerto Rico’s population at 2 million people by the year 2050.

PROMESA is a limited, temporary measure aiming to stabilize the current economic crisis. It fails to confront the underlying political conditions that created the circumstances for the collapse of the Government of Puerto Rico. From a political perspective the FOMB embodies the limitations and insufficiency of the current territorial model. Political problems require political solutions.  

In this context, Grijalva is repackaging the spent argument made by the pro-territorial Popular Democratic Party (PPD) and its allies, which claims that the political status of Puerto Rico not need to be tackled by Congress. As it should be clear to all by now, not addressing the issue is a backhand way of addressing the issue.

The need for PROMESA and the FOMB was due to Puerto Rico’s excessive public debt financing, sweetened by the triple tax exemption of its municipal bonds, a bloated and mismanaged public sector, and tax provisions which historically made Puerto Rico a haven for American Controlled Foreign Corporations (CFC).

{mossecondads}Out-going Sen. Orrin Hatch (R-Utah) correctly argued from the floor of Senate in May 2018 that Puerto Rico should not expect to be treated as an equal in federal assignments while it simultaneously pushed for preferential tax treatment by Congress. The current government of Puerto Rico which claims to favor statehood would do well to keep these words in mind.    

The underlying impediment to addressing the real problems of Puerto Rico’s political – economy is the legal limbo in which Congress, both under Republican and Democratic leadership, have insisted in keeping Puerto Rico. The tax treatment of Puerto Rico as a foreign jurisdiction, for instance, is justified under the Supreme Courts insular cases, which classify it as an unincorporated territory. This suspicious classification, which has no textual support in the Constitution, places Puerto Ricans at a structural disadvantage when compared to the rest of the nation. When Grijalva, among others, declare that the political status is not the primary concern, he is defending the unequal treatment of Puerto Rico and its American citizens.

It is highly suspect for 34 members of Congress to call the FOMB to account for its performance, with its clear class struggle undertones, while at the same time failing to address the political status that created the conditions for PROMESA and the FOMB in the first place.