Someone please buy the Wall Street Journal a globe. Or at the very least, give them a link to a Wikipedia article on Puerto Rico.
The Wall Street Journal issued a dire warning that the unfolding debt crisis in Puerto Rico could create an “exodus” of “Puerto Rican refugees” to the United States who would vote for Democrats and soak up public benefits.
Here’s the concept that the WSJ seems to find difficult: residents of Puerto Rico are United States citizens. If someone from Puerto Rico moves to another location within the United States, that person is no more a refugee than someone who heads to California for a job or someone—like say the managing editor of a business-oriented newspaper—who resigns and moves elsewhere because he doesn’t want to work for biased owners.
Puerto Ricans have the same right as other Americans to live in any part of the country. And if it seems that a high number of these Americans are moving right now, it’s because Wall Street is doing its best to crush the island with debt.
The sudden concern over the possibility of a Puerto Rican diaspora comes because the island’s government was forced to miss a debt payment on Monday. Already the population of Puerto Rico is down by 9 percent, and that’s before the latest round of problems. Schools, health care, and everyday services are suffering simply because Congress won’t allow Puerto Rico to restructure its debt under Chapter 9, the same way as a municipality like Detroit or a county like Jefferson County, Alabama.
It’s within the power of Congress to offer relief to Puerto Rico, but they’ve resisted doing so because of intensive lobbying by hedge funds known as “vulture funds.” These funds are all too aware that current US law prohibits Puerto Rico from seeking financial protection. Because Puerto Rico can’t file for protection, they’re forced to issue ever more bonds at ever higher rates. The vulture funds snap them up, and channel a fraction of the fat interest toward pressuring Congress and the public to keep the cycle going. So long as the vultures can keep Congress from acting, they rake in interest at a rate many times that of other municipal bonds. And they force Puerto Rico to both cut more services and dig the debt hole ever deeper. It’s like finding someone who is behind on their loans and giving them payday loans at higher and higher rates, grabbing up the last dollar before the inevitable crash. Only Puerto Rico isn’t allowed to crash, and doesn’t have a choice. They have to keep on closing schools, selling hospitals, reducing services, and feeding the vultures. Until everything is gone.
The vulture funds are making the bet that they can hang onto this source of quick money long enough that, when the spigot eventually falters, they will have already taken in far more capital than they might have gotten through more legitimate investment. To that end, they’re lobbying hard, making the pretense that any action to save Puerto Rico would harm more traditional funds—but funds involved retirement and savings plans are not the ones behind these high risk, high reward dollars the vultures are gobbling. This is just another gambit from the people who brought you the crash of 2008, and their intention is to squeeze every possible dollar out of the situation until the federal government is forced to take much more drastic, and expensive, action than allowing Puerto Rico to invoke Chapter 9.
The Wall Street Journal is right about one thing. Like the 670,000 American citizens who live in Washington, DC, the 3,500,000 citizens in Puerto Rico don’t get their say for president, and don’t get an effective vote in Congress. But those Puerto Rican Americans who move to other locations in the United States; they get to vote. And it’s likely they’ll remember who helped them, helped their community, helped their island when things were tight.
That’s what really worries the Wall Street Journal.