The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is the bipartisan agreement that was recently reached to address Puerto Rico’s growing debt crisis. However, like many bipartisan deals in DC, it is filled with toxic anti-worker and anti-democratic provisions. PROMESA shows clearly that Washington cares more about bondholders than the working people of Puerto Rico.
Senator Robert Menendez (D-NJ) gave a great floor speech a few weeks ago highlighting the flaws of PROMESA:
“I rise to speak about the ongoing crisis affecting the 3.5 million American citizens in Puerto Rico and to comment on the legislation pending in the House.
“We are facing a critical moment in the history of Puerto Rico. The island is sinking under a mountain of debt. I’ve said it before but it bears repeating: Just servicing the government’s $72 billion debt swallows 36 percent of the island’s revenue. That means that for every dollar Puerto Rico takes in, they immediate send over a third off to bondholders. This is not sustainable for any government, especially one that has been mired in a decade long recession.
“Congress is faced with an immediate and serious choice. Indeed, the decisions we make in the next month will have profound consequences on the people of Puerto Rico for a generation. The stakes are so high, we simply have to get this right.
“I’ve said from the beginning that any fix needs to provide a clear path to restructuring, with an oversight board that represents the people of Puerto Rico and respects their democratic rights. And, if we truly want to help the economic situation on the island, we also need to provide parity for healthcare funds and worker tax credits that all 3.5 million American citizens living in Puerto Rico have access to once they move to the mainland.
“Now, I must say I’ve been encouraged by Speaker Ryan and Chairman Bishop’s acknowledgment that Congress needs to act to prevent this fiscal crisis from becoming a full blown humanitarian catastrophe. But unfortunately, the legislation that is being marked up tomorrow falls short on several fronts.
“Instead of offering a clear path to restructuring, the legislation creates a number of obstacles that could derail the island’s attempts to achieve sustainable debt payments. Most striking, it requires a 5 to 2, supermajority vote by the control board to access this necessary restructuring authority.
“While most reasonable people agree it’s absolutely vital for Puerto Rico to be able to restructure its debt, this authority can be blocked by a simple minority of the board. And without the authority to restructure its debt, this legislation does virtually nothing to help Puerto Rico to dig out of the hole they’re in.
“Exacerbating this concern is the composition and scope of power endowed to the control board. The fact that the Puerto Rican people will have absolutely no say over who is appointed or what action they decide to take is blatant neocolonialism.
“And while there is some fancy language to pretend that the President will get to pick the board members, this is all a fig leaf to hide the real levers of power. The board will be composed of 4 Republican appointees and 3 Democrat appointees, and in addition to being the gatekeeper to restructuring, it will have the power to veto laws and regulations, override budgets, and determine the level of debt payments.
“To me, it’s simply wrong and un-American to take away the basic and fundamental democratic rights of the people of Puerto Rico.
“This bill also puts speculating hedge funds above pensioners, including language to ensure that in any restructuring deal puts the people who worked their entire lives to help the island at the back of the line behind Wall Street. I’ll remind my colleagues that each and every Puerto Rican is an American citizen, many of whom have fought and died for our country in every war over the past century. They deserve the same rights and respect as citizens in New Jersey, Wisconsin, Utah or any other state in the nation.
“Finally, the proposed legislation senselessly cuts minimum wage rules and new overtime protections that would apply to workers in Puerto Rico. At a time when cities and States across this nation are moving towards increasing the minimum wage, I cannot fathom why anyone would support decreasing it for Puerto Rico.
“With a poverty rate of approximately 45%, lowering people’s wages is not a pro-growth strategy, as some have called it; it’s a pro-migration strategy. These unrelated riders are counterproductive and will only drive more Puerto Rican residents to migrate to the mainland, where they won’t have to work for sub-minimum wages.
“Mr. President, as it currently stands, I’m afraid this bill provides little more than a Band-Aid on a bullet hole with regard to Puerto Rico’s unsustainable debt. Mark my words—if we don’t seize this opportunity to address this crisis in a meaningful way, we’ll be right back here in a year from now picking up the pieces. So while it’s absolutely clear that we need to act and act decisively and expediently to help our fellow citizens in Puerto Rico, just as importantly, we need to get this right.
“Working together and helping each other in a time of need is what this country is all about. When a hurricane hits the Gulf Coast or a tornado ravages the Midwest, I don’t ask how many of my constituents in New Jersey were affected. Rather, I stand with my fellow Americans and fight to provide relief, regardless of what state or territory they’re from.
“Let’s continue to honor that timeless American tradition, let’s honor our country’s motto of E Pluribus Unum – “out of many… one” – and provide our fellow Americans in Puerto Rico with the tools they need to dig themselves out of this mess, without taking away their rights of self-governance.”
Kenneth Romero, the executive director of the National Hispanic Caucus of State Legislators, excoriated the bill in a recent op-ed:
So the truth is that PROMESA falls short on its deliverables. It needs to promise more if the goal is to help the people of Puerto Rico — not its creditors nor its government — get out of this mess.
More importantly, PROMESA cannot be another exercise of colonial ruling, leaving the island and its democratically elected government without the power to determine what is best for Puerto Rico. Not a single hearing was held on the island to listen to what the people most affected by PROMESA have to say — 3.5 million American citizens muted. That all of this is happening in the 21st century and under the American flag is not only deplorable, it’s inhumane.
Bernie Sanders similarly condemned the bill in a letter to his colleagues, noting, “We must make it clear that hedge fund managers on Wall Street cannot get a 100 percent return on Puerto Rican bonds they purchased for as little as 29 cents on the dollar yielding interest rates of up to 34 percent while the budget for hungry children in Puerto Rico would be cut.”
Nonetheless, PROMESA, which has the backing of the leaders of both parties and the president, passed easily on Thursday 297 to 127.
Only 24 Democrats voted against it:
Brad Ashford (NE-02)
Xavier Becerra (CA-34)
Brendan Boyle (PA-13)
Bob Brady (PA-01)
Danny Davis (IL-07)
Chaka Fattah (PA-02)
Marcia Fudge (OH-11)
Luis Gutierrez (IL-04)
Alcee Hastings (FL-20)
Stephen Lynch (MA-08)
Rick Nolan (MN-08)
Donald Norcross (NJ-01)
Collin Peterson (MN-07)
Cedric Richmond (LA-02)
Bobby Rush (IL-01)
Tim Ryan (OH-13)
Jan Schakowsky (IL-09)
Jackie Speier (CA-14)
Norma Torres (CA-35)
Juan Vargas (CA-51)
Filemon Vela (TX-34)
Tim Walz (MN-01)
Debbie Wasserman Schultz (FL-23)
Maxine Waters (CA-43)
Not all of these were votes from the left—Ashford and Peterson, for instance, are two of the most conservative Democrats in the House.
It is interesting to note as well the dominance of Illinois (4), Southern California (4), and the Philadelphia metro area (4) in the list.
Jan Schakowsky had a good statement on her vote:
“I am deeply concerned about the serious financial situation facing Puerto Rico, and I am committed to finding solutions to help its people and businesses regain stability and prosperity. However, I cannot support legislation that asks hard-working men and women to bear more than their fair share of the recovery burden. My Republican colleagues insisted that this bill include provisions that would allow new workers to be paid subminimum wages – up to $3 below the federal minimum wage. It exempts Puerto Rican workers from the President’s overtime rule which is designed to make sure workers receive fair pay for the hours they work. It puts earned pensions at risk, undermining retirement security. At a time when Governor Rauner of Illinois is trying to use my own state’s budget situation to damage the well-being of workers, these provisions are especially troubling to me. I do not want to see this dangerous model used or forced upon other states and localities that face fiscal hard times. We should not set the precedent of making working families foot the bill for problems that they did not cause.”
Norma Torres had put forth an amendment to strike the subminimum wage provision from the bill, but the House voted 225 to 196 against it. All Democrats present voted for it, along with 15 Republicans. And then 225 Republicans voted against it.