Washington, D.C. — Congress should pass H.R. 5278, or the PROMESA Act, said Center for American Progress President and CEO Neera Tanden today. On July 1, the Puerto Rican government will default on approximately $800 million in general obligation bonds, a payment that the government lacks the funds to make. Under the Puerto Rican Constitution, the commonwealth’s treasury secretary must prioritize payment on these bonds, which could put Puerto Rico’s future in the hands of the hedge funds and other creditors who hold this debt. Failure by Congress to pass legislation will likely result in the hedge funds and other debtholders suing to be paid, which could siphon resources from hospitals, schools, police, and emergency services.
Tanden’s full statement is below:
Averting a humanitarian and economic crisis for the Puerto Rican people should be at the forefront of any congressional effort to prevent the territory from defaulting on its bonds. The PROMESA Act represents a bipartisan, compromise proposal and will prevent severe hardship for Puerto Ricans. While this legislation is not perfect, Congress should pass it without delay.
The legislation will allow Puerto Rico to restructure its debt and will provide relief from the territory’s unsustainable debt obligations, while requiring that public worker pensions be adequately funded as Puerto Rico develops a new fiscal plan. The bill is not a comprehensive solution to the economic problems facing Puerto Rico, and there is significant room for improvement in many aspects of the bill. Austerity will not restart the economy, and the legislation should instead provide funding for the investments that will be necessary to reestablish growth.
However, on balance, the PROMESA Act is a necessary first step, and we look forward to its fair implementation.
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