Puerto Rico’s government is on the verge of running out of money. A messy default is in nobody’s interest, which is why Congress ought to move swiftly to provide the American territory with a way to restructure its huge debt and revive its economy.
The Obama administration last week offered the outline of a rescue plan to help the island and the 3.5 million American citizens who live there. The plan would impose new oversight on the island’s finances and expand access to government programs like Medicaid and the earned-income tax credit. Crucially, it asks Congress to change the law so that Puerto Rico’s territorial government and its municipalities can seek bankruptcy protection.
Political leaders in Puerto Rico and many financial and legal experts have been saying for months that the territory cannot repay the approximately $72 billion it owes to hedge funds, mutual funds and other investors. Its economy is not growing, and tens of thousands of residents are leaving every year for the mainland to look for work. More than 300,000 have left in the last 10 years.