Ryan's Biggest Test Yet: Saving Puerto Rico From Congress

Updated on
  • Speaker has promised action, but a July 1 deadline is looming
  • House draft bill is running into opposition from all sides

Puerto Rico’s complex debt crisis is shaping up as the first true test of Paul Ryan’s six-month old speakership.

The Wisconsin Republican has pledged publicly that the U.S. House will find a "responsible" solution to the island’s debt crisis. The issue may not factor widely in the November elections, but failure could prove disastrous -- both to Ryan’s credibility and in terms of the billions of dollars Congress would need to prop up the island’s finances.

Paul Ryan

Photographer: Andrew Harrer/Bloomberg

Unlike many of his previous challenges, this isn’t a mess he can blame on his predecessor. If he can’t forge a solution, it also doesn’t bode well for Ryan’s ability to bring his recalcitrant conservative caucus along on other spending and tax plans, which could be a recipe for the continuing gridlock and peril that ousted John Boehner.

"To me, this is his first high hurdle. This belongs to him. This is his," said Representative Lynn Westmoreland, a Georgia Republican who briefly mulled running for speaker, but ultimately backed Ryan and later decided not to run for re-election this year. 

The high stakes explain why Ryan’s office has been involved -- often behind the scenes -- from the start. It could also ultimately find him having to strong-arm or bypass fellow conservatives, a move that would also break his promise for a new, bottom-up approach to running the House. 

Either way, time is running short. Congress is already blowing through a May 1 debt repayment deadline and Ryan needs to get something through both chambers before July 1 to avoid a likely default by Puerto Rico and a failure that could haunt his tenure. Making matters worse, the island’s economy is in tatters, with a high jobless rate, a declining population and concerns about an outbreak of the Zika virus.

Ryan’s immediate decision will be how much more time to give Natural Resources Chairman Rob Bishop of Utah, who Ryan put in charge of the bill, to forge a solution before taking over.

‘Bring Order’

Ryan himself has said inaction on Puerto Rico’s impending fiscal crisis could have deep ramifications for the U.S. "Our primary responsibility is to protect the American taxpayer and to help bring order to the chaos that will befall Puerto Rico if the status quo continues going in the direction it’s going," he told reporters on April 14.

But Ryan and his lieutenants have conceded that congressional action will slip past a May 1 deadline for a $422 million debt repayment by the territory. Next up is a $2 billion payment due on July 1, raising the specter of default on some of the territory’s general obligation bonds.

When Ryan was chosen as speaker in October, Republicans had high hopes he could unite a fractured caucus. And he has largely enjoyed positive early reviews from House members, who praise him for returning more power to committees and rank-and-file members. 

But Ryan has also had his share of struggles, including missing an April 15 deadline for the House to pass a fiscal 2017 budget. Ryan had said kick-starting the budget process would be part of his promised return to legislative "regular order." His efforts have instead found him wrestling with the same fiscal conservatives in the House Freedom Caucus and others that helped to usher Boehner out the door last fall.

Ryan’s Mess

While he can try to pin many of those woes on Boehner, Ryan owns the Puerto Rico problem.

It was Ryan who cut the deal with Democrats last December that kept Puerto Rico out of the sweeping omnibus spending bill. In return, Ryan promised to offer a plan by March 31 to deal with the territory’s $70 billion debt crisis.

The House Natural Resources Committee did produce a discussion draft, HR. 4900, before the deadline, but efforts to agree on some orderly combination of a federal financial oversight board and a framework for debt restructuring have since stalled. Republicans, Democrats and U.S. Treasury Department officials differ on details, including the scope of the board’s powers, how to deal with creditors, and how long creditors should be blocked from suing the island.

This is all playing out amid intense lobbying -- not only by Puerto Rico’s government, but also insurers and holders of Puerto Rico bonds, who themselves are split.

‘Bailout Scheme’

Some of the loudest objections to the current draft being negotiated by Bishop are coming from House Republicans, including many on the committee itself. Some cast the proposed legislation as a "bailout scheme" -- if not an actual bailout -- something adamantly disputed by Ryan.

Others say that they have to contend with a perception back home that it’s a bailout, particularly with groups taking out television ads on the issue.

"Puerto Rico’s increasing fiscal problems are the result of mismanagement and unsustainable policies enacted by the local government and under no circumstance will I support a taxpayer-funded bailout of Puerto Rico," said Representative Doug Lamborn of Colorado, a member of the committee, who adds that while the latest version of the bill is not a bailout, he remains opposed because of concerns about how payments to creditors might be prioritized.

Such complaints are contributing to doubts about Ryan’s ability to deliver consensus within his own conference. They’re also raising questions about Ryan’s efforts to restore more legislative decision-making to the committees, as opposed to the speaker imposing his will. 

"The underlying governing dynamic that forced John Boehner to depart is still there -- whether on budget or Puerto Rico or any other number of issues coming up," said Representative Charlie Dent of Pennsylvania, co-chairman of a group of House Republican moderates. "That’s not a criticism of Paul, by the way. That’s just a statement of fact and an acceptance of reality. Face it, we have a number of members who have a very difficult time getting to ‘yes,’ and that is structural and it does not matter who is speaker."

But Dent said there’s "an urgency" and "this one of those issues of governance you got to get done, even if we’re going to need Democrats to help us pass the bill."

Bottom-Up Approach

A House leadership aide responded that Ryan’s bottom-up push to let the committee do its work may not be as neat and tidy as having the speaker jam the legislation through, but Ryan remains committed to it. The aide also noted that Ryan has always said the bill would require bipartisan support in order to make it through the Senate, and he remains optimistic a bill will be passed.

To boost his cause, Ryan’s office has been circulating opinions from some conservative fiscal groups in support of the bill and arguing that it is not a bailout of Puerto Rico, including one from the influential Americans for Tax Reform, founded by Grover Norquist.

"The Oversight Board has the authority to mediate voluntary restructuring between stakeholders, and if (and only if) this breaks down, the board has the authority to facilitate court supervised restructuring. This is NOT chapter 9 bankruptcy," read one statement from the group, which added that any suggestions that this is a bailout are false.

Supportive Democrats

When it comes to Puerto Rico, Ryan has won plaudits from Democrats for his approach.

Representative Luis Gutierrez of Illinois says the speaker has been approachable and collegial in the discussions. But he says that, in retrospect, Minority Leader Nancy Pelosi and Democrats should have pushed harder to include Puerto Rico language in the spending deal last year -- when they had more urgent leverage.

Now, Ryan finds himself pushing a legislative effort and trying to reach a bipartisan deal with fellow Republicans who are skeptical about the bill, which Representative Tom Cole said is gaining a "high profile" in districts in "a very volatile political year."

Advertising Blitz

Some House Republicans are being hit back home with ads from groups that describe the bill as a bailout, which Bishop said has only added to confusion among his constituents.

"All they’ve heard is that same stupid ad," said Bishop. "It is bizarre that the number one issue in the First District of Utah is Puerto Rico."

"We ought to just legislate and do the best we can," said Cole, who said he believes Ryan will get the bill through.

Ryan, during a news conference Thursday, sounded defensive about the bill’s progress. "We made the deadline which was to get the bill introduced by the end of the first quarter," he said, referring to his March 31 promise.

"Now, the Resources committee is working on technical aspects," said Ryan. "I think they are doing very well. We just want to do it right."

(Updates with context and link about Puerto Rico's declining economy in sixth paragraph.)
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