What Congress Owes Puerto Rico
President Donald Trump's visit to Puerto Rico on Tuesday brought more disruption and controversy -- to the markets and the island -- than aid and comfort. Fortunately, there is a better model to provide for both the immediate humanitarian needs of these Americans and the long-term health of their economy.
But it will take the kind of sustained bipartisan focus that yielded last year's legislation to stabilize the commonwealth's finances.
Trump's off-the-cuff remark about wiping out Puerto Rico's debt not only roiled the bond market, it cast a shadow over a functioning mechanism that Congress has already established to help the island to restructure its debt. Puerto Rico's most pressing financial need right now is for short-term operational funding, which may run out by the end of this month -- something that Congress and the Treasury Department can provide.
More urgently, humanitarian aid needs to come first. Two weeks after Hurricane Maria shredded homes and businesses, more than 90 percent of the island still lacks electricity, and half its 3.4 million Americans have access to potable water. Given the potential for water-borne illnesses and the island's battered health system, that's a public health disaster waiting to happen.
Some Republicans in Congress now want to withhold more disaster funding from the Federal Emergency Management Agency until they can find offsetting spending cuts. This would be an act of fiscal brinkmanship that ignores the magnitude of three back-to-back natural disasters.
And there are even bigger bills to come. Puerto Rico's federally appointed oversight board has asked Congress for "the greatest amount of federal aid," citing damage estimates that put the cost of Puerto Rico's recovery at more than its gross domestic product. The board has some control over restructuring Puerto Rico's debts and the island's finances, but it cannot conjure money up from what would be America's poorest state if it were one -- especially if more islanders flee to the mainland, further shrinking the tax base. Moreover, given the likelihood of more intense hurricanes in the future, Congress has even more incentive to provide funds to "build back better."
Which brings up the issue of how best to help Puerto Rico in the long term. The island's residents and their government have at least a decade of tough choices and hard work ahead of them. But Congress can provide the island with regulatory relief to spur growth in an economy that has shrunk by 15 percent since 2006. One of the best things Congress could do would be to waive or repeal the Jones Act, which imposes higher shipping costs that make everything on Puerto Rico more expensive.
Less than a year ago, a bipartisan congressional task force drew up a blueprint for improving the island's economic future, covering everything from inequities in Medicaid and Medicare funding to the commonwealth's spotty statistics. The only missing ingredient is Washington's willingness to carry them out.
--Editors: James Gibney, Michael Newman
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com .