Here is the story about Puerto Rico to which Carl referred this morning.
Puerto Rico's Economic "Death Spiral" Tied to Legacy of Colonialism
Wednesday, 05 August 2015 00:00 By Amy Goodman, Democracy Now! | Video
Report
The White House rejects a bailout package for Puerto Rico days after the
U.S. territory failed to pay a small portion of the massive $72 billion it
owes to bondholders. It was the biggest municipal bond default in U.S.
history. Unlike U.S. states and municipalities, Puerto Rico cannot declare
bankruptcy. Juan González discusses how the roots of the crisis are deeply
tied to Puerto Rico's colonial status.
TRANSCRIPT:
AMY GOODMAN: Juan, you just wrote a piece in the New York Daily News today
called "Puerto Ricos Economic 'Death Spiral.'" Explain whats happening.
JUAN GONZÁLEZ: Well, there was news again this week that Puerto Rico missed
a bond payment, its first, $58 million in one of the bonds that it owes in
the $72 billion debt load that it has. Of course, there was not much news
that it did pay about $500 million in other bond payments that were due. But
this is technically the first default in what is expected to be a string of
defaults over the next several months, because the reality is, the island of
Puerto Rico, the government, cannot pay the amount of debt it has. This year
alone, Puerto Rico has to pay about $3 billion in debt service. Thats about
17 percent of its entire revenues of the government. Next year its going to
go up to 20 percent of its entire revenues. If you were an individual and
you had that much credit card debt, you couldnt meet all your bills. If you
were a corporation facing that amount of debt service, you would probably
have to declare bankruptcy, a reorganization, then try to restructure your
debts. But the problem is, Puerto Rico cant do that. And its amazing to me
how so many journalists are reporting this reality that unlike states in the
United States, Puerto Rico does not have the ability to have its
municipalities or its public corporations reorganize under bankruptcy
protection, but no one questions why this is so. They just say its an
anomaly.
And one of the points I tried to make in a column today, that this is part
of a 117-year relationship of colonialism. This is part of the colonial
status of Puerto Rico. Even the Marxist historian Richard Wolff this week
claimed that Puerto Rico was a semi-colony. No, Puerto Rico is not a
semi-colony; Puerto Rico is a colony of the United States. And I pointed to
the decisions of the Supreme Court that ratified this colonial situation.
Its calleda bunch of decisions that were rendered in the early 1900s,
called the Insular Cases, when Puerto Rico had just been acquired after the
Spanish-American War. And in a five-four decision back then, the same five
judges, by the way, that decided Plessy v. Ferguson, the separate but equal
situation, that same five-judge conservative majority back at the turn of
the century said in their decisionit was called Downes v. Bidwell"the
island of Puerto Rico is a territory appurtenant and belonging to the United
States, but not part of the United States within the revenue clauses of the
Constitution," basically saying that the Constitution only applied in Puerto
Rico those portions that Congress decided, deemed necessary to apply. So the
problem for Puerto Rico has been for 117 years that all major decisions
about the island are made by Congress, not by the elected officials of
Puerto Rico themselves.
And youve had numerous examples. One example I gavepeople forgetabout the
current crisis really originated with Bill Clinton. In 1996, Bill Clinton
was attempting to get a new federal minimum wage passed. Newt Gingrich and
the Republicans in Congress were resisting it, so Clinton cut a deal with
the Republicans: Congress would raise the federal minimum wage but would
provide billions of dollars in tax benefits to small businesses. Where would
they get the money for that? Clinton agreed to do away with a special tax
exemption that corporations in Puerto Rico had that was worth billions of
dollars. And as a result of thatand it was to be phased in over 10 years,
between 1996 and 2006. So over those 10 years, that special tax exemption
was lost, taken away by Congress, and thousands of jobs left the island, as
pharmaceutical companies, electricalmedical equipment companies, chemical
firms decided it was no longer profitable for them, so they left the island.
The best-paying jobs were lost. And Puerto Rico has been basically in
economic contraction since 2000, for the last 10 years. So you have the
reality of the decision that was made in Congress that began setting the
basis for whats happening in Puerto Rico now.
And so now, once again, Puerto Rico is having to go to Congress, asking for
the right to reorganize, like General Motors did, like Detroit did, like
Orange County did, to be able to reorganize under bankruptcy protection, and
Congress is resisting. And President Obama, the White House, as you saw, is
only paying lip service, is not really fighting over this issue. So, it
remains to be seen how it will be resolved. But the reality is that theall
of this is rooted in the fact that Puerto Rico remains a colony of the
United States, with no voting representation in Congress.
AMY GOODMAN: And how does the debt crisis face theaffect the people of
Puerto Rico?
JUAN GONZÁLEZ: Well, its unbelievable. I mean, right now you have a
situation where just a few weeks ago the government raised the sales tax
from 7 percent to 11 percent. It has already effectively eliminated all the
defined-benefit pension funds of government workers. Now, between the hedge
funds and the economists, the IMF economists who are coming in, saying the
only way to get out of this is by more austerity, they now want to eliminate
protections from overtime. They want tothey want to encourage the island of
Puerto Rico now to sell off all of its publicly ownedits already sold off
its airport, privatized its airport, and some of its toll roads. Now they
want it to sell the ports, to sell government buildings, to basically sell
any government assets as a means to raise money. They want to reduce
Medicaid. They want to lower the minimum wage. They want Congress to lower
the minimum wage below that of the federal minimum wage. They want to create
an even deeper cut in wages for young people. They basically want the
population to bear the brunt of the economic problems of the island.
And I think that what the leaders of Puerto Rico are saying: "Hey, were in
this together. All of these Wall Street firms kept pedaling loans to us."
Just last year, $3.5 billion in new bonds were issued, largely bought up by
hedge funds, because Puerto Rico already had junk bond status for its debt,
so it couldnt raise money. So the hedge funds came in, and they said,
"Well give you $3.5 billion in new loans; however, it comes at an 8 percent
interest rate." Now, understand, Puerto Rico is triple tax-exempt for anyone
in the United States. Thats the great secret of how peoplethe finance
community has made money off of Puerto Rico. That 8 percent is worth about
12 or 13 percent toif its triple tax-exempt to anybody who invests in
those bonds. So theyve been making a killing, but they specifically said,
"Not only do we get first prioritywere the general obligation bonds. We
get first priority for any payments of money that the government gets in.
But if theres a dispute, this dispute will not be heard in Puerto Rican
courts, it will be held in New York courts." So they were already preparing
for the possibility that the island would default, but they wanted to have
the courts on their side.
So you see that thisthe hedge funds, especially, are demanding theyre
first in line, they want payments. And the government of Puerto Rico is
saying, "Look, if were going to suffer, if were going to make further cuts
in Puerto Rico," as they said in Greece, "the bondholders have to suffer, as
well. They have to accept losses. They have to restructure the debts." And
thats the problem, is that the Puerto Rico government cant do that right
now, given the reality of its colonial situation. So, well see what happens
in the coming months.
AMY GOODMAN: And well link to your column at democracynow.org.
When we come back, you may have heard about the proliferation of
presidential candidates. What about the crackdown on the people who get to
vote for them or who they want to? Its been 50 years since the Voting
Rights Act was passed. Today well speak with Ari Berman. Hes author of
Give Us the Ballot: The Modern Struggle for Voting Rights in America. Stay
with us.
This piece was reprinted by Truthout with permission or license. It may not
be reproduced in any form without permission or license from the source.
AMY GOODMAN
Amy Goodman is the host and executive producer of Democracy Now!, a
national, daily, independent, award-winning news program airing on over
1,100 public television and radio stations worldwide. Time Magazine named
Democracy Now! its "Pick of the Podcasts," along with NBC's Meet the Press.
________________________________________
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Puerto Rico's Economic "Death Spiral" Tied to Legacy of Colonialism
Wednesday, 05 August 2015 00:00 By Amy Goodman, Democracy Now! | Video
Report
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The White House rejects a bailout package for Puerto Rico days after
the U.S. territory failed to pay a small portion of the massive $72 billion
it owes to bondholders. It was the biggest municipal bond default in U.S.
history. Unlike U.S. states and municipalities, Puerto Rico cannot declare
bankruptcy. Juan González discusses how the roots of the crisis are deeply
tied to Puerto Rico's colonial status.
TRANSCRIPT:
AMY GOODMAN: Juan, you just wrote a piece in the New York Daily News today
called "Puerto Ricos Economic 'Death Spiral.'" Explain whats happening.
JUAN GONZÁLEZ: Well, there was news again this week that Puerto Rico missed
a bond payment, its first, $58 million in one of the bonds that it owes in
the $72 billion debt load that it has. Of course, there was not much news
that it did pay about $500 million in other bond payments that were due. But
this is technically the first default in what is expected to be a string of
defaults over the next several months, because the reality is, the island of
Puerto Rico, the government, cannot pay the amount of debt it has. This year
alone, Puerto Rico has to pay about $3 billion in debt service. Thats about
17 percent of its entire revenues of the government. Next year its going to
go up to 20 percent of its entire revenues. If you were an individual and
you had that much credit card debt, you couldnt meet all your bills. If you
were a corporation facing that amount of debt service, you would probably
have to declare bankruptcy, a reorganization, then try to restructure your
debts. But the problem is, Puerto Rico cant do that. And its amazing to me
how so many journalists are reporting this reality that unlike states in the
United States, Puerto Rico does not have the ability to have its
municipalities or its public corporations reorganize under bankruptcy
protection, but no one questions why this is so. They just say its an
anomaly.
And one of the points I tried to make in a column today, that this is part
of a 117-year relationship of colonialism. This is part of the colonial
status of Puerto Rico. Even the Marxist historian Richard Wolff this week
claimed that Puerto Rico was a semi-colony. No, Puerto Rico is not a
semi-colony; Puerto Rico is a colony of the United States. And I pointed to
the decisions of the Supreme Court that ratified this colonial situation.
Its calleda bunch of decisions that were rendered in the early 1900s,
called the Insular Cases, when Puerto Rico had just been acquired after the
Spanish-American War. And in a five-four decision back then, the same five
judges, by the way, that decided Plessy v. Ferguson, the separate but equal
situation, that same five-judge conservative majority back at the turn of
the century said in their decisionit was called Downes v. Bidwell"the
island of Puerto Rico is a territory appurtenant and belonging to the United
States, but not part of the United States within the revenue clauses of the
Constitution," basically saying that the Constitution only applied in Puerto
Rico those portions that Congress decided, deemed necessary to apply. So the
problem for Puerto Rico has been for 117 years that all major decisions
about the island are made by Congress, not by the elected officials of
Puerto Rico themselves.
And youve had numerous examples. One example I gavepeople forgetabout the
current crisis really originated with Bill Clinton. In 1996, Bill Clinton
was attempting to get a new federal minimum wage passed. Newt Gingrich and
the Republicans in Congress were resisting it, so Clinton cut a deal with
the Republicans: Congress would raise the federal minimum wage but would
provide billions of dollars in tax benefits to small businesses. Where would
they get the money for that? Clinton agreed to do away with a special tax
exemption that corporations in Puerto Rico had that was worth billions of
dollars. And as a result of thatand it was to be phased in over 10 years,
between 1996 and 2006. So over those 10 years, that special tax exemption
was lost, taken away by Congress, and thousands of jobs left the island, as
pharmaceutical companies, electricalmedical equipment companies, chemical
firms decided it was no longer profitable for them, so they left the island.
The best-paying jobs were lost. And Puerto Rico has been basically in
economic contraction since 2000, for the last 10 years. So you have the
reality of the decision that was made in Congress that began setting the
basis for whats happening in Puerto Rico now.
And so now, once again, Puerto Rico is having to go to Congress, asking for
the right to reorganize, like General Motors did, like Detroit did, like
Orange County did, to be able to reorganize under bankruptcy protection, and
Congress is resisting. And President Obama, the White House, as you saw, is
only paying lip service, is not really fighting over this issue. So, it
remains to be seen how it will be resolved. But the reality is that theall
of this is rooted in the fact that Puerto Rico remains a colony of the
United States, with no voting representation in Congress.
AMY GOODMAN: And how does the debt crisis face theaffect the people of
Puerto Rico?
JUAN GONZÁLEZ: Well, its unbelievable. I mean, right now you have a
situation where just a few weeks ago the government raised the sales tax
from 7 percent to 11 percent. It has already effectively eliminated all the
defined-benefit pension funds of government workers. Now, between the hedge
funds and the economists, the IMF economists who are coming in, saying the
only way to get out of this is by more austerity, they now want to eliminate
protections from overtime. They want tothey want to encourage the island of
Puerto Rico now to sell off all of its publicly ownedits already sold off
its airport, privatized its airport, and some of its toll roads. Now they
want it to sell the ports, to sell government buildings, to basically sell
any government assets as a means to raise money. They want to reduce
Medicaid. They want to lower the minimum wage. They want Congress to lower
the minimum wage below that of the federal minimum wage. They want to create
an even deeper cut in wages for young people. They basically want the
population to bear the brunt of the economic problems of the island.
And I think that what the leaders of Puerto Rico are saying: "Hey, were in
this together. All of these Wall Street firms kept pedaling loans to us."
Just last year, $3.5 billion in new bonds were issued, largely bought up by
hedge funds, because Puerto Rico already had junk bond status for its debt,
so it couldnt raise money. So the hedge funds came in, and they said,
"Well give you $3.5 billion in new loans; however, it comes at an 8 percent
interest rate." Now, understand, Puerto Rico is triple tax-exempt for anyone
in the United States. Thats the great secret of how peoplethe finance
community has made money off of Puerto Rico. That 8 percent is worth about
12 or 13 percent toif its triple tax-exempt to anybody who invests in
those bonds. So theyve been making a killing, but they specifically said,
"Not only do we get first prioritywere the general obligation bonds. We
get first priority for any payments of money that the government gets in.
But if theres a dispute, this dispute will not be heard in Puerto Rican
courts, it will be held in New York courts." So they were already preparing
for the possibility that the island would default, but they wanted to have
the courts on their side.
So you see that thisthe hedge funds, especially, are demanding theyre
first in line, they want payments. And the government of Puerto Rico is
saying, "Look, if were going to suffer, if were going to make further cuts
in Puerto Rico," as they said in Greece, "the bondholders have to suffer, as
well. They have to accept losses. They have to restructure the debts." And
thats the problem, is that the Puerto Rico government cant do that right
now, given the reality of its colonial situation. So, well see what happens
in the coming months.
AMY GOODMAN: And well link to your column at democracynow.org.
When we come back, you may have heard about the proliferation of
presidential candidates. What about the crackdown on the people who get to
vote for them or who they want to? Its been 50 years since the Voting
Rights Act was passed. Today well speak with Ari Berman. Hes author of
Give Us the Ballot: The Modern Struggle for Voting Rights in America. Stay
with us.
This piece was reprinted by Truthout with permission or license. It may not
be reproduced in any form without permission or license from the source.
Amy Goodman
Amy Goodman is the host and executive producer of Democracy Now!, a
national, daily, independent, award-winning news program airing on over
1,100 public television and radio stations worldwide. Time Magazine named
Democracy Now! its "Pick of the Podcasts," along with NBC's Meet the Press.
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