Rachel Greszler writes about Obama’s Disastrous Plan for Puerto Rico (emphasis added)
Some have suggested granting the island retroactive access to Chapter 9 bankruptcy. This would leave some creditors out of luck (investment promises to the contrary) and would address only about 30 percent of the commonwealth debt. Even if all creditors were thrown to the wolves, ordinary Chapter 9 bankruptcy could only reduce the island’s total debt to about $50 billion. Tack on the unfunded pension obligations and total commonwealth debt would stand at $94 billion, well above the “unpayable” mark of $72 billion.
Presumably, that’s why the administration wants to throw creditors under the bus — because if it doesn’t, Puerto Rican pensions will have to take a hit too.
If Puerto Rican pensions were paltry, there might be just cause for protecting them. Pushing retirees into poverty would impose additional costs on the island. But with annual Christmas, summer, and medication bonuses, as well as more than $1 billion in subsidized loans to members for home purchases and cultural vacations, there’s room for cuts without pushing pensioners onto the streets. After all, Puerto Rican retirees also receive Social Security and Medicare benefits.
The administration’s proposal would wrongly violate contractual prioritization for hundreds of thousands of U.S. investors — many of whom are retirees — all to preserve the pensions of Puerto Rico’s public employees. That’s unfair.
Worse, it would set a very dangerous precedent. State and municipal pension plans across the U.S. are underfunded by at least $3 trillion. Would the president also propose wiping out all state and local bondholders before insisting on state and local pension reform?
Puerto Rico knowingly has thrown itself into this mess. They should be held accountable.
