As we know, Puerto Rico’s disastrous overspending has put default in the horizon, and more debt as bond yields rise.
Pres. Obama has come up for a default plan because,
The situation in Puerto Rico “risks turning into a humanitarian crisis as early as this winter,” one senior administration official said, speaking on condition of anonymity because the person was not authorized to speak publicly.
Relief for the yet-to-happen so-called “humanitarian crisis” of course involves more government handouts for a place where over 25% of the workforce works for the government – with no calls for reducing the bureaucracy.
In the past, Republicans in Washington took a dim view of granting bankruptcy for Puerto Rico. But the GOP may be ignoring an opportunity that the Puerto Rico crisis presents for dealing with a problem closer to home: the state and local pension crisis. With his proposal, President Obama was careful to wall off the municipal bankruptcy code from larger changes. He and his political allies, especially public-sector unions, fear that helping Puerto Rico might make it easier for municipalities or other entities within states—including deeply indebted pension systems—to file for bankruptcy protections. In places like Illinois, New Jersey, and California, where taxpayers’ efforts to reform public-sector debt run into one stumbling block after another, bankruptcy might be the only way of clearing away these steep fiscal obligations. The GOP should use Obama’s Puerto Rico gambit, clearly a political ploy, to start a discussion on municipal debt that the administration and its allies would rather not have.
No matter how you put it, it’s all about the spending.