In a letter written to Senate Majority Leader [crscore]Mitch McConnell[/crscore] Wednesday, 46 Democrats pushed the Kentucky Republican to extend bankruptcy rights to Puerto Rico.
The Democratic members of the upper chamber said inaction on the debt crisis in the commonwealth – which defaulted earlier this month – is going to cost American taxpayers in the long run, and claimed that allowing the island to restructure its debt would not cost America a dime.
“Providing Puerto Rico with restructuring tools would not be a first. Puerto Rico was included in Chapter 9 of the U.S. Bankruptcy Code until 1984, when Congress inexplicably excluded it from the nationwide approach to resolving municipal insolvency,” the Senate Committee on Energy and Commerce said in a statement.
The lawmakers said they feel the issue should have been addressed in the must-pass 2016 omnibus spending bill.
“This is the only way Puerto Rico can respond effectively and responsibly to this growing financial and social catastrophe,” they wrote. “Any legislation that does not include a federal process that allows Puerto Rico to adjust its debt would not be a real solution for Puerto Rico’s crisis.”
Critics of extending Puerto Rico bankruptcy rights said it would not fix the root of the problem.
During a Senate hearing in early December, Sen. Chuck Grassley said the island issued its bonds knowing Chapter 9 was not an option and it would be unfair to retroactively change the policy at the expense of investors if other options exist.
Grassley, Sen. [crscore]Orrin Hatch[/crscore] of Utah and Sen. [crscore]Lisa Murkowski[/crscore] of Alaska introduced a bill that would provide the territory –which faces around $72 billion in debt– $3 billion in aid, establish an assistance authority to help the commonwealth with its budget process and cut payroll taxes for employees by half.
McConnell said he is still weighing how to best handle the situation.
“I think the Puerto Rico issue is something a lot of us are concerned about. A lot of discussion about what to do and as long as it doesn’t involve the use of federal tax dollars, I think it is something we ought to figure out some way forward on,” the Kentucky Republican said Wednesday. “Exactly what the way forward is at this point, I’m not sure, but we certainly agree that it’s a big problem and we need to see what role, if any we should play in it.”
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