It’s going to be close, but it looks like the U.S. Senate will give President Barack Obama the opportunity to ride to Puerto Rico’s financial rescue before the July 4 congressional recess. That’s too bad because what Congress is proposing to do is a bad bill. It sets all kind of precedents no one should want to revisit in the future. The people who say it doesn’t are splitting hairs.
As a matter politics if it passes in its current form it will be impossible at some future date to say “No” to California or Illinois or some other state teetering on the edge of bankruptcy and unable to pay its bills when it comes calling looking for the federal government to solve the problem.
The current push is fueled by Puerto Rico’s approaching default on a $2 million debt payment due on July 1, money the island government says it doesn’t have. “I think it will pass because it’s the only game in town,” Florida Democrat Bill Nelson said Monday.
A missed payment of that size is certain to create some chaos in the financial markets, the kind of thing politicians like to avoid whenever possible. If the rush means they’re not looking carefully at what they’re voting on though, then shame on them.
No one, for example, has probably thought too carefully about the section of PROMESA – the Puerto Rico Oversight, Management, and Economic Stability Act – making it legal for the control board established by the legislation to accept gifts.
“GIFTS, BEQUESTS, AND DEVISES.—The Oversight Board may accept, use, and dispose of gifts, bequests, or devises of services or property, both real and personal, for the purpose of aiding or facilitating the work of the Oversight Board. Gifts, bequests, or devises of money and proceeds from sales of other property received as gifts, bequests, or devises shall be deposited in such account as the Oversight Board may establish and shall be available for disbursement upon order of the Chair, consistent with the Oversight Board’s bylaws, or rules and procedures. All gifts, bequests or devises and the identities of the donors shall be publicly disclosed by the Oversight Board within 30 days of receipt.”
Bear in mind this board, once established, will be making all the decisions about the island’s public financing for the foreseeable future. We’ve been down this road before, as when so-called sovereign entities like state governments and Indian tribes were exempted from the ban on giving gifts to members of Congress and their staffs. That loophole opened the door to practices leading to at least one major scandal involving sky boxes, sports tickets and other swag that, on paper at least, was perfectly legal. It was only after it got into the Washington press that the gifts didn’t look so good.
As the Center for Individual Freedom, a group that opposes PROMESA put it in a recent blog post, “The provision is crafted in such a way that any stakeholder looking to buy influence on the board will be able to do so. Perhaps labor unions (SEIU, in particular), which already have generously given their time and resources to help Puerto Rico’s government produce a report claiming that billions of dollars of its debt is invalid, will take center stage in the gift-giving war, hoping to ensure that the Commonwealth’s underfunded public pension system is provided preference over bondholders.”
In this one provision lay the seeds of corruption of a kind rarely seen anymore. Never mind the so-called transparency safeguards; the ability to hide the source of money in politics is well documented so what good really is any disclosure requirement.
If PROMESA is enacted the financial control board will have absolute power in Puerto Rico. The gift-giving clause is therefore an influence peddler’s dream. As Lord Acton said, “Power tends to corrupt and absolute power corrupts absolutely.” We can see the writing on the wall. If the Senate is going to move ahead with this legislation, which is already questionable, they better get it right. The gift clause needs to go before the bill goes to the president for his signature.