By David Pendered
Lost in the debate over federal money to help Georgia residents recover from Hurricane Michael is the issue of the largest government bankruptcy in U.S. history – an estimated $72 billion filing by Puerto Rico, said to be the only, “bankrupt tax haven in the world.”
This $72 billion sum – and everything that contributed to it – is in the background of partisan discussions over the hurricane relief bill and many funding measures related to Puerto Rico. Not to mention that the commonwealth faces nearly $46 billion in unfunded pension obligations and other post-employment benefits, according to a report by a research arm of George Mason University.
The commonwealth’s debt is rated as likely in default, or near default, according to Moody’s Investors Service. The commonwealth was in dire fiscal shape long before Hurricane Maria ravaged the island’s infrastructure in 2017. Puerto Rico’s filing dwarfs that of Detroit’s bankruptcy filing of about $18 billion, in 2013. At the time, Detroit’s was the largest public bankruptcy filing in U.S. history, according to a report by reuters.com.
Puerto Rico’s insolvency is now a factor in the presidential campaign. Democratic presidential candidate Sen. Elizabeth Warren announced on May 2 her proposed debt relief package.
Warren’s comments came on the heels of an April 30 event at which Georgia’s two Republican senators, and colleagues from adjoining states, issued what they portrayed as a reasoned call for Congress to approve a disaster relief package assembled by senators Johnny Isakson and David Perdue.
The proposal has backing from President Trump and would provide a total of about $13.6 billion in aid, plus $600 million in nutritional aid for Puerto Rico, according to their report.
Georgia’s senators observed:
- Johnny Isakson: “We’re talking about a disastrous failure of the government of the United States of America to respond to the needs of the people.”
- David Perdue: “The President is telling us to get this done, whatever it takes.”
The federal government has provided a total of $6.9 billion to Puerto Rico in disaster relief related to Hurricane Maria, according to a report by FEMA, the Federal Emergency Management Agency.
The funding includes $1.3 billion through the individuals and household program, and $5.6 billion in total public assistance grants, according to the report. FEMA issues regular reports of its activities related to Puerto Rico.
Puerto Rico’s fiscal situation stems in part from a host of economic development programs implemented over the decades. The consequence is that Puerto Rico has an enormous balance sheet, a history of selling public assets to pay debt or other public expenses, and a record of borrowing money illegally, in violation of the constitutional limit, through deals aided by dozens of banks and financial firms.
Cate Long has chronicled Puerto Rico’s fiscal strategies for years. Long is a former guest contributor to reuters.com who’s now in private practice covering Puerto Rico’s debt situation.
Long pinned this Tweet on March 27:
- “I’m going to state this everyday: US multinationals operate in Puerto Rico and generate +$40 billion of net income there. PR govt taxes them < 4% on this income & companies get to credit 80% of that to their federal taxes. PR is the only bankrupt tax haven in the world #muniland.”
Freshman Florida Sen. Rick Scott, a Republican and former governor of Florida, joined Isakson and Perdue in the conversation last week. Scott knows of what he speaks when it comes to a need for disaster relief.
Blue tarps cover rooftops and the wreckage of retail shops covers parking lots across swaths of the central Florida Panhandle. That’s where Hurricane Michael made landfall, in Mexico Beach, before the storm returned with a vicious North wind that leveled much of what was left standing.
The storm erased portions of Mexico Beach, a community that lifted to a new level the claim of Pawleys Island, S.C., to be home of the brand, “arrogantly shabby.” Mexico Beach had become a resort town that provided jobs for some of those left without work since the region’s largest employer was closed in 1999, a paper mill in the town of Port St. Joe. Likewise, Mexico Beach businesses employed some those left jobless as the commercial seafood industry collapsed in Apalachicola Bay, amid the dispute between Florida and Georgia over the waters of the Chattachoochee River.
Scott visited Tyndall Air Force Base, in Panama City, after Air Force Secretary Heather Wilson said March 27 the $4.7 billion in damage repair at the base was to be stopped May 1 for lack of funding from Congress. That leaves in limbo both the repairs, and its construction-related paychecks, as well as the staffing and operations of an installation that is a major economic engine for the region. Scott observed as much in a partisan April 29 statement:
- “It’s time Democrats realize that military families – and our entire North Florida community – need this funding NOW so they can start rebuilding their lives. Our men and women in uniform deserve better, and I will never stop fighting for Tyndall.”