Should the U.S. government wipe out Puerto Rico's debt? | The Tylt
Should the U.S. government wipe out Puerto Rico's debt?
President Trump roiled the markets on October 3 by saying Puerto Rico's debt should be wiped out:
“We have to look at their whole debt structure,” he said Tuesday evening on Fox News’s Hannity. “You know, they owe a lot of money to your friends on Wall Street, and we’re going to have to wipe that out. You can say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”
But Director of the Office of Management and Budget Mick Mulvaney quickly contradicted Trump's statement:
“I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” he told Bloomberg News. “We are not going to bail them out. We are not going to pay off those debts. We are not going to bail out those bond holders.”
Critics argue that since U.S. policies like the Jones Act are what landed the territory in a financial crisis in the first place, the least we can do is wipe the slate clean and give them a fresh start—especially after they've suffered $95 billion in hurricane-related damage.
Thanks to the law, the price of goods from the United States mainland is at least double that in neighboring islands, including the United States Virgin Islands, which are not covered by the Jones Act. Moreover, the cost of living in Puerto Rico is 13 percent higher than in 325 urban areas elsewhere in the United States, even though per capita income in Puerto Rico is about $18,000, close to half that of Mississippi, the poorest of all 50 states.
This is a shakedown, a mob protection racket, with Puerto Rico a captive market.
And while most people would be happy to see Wall Street hedge funds lose in a Puerto Rican debt forgiveness agreement, three quarters of the island's debt is owned by individuals and mutual funds that are held by mom-and-pop investors. Just wiping away that debt could create its own financial problems.
"For the most part, Main Street America owns this debt," Long said. "It's not as though these are vultures circling around the island."