Transportation, Housing and Urban Development, and Related Agencies

Floor Speech

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Ms. CANTWELL. Mr. President, I see my colleague from New Jersey has been on the floor for several hours talking about the very important issue that frankly deserves a lot more discussion in the U.S. Senate. It is an issue of great importance to this territory of the United States, and it certainly is an important issue to the people of the United States of America, whether they understand that or not, because the success of Puerto Rico, financially, is also tied to how well the United States, as a partner of this territory, continues to be successful as well. Everybody thinks of the situation with Greece and the European Union. Well, they should also be thinking about the situation in Puerto Rico and its relationship to the United States of America because, if it doesn't go well for Puerto Rico, I guarantee it is not going to go well for the United States of America.

My colleague has been on the floor now for hours talking about the structure of what would be a fair way to enter into a reorganization of the debt. I thank him for coming to the floor and doing this.

I think it was probably 7-plus months ago that we had one of the first hearings on this issue and tried to get people to focus their attention on the crisis. What kind of authority does the territory have today and what kind of structure should we honor as they confront this financial crisis?

So I just want to put up a couple of charts. I am going to ask that we turn it a little differently so that when I ask a question, my colleague can actually see the chart. I will try to position myself here on the floor so he might be able to join in this question.

I know there are many charts here about the situation, and I want to make sure that I am saying this the right way because part of the issue with the debt crisis is my understanding that 45 percent of Puerto Rico is in poverty, including 58 percent of the children; that there is a 12-percent unemployment rate, which is nearly double that of our highest State; and that the sales tax is 11.5 percent.

People are saying: ``Well, stop government spending.'' They are doing that. That part is being achieved. But the per capita income is almost half of the poorest State in the United States. So I think many people don't have any idea--when they look at this debt issue, they think, OK, this is where we are going to get money. This is a very difficult issue.

Part of the discussion we are going to have next--and that is what I hope my colleagues understand--that whatever happens tomorrow, this issue is not going away. The financial stability of Puerto Rico is going to be a question mark for a long time, and we are going to have to figure out how a territory that has 45 percent of the population living in poverty and these rates of unemployment--how we are going to put them back on the right path? This is the fundamental question. How do we get back on the right path?

In the Senate, there are probably 100 opinions about whether you do the earned-income tax credit, go back to tax breaks for manufacturers, whatever the ideas are, but we are not even at that stage. We are just at the financial crisis stage. The fundamental question is, How do you get out of the financial crisis when the economy of the country is in this hard of a spot?

So I ask my colleague, the Senator from New Jersey, if he is aware of these numbers and these statistics.

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Ms. CANTWELL. I am wondering if my colleague from New Jersey is aware of this point, which I find most interesting and am trying to understand. He has been talking about this control board and all the power they are going to have. Do you understand that in this House bill, the members of that control board won't be paid, but the measure allows them to accept, use, and dispose of gifts, requests, devices of services or property, both real and personal, for the purposes of aiding and facilitating their work? So they literally can accept gifts, but what kind of gifts?

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Ms. CANTWELL. As I bring up--this is a provision I am just getting familiar with, and I am obviously very concerned about it. Through the Chair, I would say that I am very concerned about the fact that now we are going to turn over all this authority to people who can accept gifts. I don't know what that means and who is going to oversee that because they are going to be appointed in a process that I believe will probably be challenged as unconstitutional, which will also take the bill to a whole other level of legal uncertainty.

But I wanted to go over this and ask about this point. It is my understanding that they are about $72 billion in debt. For fiscal year 2016, the debt payments will be about $4.1 billion. So making a full payment would require about 25 percent of their annual income. My understanding is that a significant part of this debt is the GO bonds and that various bonds have been issued. The question becomes, if your annual revenue is $17 billion a year, how are you going to reorganize this huge debt when your population is already at a 45-percent poverty rate?

So I think all of us, in a normal situation, would say: Let the bankruptcy court figure that out. That is what I would do. I would say let the bankruptcy court figure that out because bankruptcy laws in the United States of America are fairer and they decide these issues. They decide what is fair treatment under the law. I certainly would prefer that. I don't prefer a board of people who can get gifts and make all these decisions because I want legal certainty and I want it now, and I would rather be more prescriptive in the law.

Do you know of any way the people of Puerto Rico could pay the $72 billion in debt by themselves? I am trying to understand what we are asking of the rest of the people who have been investors and if people think we are going to do this on the backs of the Puerto Ricans given the fiscal crisis they are already in.

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Ms. CANTWELL. I wonder, because a lot of this debate has been so focused on the people of Puerto Rico, whom I fully want to support, and I wish this body would engage in a full, robust debate, with amendments and a markup. But, there are costs to the U.S. taxpayers.

Mr. President, I want to know if my colleague understands that U.S. taxpayers basically can be on the hook for as much as $24 billion over the next 10 years? The United States is already contributing as much as $6.6 billion for their budget as it relates to the Medicaid costs. And if, again, you don't have a functioning economy, if you have even more people in poverty because now you have said you are going to put the brunt of the $72 billion on the backs of the Puerto Rican government and infrastructure, then you are driving more people into poverty.

Our costs are going to be real. This is about getting it right with legal certainty so we can move forward because this issue is not going away. They are not all of a sudden going to become healthy when this bill passes.

My sense is that what has been passed by the House leads will lead to much legal uncertainty and lawsuits are going to ensue. All my colleagues know that when people disagree, the next thing they do is go to court.

What we would rather have is legal certainty so that we can get a resolution of this through the regular bankruptcy process. If we don't do this right, there are billions of dollars that the U.S. economy can be on the hook for because the worse we make it for Puerto Rico, the more money will be involved for the U.S. Government.

So while this proposal is not about giving them more money now, it is certainly about what is a fair settlement on this debt. If you ask me, that shouldn't be decided or discussed here in the Halls of the U.S. Senate or Congress just because a bunch of hedge funds have enough money to hire lobbyists to show up here. It should be decided through a bankruptcy court, through a normal bankruptcy process, just like it is done in any other place.

I wonder if my colleague thinks our colleagues understand these issues that will cost the U.S. economy? Has the Senator heard any numbers similar to this?

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Ms. CANTWELL. I would also say to my colleague that I think the mystery here is some people think that what will happen is it will just get worse in Puerto Rico, and that is true if we don't make the right decisions. This is a time where we need to come together. We all need to come together and come up with a solution that we believe in. A solution that we know has legal certainty because we are going to have thornier questions to answer.

I ask my colleague from New Jersey if he is aware that Puerto Ricans don't have to stay in Puerto Rico? They don't have to stay there. In fact, they have come to the United States, and we have seen over the last several years that 300,000 Puerto Ricans have come to the United States of America. That is how many have come. Somebody estimated for me that last year 80,000 came.

So, if they have 45 percent poverty rate and 12 percent unemployment and now you are going to put the people and the government of Puerto Rico at the mercy of four people they don't even know and they don't even get a say in the process, I guarantee you people are going to leave. So that 300,000 people has cost us an additional $4.1 billion in the United States of America. Basically, every Puerto Rican who moves to the mainland costs us about $2,500, and we believe that, over the last several years, it has been about $175 million per year.

OK. So the reason I am asking this is because I am trying to understand whether our colleagues understand this. The Senator and I have spent a little more time on this. The Senator represents a large Puerto Rican population, and the Senator has done great service for our foreign affairs and foreign policy. Does the Senator know whether people understand this issue and the consequences, that they will come to the United States? They will be here, and we have open arms. But there is a different process here, and it is almost as if there is an incentive.

I would throw in the Medicaid numbers here as well and ask my colleague through the Presiding Officer: In Puerto Rico, the per capita Medicaid spending is about $1,800, but here in the United States, that same Puerto Rican--to cover his Medicaid costs--would be over $5,200.

So, if someone is in Puerto Rico and they realize the situation is going to get worse, they don't think there is a successful economic plan, and they can come to the United States--these numbers are going to be exacerbated by more and more Puerto Ricans coming here, the cost for us will be getting higher, to say nothing of some of the other challenges.

So, personally, I would want Puerto Rico to have the best successful opportunity to restore a robust economy, and it is going to require tough decisions. We need to have everybody in the pool when it comes to those decisions, and we have to have a fair process that will stand up in court.

I ask my colleague from New Jersey, who is on the Finance Committee, if he thinks people understand the significance of Medicaid? How much Medicaid money we are going to be asked for?

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Ms. CANTWELL. Mr. President, I would also ask my colleague this. I have read some articles in the press on this subject, and I know in Florida there are so many Puerto Ricans and many in New Jersey as well. But I read this quote from the Miami Herald, that said: ``Some bottom- feeders bought Puerto Rican debt at cheap prices and don't want a restructuring that might allow repayment at less than the full face value of the bonds--allowing them to make a huge killing at the expense of Puerto Rico's beleaguered population.''

To me, that is what this debate is about. What I am saying is that we need to have a process that is fair and open. A bankruptcy process that people can understand, and that the people who are appointed have that done in a way that meets constitutional challenges and that don't mire us in debate for the next 2 years while the Puerto Rico economy continues to flounder.

I don't know if my colleague has read press accounts such as this, but I feel that a lot of people don't know the details about this debt, the size of it, or the background or what people are offering or the process that Puerto Rico has been through. They have tried to reorganize this debt. They haven't been successful because people think that, as long as they have the opportunity, they will not settle. That is why people go through the bankruptcy process. That is why we afford people in the United States of America these same opportunities. But, by not affording Puerto Rico the bankruptcy process, it is going to hurt the people of Puerto Rico and then, in consequence, it is going to hurt the people of the United States, including the U.S. taxpayers, because we will not have gotten this right, and we will not be able to help Puerto Rico get on the right track.

I don't know if my colleague has seen comments like this in other places?

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Ms. CANTWELL. I don't know what Leonardo DiCaprio is doing, but I guarantee you there is going to be another movie. It is not going to be ``The Wolf of Wall Street,'' it is going to be about Puerto Rico.

People are going to find out exactly how we got into this situation. They are going to find out what a mess it was, and they are going to find out how much it cost our economy. That is what is going to happen.

Instead, we could take the time here to have an open amendment process, offer some amendments, and try to get a legal process that is open, that is by the book, and is what we would provide to people in the United States--because Puerto Rico is part of the United States-- then we could let a bankruptcy court make these decisions instead of letting a few people make the decision.

I think my colleagues don't understand how much is at risk or how much the cost to the U.S. economy could be and certainly how big the debate is going to be that we still have to have in the Congress, in the House of Representatives, and in the Senate on this issue of how we are going to get Puerto Rico out of this mess.

But, if you think you are putting $72 billion on the backs of the Puerto Rican economy, it is not going to help us in our economy, and it is not going to help their economy. We need a more fair restructuring plan, one that gives us legal certainty, one that will not be challenged as unconstitutional, one that doesn't give gifts to creditors--something that is fair.

I know a lot of people think there is some magic date. I read that my House counterpart from the Natural Resources Committee said July 1 is not a magic date. He is the one who worked on this bill as it came through the House. He said there wasn't a magic date. So it is wrong that somehow people think there is a magic date and that is why we have to buy a policy when you can't even have an open discussion on amendments. It is very bad policy.

Instead, I would prefer us not to be some footnote in some movie in the future that everybody in America watches and tears their hair out over, saying: ``Well, how did that happen? Why did we lose all of that money?''

These are two important issues. They are important for Puerto Rico, and they are important for the United States of America.

I will say I know all our colleagues in the House and the White House are well intentioned. They want to get a resolution. But getting a resolution that might put us into further jeopardy is a challenge given how important it is to make sure that everybody is a part of the process. That is, everybody is part of the debt reorganization.

Is it your understanding that with the decision of just four board members, the board could force Puerto Rico into a position that none of the debt would go? Or they could avoid any of that debt becoming part of that reorganization?

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Ms. CANTWELL. Through the Chair, I would say to my colleague that I have heard your concerns on the floor, and I look at these problems. I know some colleagues say: I don't want bankruptcy. We want a process here. We don't want a bailout.

Well, by having a flawed bill that ends up in a legal process that declares it unconstitutional means that you are going to end up with a bailout, because we are going to be on the hook. What would be better is that we had all the debt in a reorganizing structure and had a fair process through a bankruptcy court for these issues to be decided.

Like you, I have a concern--on point No. 10 of this chart--about this appointee process because I think it is going to be challenged. People are even admitting that the Department of Justice says it is going to be challenged.

We don't want this process held up for 2 more years, 4 more years because somebody doesn't think the board has the authority to operate. Why not pass a bill where we are sure that they have the authority to operate? Why not do it the right way so we know the language is legal?

I think it is unbelievable that we would say to the people of Puerto Rico--where 45 percent of the population is in poverty--oh, and by the way, as to this control board, which is going to control everything you guys do, we are going to make you pay $370 million of that cost. Oh, but they could have gifts. I know people were in a hurry. They wanted to get a deal. They wanted to be respectful, but there are a lot of holes in this bill that deserve a debate and deserve an amendment process.

I ask my colleague if he is familiar with the fact that a $370 million cost would also be imposed on the people of Puerto Rico for something which they never had a say in. It is not as if they can even submit what they think the plan could be. They could, but the board doesn't have to consider it. They don't have to do anything. It is clearly given to this board of individuals. Those four people can come up with a debt process, they can come up with the requirements, and they can come up with a whole scheme.

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Ms. CANTWELL. Through the Chair, I thank my colleague from New Jersey for being on the floor.

When I think about the pressure being applied in the halls here, where one individual said, ``you can see the pressure running through the halls of the Capitol''--we don't see Puerto Ricans running through the halls of the Capitol. What we see are people who have been struggling with this issue and trying to get the best deal possible. But the best thing we could do for them is give them bankruptcy authority and a clear path that allows them to restructure their debt. That is all we have to do. Then everybody is in on restructuring the $72 billion of debt. They can then move on, and next January, we can have a realistic conversation in the Senate. Nothing precludes us from having it. What are we going to do about the 45 percent poverty rate? We will not have added another 10 percent to that. We will not have added to the unemployment rate, which is now higher than the 12 percent. We will still have very, very tough and thorny questions to deal with, but we can have a path for the $72 billion of debt to be successfully restructured with a plan that protects the interests of the U.S. taxpayers.

I certainly want to help the people of Puerto Rico, but I also know the views here are going to be varied on what that economic strategy is for Puerto Rico. Everybody is going to have an idea. But there should be 100 percent agreement that all the debt is on the table and that they should be given full bankruptcy authority to get a restructuring plan.

If our colleagues in the House think this is bankruptcy, well, then, they shouldn't be afraid of discussing a bill with us from the Senate that is bankruptcy. I don't understand the hesitation to get this right because getting it wrong will cost taxpayers here in the United States as well.

We want a successful program. We don't want constitutional challenges. We don't want this held up. We want a plan to move forward. The challenges are tough enough as it is. So I ask my colleague if he understands what the hurry is in passing this legislation without even allowing amendments or allowing floor debate.

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