Biden calls for less Puerto Rico austerity

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Democratic presidential candidate Joe Biden said if elected he would reverse the Puerto Rico Oversight Board’s austerity policies.

On Tuesday he released a position paper on Puerto Rico and talked about the topic at a campaign rally in Florida.

Joe Biden
Democratic presidential candidate Joe Biden said Puerto Rico's debt should be audited and that some of it is illegal and thus void.

“Billions of dollars in debt may have been issued illegally in violation of Puerto Rico’s constitution and hence be invalid," Biden said. "An audit of Puerto Rico’s debt will enable Puerto Rico to plan for a fair and sustainable fiscal path forward.”

If elected, he said he would work to clarify the roles of the board and the local government and would work to protect pensioners in the debt restructuring.

Biden said he would make sure that Puerto Rico residents get equal Medicaid benefits to those who live in the 50 states. Currently Puerto Rican residents get only a fraction of what stateside residents get.

Biden said he would accelerate the release of Hurricane Maria aid to Puerto Rico residents.

“The most significant and easier to implement of the proposals is to provide equal treatment to Puerto Rico in social programs such as the Supplemental Security Income. The reason is that no negotiation with Congress is necessary. The Biden administration could simply withdraw from the appeals process underway and let stand the decision by the U.S. District Court that provided for such equal treatment," said Vicente Feliciano, president of Advantage Business Consulting.

Biden said he would start a fair and binding process for island residents to determine its political status. He said he would create a federal task force to make sure that the island has the resources and technical assistance that they need.

Some news outlets have quoted Mercedes Schlapp, leader in the Latinos for Trump group, criticizing Biden’s proposals. The El Nuevo Dia news website quoted her as saying, “Joe Biden contributed to the collapse of Puerto Rico’s economy and his plan does nothing to tackle the corruption that is choking the island. Biden’s failed policies sent Puerto Rico’s main industries to communist China and destroyed the local economy.”

The Bond Buyer contacted the Latinos for Trump group but didn’t get a response.

“Overall, I think what Biden is saying is a good thing,” said Jorge Irizarry, executive director of Bonistas del Patio, a group of local Puerto Rico bondholders. Puerto Ricans should be treated equally in the Medicaid benefits they receive, he said.

“The federal government has already allocated a huge amount of dollars [to Puerto Rico] but the dollars haven’t gotten to people on the ground…. My concern is the corruption of the Puerto Rico government in putting the money to use.”

The local government also wastes money, Irizarry said. For example, too much money at the University of Puerto Rico goes to support administration rather than to things that would help the students.

“The proposal touches on debt, but probably wouldn’t do much for existing or future bondholders one way or the other, besides perhaps further delaying final resolution," said Matt Fabian, partner at Municipal Market Analytics.

“The bigger potential is for resolution of Puerto Rico’s status; the hypothetical combination of a Democratic President, Democratic Congress, and an end to the Senate filibuster could be the right combo to either admit Puerto Rico as a state or allow the island more independence within the next Congress,” Fabian continued. “There hasn’t been a real chance of status change in decades, but things could be different next year.”

Puerto Rico commentator Cate Long said, “I think it is imperative that all presidential candidates make an effort to assist Puerto Rico to achieve economic recovery. There is no ‘austerity’ in Puerto Rico as the Financial Oversight and Management Board [for Puerto Rico] has increased General Fund spending significantly in an effort to hide the island's ability to repay their debt.

“Notably a president cannot change debt restructuring without Congress amending Puerto Rico Oversight Management and Economic Stability Act and so far Congress has shown no interest,” Long said. “This is unlikely to change unless Democrats take full control of Congress and the White House, which probably won’t happen.”

Julio López Varona, co-director at the Center for Popular Democracy Action, said “Puerto Rican communities and their diaspora are encourage to see their longtime demands to reject austerity and protect basic services, like education and the healthcare system, reflected in Biden’s plan for Puerto Rico, but it’s not a perfect vision.

“Unfortunately, the plan continues to see PROMESA as the solution to Puerto Rico’s long-term financial crisis. PROMESA and the unelected and unaccountable Financial Oversight and Management Board have failed at creating a sustainable plan for economic recovery and fiscal health. Maintaining them would perpetuate many of the structures that led to this crisis and allow for this system of fiscal and colonial oppression to continue.”

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