Tuesday, April 19, 2016

Puerto Rico is broke, but cannot declare bankruptcy

Puerto Rico is a US territory, acquired from the Spanish American War of 1898.  It's still a territory because several referendums on state hood were voted down over the years.  As a territory, Puerto Ricans are US citizens and can leave the island and settle on the mainland anytime and anywhere they wish.  Puerto Rico doesn't have to pay federal income tax, but they don't get representation in Congress. 
   Over the years, the government of Puerto Rico has be spending more than they take in from taxes.  They have been covering the shortfall by borrowing, largely from New York banks.  The money has run out, and Puerto Rico can't make payments due this year.  There just isn't any money in the treasury. 
   And, thru some lawyer's technicality Puerto Rico cannot declare bankruptcy.  Apparently when they wrote the US bankruptcy code they forgot to make any provisions for territories, as opposed to states, cities, corporations and individuals.  Puerto Rico has been agitating to get that fixed.
   I'm not so sure.  Let things work themselves out.  The foolish lenders who offered loans to cover operating expenses to a  government that would never be able to repay, ought to loose their money.  Maybe a good stiff loss will teach bonehead banks a lesson. 
   And then Puerto Rico will have to figure out how to live within their means.  They won't be able to borrow, so they will have to cut spending and hike taxes and collect the taxes on the books.  All of these are good things.  I hear that half the population of Puerto Rico is drawing some kind of salary from the government.  Which is ridiculous. 
  And I sure don't want to spend my tax money bailing them out. 

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