[Congressional Record (Bound Edition), Volume 162 (2016), Part 6]
[House]
[Pages 8370-8371]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          BREAKING THE PROMISE

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
California (Mr. McClintock) for 5 minutes.
  Mr. McCLINTOCK. Mr. Speaker, the House is expected to take up the 
PROMESA bill today regarding the Puerto Rican debt crisis. This bill 
has serious implications to every taxpayer in the country.
  PROMESA applies a form of chapter 9 bankruptcy to the general 
obligation bonds of Puerto Rico that are guaranteed by the 
Commonwealth's constitution.
  Article VI, section 8 of Puerto Rico's constitution explicitly 
provides that ``interest on the public debt and amortization thereof 
shall first be paid.''
  Well, this bill ignores the Puerto Rican constitution and breaks that 
promise, and here is why this is so important to the rest of the 
country:
  Every State government has similar constitutional provisions that 
guarantee its general obligation bonds. This is what allows States to 
borrow at extremely low interest rates: because their debt is 
constitutionally guaranteed and, therefore, the risk of default is 
extremely low.
  If Congress is willing to undermine a territory's constitutionally 
guaranteed bonds today, there is every reason to believe it would be 
willing to undermine a State's guarantee tomorrow. This, in turn, 
invites credit markets to question such guarantees as being no longer 
secured on constitutional bedrock but, rather, dependent upon the 
shifting whims of Congress. This, in turn, means the value of these 
bonds is

[[Page 8371]]

devalued, and interest rates paid by taxpayers on that debt will 
increase.
  The Governors of six States have already raised this warning, and the 
U.S. Virgin Islands, whose credit is directly undermined by PROMESA, 
wants out of the bill for the same reason.
  Now, PROMESA could have respected the $18 billion of constitutionally 
guaranteed debt and focused instead on restructuring the $54 billion of 
Puerto Rican municipal debt that is not constitutionally guaranteed. 
After all, there is no reason to treat San Juan's municipal debt any 
differently than San Jose's. But constitutionally issued debt is 
fundamentally different, and its reliability must be maintained. 
Tellingly, supporters of this bill voted down just such an amendment in 
committee.
  Supporters have said they have addressed this concern by inserting 
instructions to the control board to ``respect the relative lawful 
priorities in the constitution, other laws or agreements.'' But 
ironically, one of those ``other laws'' the control board is instructed 
to respect is the government's repudiation of that debt.
  Furthermore, the same section instructs the control board to provide 
``adequate funding for public pension systems'' and includes other 
contradictory instructions. The only possible interpretation of these 
provisions is that the sanctity of the sovereign debt is subject to 
balancing and, therefore, subordination to junior claims by the control 
board.
  Just last week, Treasury Secretary Jack Lew and the White House 
admitted that this was both the intent and effect of the bill.
  Meanwhile, another provision of PROMESA prevents lawful bondholders 
from enforcing their claims in court for a period of 6 months but 
doesn't prevent the government from paying out junior claims during 
this period. Indeed, in anticipation of this bill, the new budget for 
Puerto Rico increases general fund spending, while it radically reduces 
its debt service payments.
  Honoring the rule of law and maintaining the Commonwealth's full 
faith and credit guarantee would be a powerful signal to bond markets 
that the United States stands by its promises, even when it is 
inconvenient.
  Under current law, it is in the interest of both sides, debtor and 
creditor, to work out terms that both can live with to restructure and 
repay this debt. Indeed, until the prospect of a congressional rescue 
arose, Puerto Rico was negotiating terms of a debt restructuring with 
the mutual consent of its creditors.
  It is also in the interest of the people of Puerto Rico to uphold the 
full faith and credit clause of their constitution, which will be 
vitally important for them to reenter the credit market once their 
affairs are put back in order.
  Puerto Rico faces both crisis and opportunity: a crisis born of 
slavish devotion to failed leftist economic policies, and an 
opportunity to replace those policies with proven free market solutions 
that can create a fresh start for the people of Puerto Rico and shine 
as a beacon of hope for other similarly afflicted States.
  I fear the net result of this legislation will be to spread the 
crisis to other States with heavy debts by increasing their debt 
service costs.

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