Is Washington about to take over Puerto Rico?
The territory’s dire financial crisis took a step toward resolution last week when the House Natural Resources Committee released a draft plan to give the federal government an extraordinary new power: a five-member oversight board that could enact laws and regulations over the objections of Puerto Rico’s own elected officials.
Though such boards are used at times by states to rescue a troubled city, it’s an unusual move for Washington, and the financial firms that hold Puerto Rican bonds are spooked: the proposed board would also have authority to allow the island to restructure its $72 billion debt, which could cost the bondholders significant money.
In defense of the plan, supporters point to a successful example from two decades ago. In 1995, Congress imposed a control board on Washington, D.C., after it faced a budget crisis of its own. It took a few years to get the city back on its feet, but today the move is widely considered a success.
“It’s a great analogy,” said former Rep. Tom Davis (R-Va.) who chaired the House subcommittee with jurisdiction over D.C. until 2000. He added, “The city’s a miracle when you go back 20 years and look at what it was.”
But critics say that this analogy misses the mark, and that Puerto Rico and D.C. are different enough that the Puerto Rico move would be genuinely unprecedented—and risks undermining political support for the difficult policy decisions the island must make to reverse its economic crisis.
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