Nestled in the $36.5 billion disaster relief package the House of Representatives approved Thursday is $5 billion specifically for Puerto Rico to maintain basic government function after being devastated by two hurricanes, as economic activity on the island has come to a near standstill, and tax revenue collection is close to nonexistent.
That the aid has come in the form of a loan rather than a grant has been galling to defenders of Puerto Rico. But House Republicans argue it would be unfair to just “bail out” the island, including House Freedom Caucus Chair Mark Meadows, who said that a grant to Puerto Rico would be unfair to states that have been “fiscally responsible.”
“It’s somebody’s money,” Meadows told The Intercept after a House vote on the aid package this week. “It’s different if you could just print money, and it didn’t come out of my pocket or your pocket. It comes out of the American taxpayer’s pocket … For them to suggest that it’s fair, for someone in another state to put forth money that is not just directed at relief, to bail out a government, whether it be Puerto Rico or Illinois or some other state, is not fair for a state that’s been fiscally responsible and with their taxpayers, versus one that hasn’t.”
Setting aside how appropriate the metaphor of a bailout is when Puerto Rico is still literally bailing itself out from catastrophic flooding, comparing Puerto Rico to a state has its own level of unfairness to it.
Puerto Rico is not a state, even though it is controlled by the United States and its residents are American citizens. The island’s financial troubles — the ones Meadows and others in Congress use to make the case for holding back aid — stem from an act of Congress itself. In 1996, Congress began phasing out Section 936, a tax break that lured manufacturers to the island. With no clout in Congress, Puerto Rican politicians were powerless to protect it. And, indeed, some on the island hoped that phasing out the tax break would bring the island closer to statehood.
That hasn’t happened, but the predicted financial devastation did arrive, leading to surging unemployment, stagnation, and the fiscal crisis the island faced ahead of the storms.
Puerto Rico Gov. Ricardo Rosselló originally requested over $4 billion in a letter to congressional leaders over the weekend, saying that in addition to its “immediate humanitarian crisis,” the island is “on the brink of a massive liquidity crisis that will intensify in the immediate future.”
When asked why Puerto Ricans should have to repay part of their disaster relief funding, Meadows responded that a grant would never get paid back, and though it’s likely a loan won’t get paid back either, a loan is what’s appropriate for a government already overburdened with debt.
“A grant would just be money that would never get repaid,” Meadows said. “I don’t know that a loan will get repaid based on their financial conditions … and so that should be a loan because you’ve got a government that’s overburdened with debt already and so it was a temporary relief measure to make sure that they can make payroll for their government employees.”
Republicans recognize that Puerto Rico isn’t in a position to pay back debt but maintain that it’s the island’s responsibility to handle their debt. “We need to make sure Puerto Rico can stand on its own two feet,” House Speaker Paul Ryan told reporters.
“When you get yourself in debt, you’ve got to find yourself a way to get out of it,” Republican Rep. Don Bacon, R-Neb., said. “But hurricane relief is a different story. We owe them help. … I think there’s a lot more good in this bill than bad. Having said that, I share some concerns when someone gets themselves in debt, I don’t like putting that debt on someone else, so I think there’s some legitimate concerns there.”
Democratic Rep. Ruben Gallego of Arizona called the loan “ridiculous,” saying that the opportunity should be used to “give them the full relief,” but still doesn’t consider funding to be the biggest issue at hand.
“More importantly, I’m glad that we’re getting money back to Puerto Rico, but the bigger issue of Puerto Rico is the current mess that FEMA and the Department of Defense have done to the island by not being quickly responsive,” Gallego said. “That has nothing to do with funding or the aid bill, that has to do with them being bad managers.”
Hurricane Maria destroyed the island’s infrastructure, including its electrical and telecommunications systems, which has led to damage assessments in the range of $95 billion, Rosselló said. Only 17 percent of electricity has been restored, and as of Friday, about 63 percent of residents have access to drinking water, according to status.pr, a site the Puerto Rican government created to provide recovery updates. Few businesses have reopened and the ones that have are only operating at minimal levels. Without the loan, Puerto Rico could run out of money as early as this month.
The relief bill also includes $18.67 billion for the Federal Emergency Management Agency disaster relief fund, which will be shared by Florida, Texas, Puerto Rico, and the U.S. Virgin Islands, however FEMA deems appropriate. But the bill does include a single grant for Puerto Rico: $1.27 billion for “disaster nutrition assistance.”
Meanwhile, Resident Commissioner Jenniffer González-Colón, Puerto Rico’s sole representative in Congress, didn’t get to vote on a disaster relief bill affecting her constituents.
As for the overall debt, in order to really help Puerto Rico out, Gallego said, “We should allow them to restructure their debt like anybody else and be able to get out of the situation they’re in, like any other state or municipality does it.”
And if the federal judge currently overseeing the case agrees to entirely write down Puerto Rico’s debt, Gallego says: “Fine with me.”
President Donald Trump initially suggested last week that Puerto Rico’s overall debt should be wiped out completely, and Steny Hoyer, the second-ranking Democrat in the House, said he agrees.
“And what the president said, is that we need to make sure Puerto Rico is on a fiscally stable path,” Hoyer told reporters on Tuesday. “I agree with that, I don’t know exactly what he meant by that, but I agree with that, so that’s what we’ll try to do.”