News Release

Puerto Rico: * Debt Burden * Medicaid Crisis

On Tuesday night, President Donald Trump told Fox News that Puerto Rico owes “a lot of money to your friends on Wall Street and we’re going to have to wipe that out. You’re going to say goodbye to that, I don’t know if it’s Goldman Sachs, but whoever it is you can wave goodbye to that.”

On Wednesday, The Hill reported: “Mulvaney walks back Trump’s comments on wiping out Puerto Rico debt.

MARK WEISBROT, via Dan Beeton,  beeton at cepr.net
Weisbrot is Co-director of the Center for Economic and Policy Research in Washington, D.C. He wrote for BuzzFeed News on Saturday: “…if Puerto Rico is to have a future, it will need a whole new economic plan that allows it to recover. This would include, at a minimum, the cancellation of most of its debt, which is not going to be paid in any case. The austerity that has been imposed as a response to this debt burden needs to be replaced by a fiscal stimulus program, much of which could go toward reconstruction. …

“The hurricanes have hit at a time when Puerto Rico is facing an unprecedented economic crisis, having already suffered a lost decade without economic growth. Unemployment is at 11.7 percent, more than two-and-a-half times the level of the United States. The poverty rate is at 46 percent, and 58 percent for children — nearly three times the U.S. rate. In the past decade, about 10 percent of the population has left the island, and the pace of out-migration has doubled in recent years.

“Unfortunately, over the last year or so, the U.S. federal government has made this economic crisis much worse. The Obama administration — with input from Republican congressional leaders — appointed a fiscal oversight board that imposed a draconian austerity plan on Puerto Rico in response to the island’s default on its $74 billion dollar debt. The plan [PDF] proposed by this board was rejected by creditors who — amazingly — wanted to squeeze even more out of Puerto Rico. But regardless, the austerity condemns the island to a second lost decade and more.

“The coming decade will be shaped by cuts to health care and pensions, as well as the kind of deficient infrastructure spending that left Puerto Rico extraordinarily vulnerable to this hurricane. And all of this punishment — even if it ‘worked’ as planned — would only win creditors about $7.9 billion of the $74 billion they are owed. Hence the island’s government is now in court [PDF] with the creditors.”

LARA MERLING, also via Dan Beeton, beeton at cepr.net
Merling is a research assistant at CEPR and co-author of the new report, “More Trouble Ahead: Puerto Rico’s Impending Medicaid Crisis,” and the recent report, “Life After Debt in Puerto Rico: How Many More Lost Decades?” She said: “It’s essential to include full funding for Puerto Rico’s Medicaid program in any emergency aid supplemental for Puerto Rico. As the White House pushes for aid funding from Congress for Texas, Florida, the Virgin Islands, and Puerto Rico, it will be important to make sure that Medicaid funding is included.”