The Puerto Rico rescue plan is a "big win for limited government conservatives" despite being far from perfect, Forbes.com reported.
The House Natural Resources Committee last week backed a plan to help Puerto Rico escape crippling debt and expand the economy by a 29-10 vote and left intact most provisions endorsed by House Speaker Paul Ryan.
The bill, called the Puerto Rico Oversight, Management, and Economic Stability Act ("Promesa"), would empower a federal oversight board to negotiate with investors and decide what they would recover from the roughly $70 billion they lent the island.
Under the plan, investors may not sue Puerto Rico while the oversight board does its work, and all the island's creditors could face a loss despite recent lobbying from Wall Street interest groups.
Speaker Ryan and Nancy Pelosi, the top Democrat in the House, in separate statements touted bipartisan support for the bill. If that holds, lawmakers may guide the rescue past the Senate to President Barack Obama before $1.9 billion in Puerto Rico debt is due on July 1, Reuters
"It’s a basic principle of conservative tax reform to move from our outdated “worldwide” tax system to a “territorial” one. There is no better place to start than Puerto Rico," Forbes.com
Contributor Ryan Ellis reported.
The bill "has no taxpayer bailout of Puerto Rico–not a single dime of taxpayer money is sent down there. Rather, Puerto Rico will have to work their own way out of $72 billion in debt and defaults," Ellis explained.
"There’s no bankruptcy, either, despite this being a goal of the inept Puerto Rican government, Congressional Democrats and the White House (who famously called for “Super Chapter 9″)," he said.
"All that being said, Promesa is not perfect. It lacks the necessary pro-growth reforms needed for Puerto Rico to get out of its decade-long depression, reverse migration back to the island, attract capital, and create jobs. There is a small nod here with minimum wage relief, but that alone certainly won’t do the trick. A better idea would emulate bold tax initiatives like enterprise zones (which I have described in detail and which were once proposed for Puerto Rico by Paul Ryan) and other strong tax relief," Ellis said.
"The bill would be helped by the adoption of an amendment which will be offered at the Natural Resources markup by Congressman Tom MacArthur (R-N.J.) His amendment will express a sense of the Congress that there should be “permanent, pro-growth fiscal reforms which feature, among other elements, a free flow of capital between U.S possessions and the rest of the United States.”
MacArthur told Ellis: “it is vital that we help resolve Puerto Rico’s debt crisis, but the island will not enjoy enduring prosperity until we also include growth initiatives…we also have a unique opportunity to establish enterprise zones and apply other pro growth tax policies in Puerto Rico, which will allow this island paradise to become an economic miracle.”
Meanwhile, Puerto Rico's Governor, Alejandro Garcia Padilla praised the bill for elements to help address insolvency, protect essential services and grow the economy. However, he reiterated reservations about the broad power of the oversight board.
Among Republicans who voted on Wednesday, more than half endorsed the rescue plan but a vocal minority warned that it would hurt investor demand for municipal bonds and force issuers to offer higher yields.
"Taxpayers across the country will have to pay ... as markets adjust to this new world," warned Congressman Tom McClintock of California.
(Newsmax wires services contributed to this report).
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