April 21, 2016
Dear Members of Congress,
On behalf of Frontiers of Freedom, we write today to express opposition to the “Puerto Rico Oversight, Management and Stability Act” (PROMESA). Upon taking office, Conservatives in Congress made a promise to their constituents and the American people to end Washington cronyism by standing for the rule of law and the interests of the American taxpayer. A vote for the PROMESA does exactly the opposite.
The PROMESA bill is an unapologetic bailout of Puerto Rico’s government on the backs of average everyday American retirees, pensioners and investors across the Country, despite the fact that those bondholders played no role in the Commonwealth’s wanton disregard for the principles of sound governance. Further, the bill threatens to put American taxpayers broadly and directly on the hook for the mess in Puerto Rico.
Eighty percent of the bondholders holding Puerto Rican debt are individual savers who bought bonds directly, or through mutual and retirement funds. With PROMESA, Congress would retroactively change the rules in the middle of the game, barring these bondholders from their basic right to legal recourse if Puerto Rico defaults on their bonds, and enabling Puerto Rico to use their money to fund other obligations. As noted in a recent Washington Times editorial, doing this also pushes the costs to states, because it “would raise borrowing costs across the board for everyone who invests in the public finance sector.”
In spite of this, proponents of the bill have claimed that it is not a taxpayer bailout, because it does not send federal funds to “bailout” Puerto Rico. That is a hollow retort. In enacting PROMESA, lawmakers would retroactively discard the protections Puerto Rico’s Constitution affords to “full faith and credit” debt, which Congress has twice affirmed. Inflicting this financial harm retroactively on Puerto Rico’s senior bondholders would no doubt constitute a taking of private property by the federal government for public use, forcing taxpayers to compensate those bondholders as required by the Fifth Amendment.
This is not a solution to Puerto Rico’s debt crisis. It is a free pass to a Socialist government that resides right here in the United States, which continues to spend hundreds of millions on consultants in pursuit of a bailout even as it laments its inability to pay bondholders or fund essential services. PROMESA is a disservice to the Puerto Rican people, whose government will struggle to ever regain access to the market, and a willful and eager circumvention of the rule of law that jeopardizes the American taxpayer. By passing this legislation, Congress is announcing to the American people that, once again, the Washington fix is in.
Puerto Rico and the American people deserve a workable solution.. That can be accomplished by passing legislation which promotes private sector growth and demands that Puerto Rico both engage in constructive negotiations with its creditors and respect the laws under which it lent money to bondholders.
Thank you for your thoughtful consideration of this letter. I look forward to further correspondence as we work toward an equitable solution to the Puerto Rican debt.
Frontiers of Freedom