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Keeping An Island Afloat: Obama's Plan To Aid Puerto Rico


As soon as Puerto Rico's huge debt problem surfaced, a lot of people started calling it America's Greece or Greece in the Caribbean. Puerto Rico has $72 billion of debt. It's nearly out of cash. Today, the White House shared its plans for getting the U.S. territory out of this mess. It would allow Puerto Rico to restructure its debt through bankruptcy and set up a financial control board to oversee reform on the island. NPR's Greg Allen reports.

GREG ALLEN, BYLINE: Officials now say Puerto Rico will be unable to make debt payments by the end of next month. Senate Republican Lisa Murkowski is from Alaska, a state that, in her lifetime, used to be a territory. She believes Congress should help.


LISA MURKOWSKI: Puerto Rico's short-term liquidity crunch is real, and action is needed.

ALLEN: Murkowski heads the Senate Energy and Natural Resources Committee where the Obama administration today laid out its plan to help Puerto Rico. The island's financial problems are tied to a larger economic crisis. Over the last decade, Puerto Rico has lost a quarter-million jobs, and unemployment is twice the national average. The spiraling economy has sparked a huge outmigration. Eighty-four-thousand people left the island last year. Treasury official Antonio Weiss says once the money runs out in Puerto Rico, essential services may be cut, and the financial problems could become a humanitarian crisis.


ANTONIO WEISS: Without federal action, this crisis will escalate and result in further economic contraction, outmigration and suffering of American citizens in Puerto Rico.

ALLEN: The Obama administration wants Congress to pass a new type of bankruptcy that would be available only to Puerto Rico and other territories. The White House says a financial control board would be set up for Puerto Rico similar to one established for Washington, D.C., two decades ago. But even with that assurance, many Republicans are reluctant to amend the U.S. bankruptcy code. Here's Wyoming Republican senator John Barrasso.


JOHN BARRASSO: So what happens when a retiree in Wyoming goes to their mailbox, opens their financial statement only to find their investment has been negatively impacted because Congress changed the rules of the game after the fact. What do I tell them?

ALLEN: Another group opposed to changing the bankruptcy law includes hedge funds and other lenders who hold much of Puerto Rico's debt. Democratic senator Bernie Sanders taking time out from the campaign trail said given the scale of the human crisis in Puerto Rico, he has little sympathy for hedge funds and other lenders who knew they were making risky investments.


BERNIE SANDERS: The childhood poverty rate has shot up to 56 percent. That is a human tragedy, and in my view, Wall Street should not be believing that they can get blood from a stone.

ALLEN: Puerto Rico's governor, Alejandro Garcia Padilla, is endorsing the White House proposal. Along with a bankruptcy provision, it would increase Medicaid funding and extend the earned income tax credit to Puerto Rican residents. Garcia said his government can fix Puerto Rico's problems if Congress gives it the tools.


ALEJANDRO GARCIA PADILLA: We have never asked Congress for a bailout, and we are not seeking one today.

ALLEN: Senator Murkowski and other Republican leaders have said that before they take action, they want to see updated, audited financial statements from Puerto Rico. Murkowski also was frustrated the White House hasn't released estimates for how much its plan would cost. One estimate done by a private investment firm, Height Securities she said put the price tag at $5 billion.


MURKOWSKI: If, in fact, we are in this ballpark, you need to understand that it's going to take Congress a while to work through some of these proposals.

ALLEN: Time is running short. Puerto Rico's expected to run out of cash next month. Greg Allen, NPR News. Transcript provided by NPR, Copyright NPR.