Paul Ryan has a tough job with the Puerto Rico oversight bill

 To recap, the Puerto Rico Oversight Act as it currently stands will:

1. Give Puerto Rico a six-month stay on all debt payments;
2. Require the Governor to create 5-year fiscal plans and submit them to an appointed Oversight Board for approval;
3. Require the Legislature to submit all passed budgets to the Oversight Board for approval;
4. Allow the Board to unilaterally cut budgets if the Governor submits a budget that does not comply with the fiscal plan;
5. Allow the Board to negotiate with creditors to restructure debts (which usually means reducing them in net-present value terms);
6. Allow the Board to suspend certain federal labor regulations on the island, including the federal minimum wage;
7. Grant bankruptcy protection to Puerto Rico (without using the term) and give the Oversight Board the ability to intervene in litigation against the island.

Without (1) and (7) the island goes to pieces right quick. You can see a (rather misleading) summary of what Republican supporters say the bill will do here.

My worry about the Oversight Board is not that it will cut budgets more drastically than an elected Puerto Rican government. The examples of Portugal, Spain, and Greece are pretty clear: when they cannot borrow anymore, elected officials do a fine job of imposing austerity. Maybe too fine a job. Rather, I worry that they won’t negotiate as hard as the government would. On the other hand, as Felix Salmon points out, the Board will consist of seasoned professionals who may be able to drive a harder bargain than Puerto Rican officials. So it is a bit of a wash.

But ... weirdly ... Republicans kept trying to neuter the bill in committee! (The link takes you to a blow-by-blow of the action.)

Consider the McClintock amendment. (Rep. McClintock, R-California, has in fact offered several amendments.) It would clarify that the bill would not apply to Puerto Rico debt obligations that are supported by a pledge of “full faith, credit and taxing power,” meaning, like, all of them. It would also clarify that nothing in the bill would alter debt holder rights or guarantees under Puerto Rico’s constitution or other laws. Which would, in effect, nullify bankruptcy protection by insuring that creditors could sue under Article 6, Section 8, of the Puerto Rican constitution.

Pretty blatant. Rejected 12 to 27. 12 Republicans in support, 16 Democrats opposed, 11 Republicans opposed.

Which Republicans opposed the amendment? Well, there was the committee chair, Rob Bishop (R-Utah). Good for Rob! The other Republicans that opposed it consisted of a collection of retirees on their way out (so under no political pressure), Raúl Labrador (R-Idaho, but born in Puerto Rico), Amata Radewagen (R-American Samoa), and a handful of others.

For most of the markup the Chairperson Bishop has been able to beat back amendments with points of order, but the more senior Republicans (including McClintock, obviously) lined up behind these poison pill amendments. The final vote was 29 to 10 and basically split the Republicans.

You gotta wonder what it will look like on the floor. If Paul Ryan lets it move without the majority of the caucus behind it, then he will have earned my respect. Sure, I may be a little disgusted at his resorts to magic asterisks to justify his silly budgets, that cut social insurance not because we have to but because he wants to ... but hey, reasonable people can disagree. If he gets this bill through and refrains from helping the Drumpfster this year, well, then the man will deserve to be the GOP nominee in 2020. Honorable opposition indeed!

Good luck with that, Paul.

Comments

[shah8]

1) Seasoned professionals will have to be filtered by same Republicans that are trying to sabotage the bill now.

2) Countries with no leverage gets disordered austerity and long term slow or declining growth. Greece, Portugal, are good examples of that. In contrast, Spain is too big and too central for austerity-without-regard. Argentina too big and self sufficient. Saying that elected governments are *too good* is not the right perspective if you use Greece. Perhaps Jamaica.

3) The real danger is not that "professionals" or professionals are too creditor friendly, but that they may have no experience in, or regard for, local island political economy (and real economy). The Flint situation, for example, flowed out of the consequences of the Detroit EM regime, and the use of its water services to get other municipalities to financially bolster Detroit's bottom line. The EM for Flint behaved in a way meant to avoid subsidizing Detroit and used his position to override local experience and concerns, even though it's just a matter of paying Detroit until the new pipeline system was built. And all of this was lathered with a contempt for black people and poor whites that the EM system made easier to manifest.

With as many moving parts as this program has (I mean, can you imagine the probable fights over just who is appointed to the oversight board? The bill has a whole bunch of people who can nominate!), there are too many centers of power here, and there are too many ways to abuse this sort of setup. And as I scan through the bill, I find this pretty sketchy. For example, it seems that the Board determines what it means to be a "compliant budget". What is that, exactly? Think the sort of games the Republicans play with the US Post Office, tho' with the support of upper leadership in this case. And so on...

Again, what Puerto Rico needs is the creation of stakeholders. And that means clarity in who wins and who loses as fast as humanly possible.

[Will Baird]

http://www.theatlantic.com/politics/archive/2016/06/puerto-rico-guam-supreme-court-status/486887/

[Noel Maurer]

That decision was expected. http://www.supremecourt.gov/opinions/15pdf/15-233_i42j.pdf

To be honest, it's almost certainly the right call. Sotomayor and Ginsberg really had stretch the law in their dissent. (Not to mention Article 1, Section 8 of the Constitution.)

Moreover, the claims of "colonialism" are overstated. The decision isn't based in the insular cases. If the United States still had incorporated territories, it would apply to them, too. And it does apply to the District of Columbia.

This wasn't the best call for the residents of Puerto Rico, but it was the right legal call.

[Noel Maurer]

The Puerto Rico Oversight bill, by the way, got out of the House in decent shape on a vote of 297 to 127, with 139 Republicans and 158 Democrats. So it made it past the Hastert Rule (only 103 Republicans opposed it) but required Democratic votes to pass.

So props to Paul Ryan, where it's deserved.

[Noel Maurer]

But my post did end by stating that Speaker Ryan would also have to avoid helping Fat Crybaby. That, sadly, he has not yet done.

[J.H.]

Well of course that decision was expected. I couldn't see how it could play out any other way legally. To do so would require some amazing legal gymnastics by the Supreme Court.

However, those who subscribe to the theory that Puerto Rico is in fact completely self-governing and in some kind of compact with Congress and hasn't been subject to Congressional authority since 1952 have now had a dash of cold water thrown in their faces.

It will be interesting if this pushes the status debate in Puerto Rico away from support for the status quo as some kind of "best of everything" and towards considering the real options: statehood, territorial status (with autonomy granted by Congress) and independence (either as state in free association - which is what most closely resembles the status that those who think the 1952 constitution actually granted - or as a completely independent state like the Philippines).

[Noel Maurer]

There is an peculiar court decision from 2008 that argued that Puerto Rico had effectively become an incorporated territory. Consejo de Salud Playa de Ponce V. Rullan concluded, "Actions speak louder than words. Although Congress has never enacted any affirmative language such as "Puerto Rico is hereby an incorporated territory," its sequence of legislative actions from 1900 to present has in fact incorporated the territory."

The problem is that, well, other courts haven't picked up on the reasoning.

But it gets thorny. Consider first that the Seventh Amendment still doesn't apply to Puerto Rico. But does the 7th apply to any state? In 1877, in Pearson v Yewdall, the Supreme Court held that the 14th Amendment does not impose the 7th upon the states. (I spelled that "Udall" the first time out!) Meanwhile, in 2016's Puerto Rico v. Sanchez Valle, SCOTUS ruled only that Puerto Rico was indeed a territory. Nothing about incorporated or unincorporated in there; the logic would have been the same for Alaska before 1959.

So what does unincorporated status mean? Puerto Rico is indeed treated differently in terms of federal funding -- a big part of the recent crisis is in fact due to Congress's decision to fund Medicaid at a far lower rate on the island. But is that because Puerto Rico is unincorporated? No: Alaska was similarly shortchanged for federal highway money before statehood.

That leaves the income tax exemption. (Alaskans paid income taxes before statehood; the District of Alaska was incorporated in 1912, around the time of the 16th Amendment.) It seems fair that Puerto Ricans don't pay those taxes on the basis of "no taxation without representation," but the courts haven't held that. Rather, they don't pay because of 48 U.S. Code § 734. In other words, Congress exempted the island in 1917. Could it have done that with an incorporated territory? I have no idea and I would love to have a lawyer weigh in ... but I suspect that the answer is unknown. I do not see why Congress couldn't suspend the internal revenue laws in an incorporated territory if it so chose and I suspect that SCOTUS would give such action a thumbs-up. (After all, nobody doubted the constitutionality of the Empowerment Zones.)

To conclude, I am honestly not sure that Puerto Rico's "unincorporated" status amounts to anything. I suspect that it doesn't. If that's correct, J.H., then your second option amounts to the status quo.

[J.H.]

Interesting stuff Noel!

That 2008 case is indeed interesting, but I'm not sure if the other courts would even want to touch it because the reasoning amounts to calling Puerto Rico a de facto incorporated territory whereas courts often rely on the de jure situations.

In fact in Puerto Rico's Future: A Time to Decide
by Dick Thornburgh, the author notes that in the past the United States did in essence provide for de jure incorporation according to the Supreme Court's reasoning in 1899-1905. As noted there, according the Supreme Court, Alaska was always an incorporated territory (note the small "t") since being annexed in 1867 (not just in 1912 - in 1912 Congress organised it as a Territory (note the large "T") but it was an incorporated land from before that). The reason being? The treaty of cession with Russia in 1867 established that the residents of the territory (note the small "t" again) were to "be admitted to the enjoyment of all the rights, advantage, and immunities of citizens of the United States".

Similarly the Supreme Court ruled that Hawaii was incorporated by virtue of the Organic Act of 1900 which explicitly stated in Section 5 "That the Constitution, and, except as herein otherwise provided, all laws of the United States which are not locally inapplicable, shall have the same force and effect within the Territory as elsewhere in the United States...". So as the Supreme Court noted, the Constitution was formally and fully extended to the Hawaiian Islands (the exceptions provided for were for certain laws, not parts of the Constitution).

So in essence the Supreme Court reasoning of 1899-1905 seemed to rely on the distinction between incorporated and unincorporated territories as being:

(i) The application (or not) of the full effect of the Constitution onto a territory

(ii) the related aspect of the residents being granted Constitutionally derived citizenship versus citizenship by statute.

Congress seemed to have applied the Constitution in full to both Alaska and Hawaii by the treaty of cession and organic act respectively, but I don't think they have ever done so with any of the other territories. Notwithstanding the incremental incorporation of Puerto Rico as suggested by that 2008 judgment it could probably be reasonably argued that Congress has still not fully incorporated Puerto Rico, unlike Hawaii and Alaska.

And since the full constitution doesn't apply to any of the current territories except Palmyra Atoll (a leftover from the incorporated Hawaii Territory) then what I was getting at over at this other thread (http://noelmaurer.typepad.com/aab/2007/08/the-never-endin.html) might in fact be true: American citizenship is not a fundamental right (the case involving American Samoa seems to confirm this - and if it were it has major implications on the citizenship status of millions of people in the Philippines), but rather American nationality is a fundamental right for any person born on US territory. American citizenship seems to be a constitutional right, but only where the full constitution (including the Fourteenth Amendment) is applicable.

The solution of course is simple - just copy and past Section 5 of the Organic Act for Hawaii into an amended Organic Act for Puerto Rico and presto! Puerto Rico becomes a de jure incorporated territory.

In conclusion I think that Puerto Rico's unincorporated status does amount to something since it means in essence that it might be legally possible for Puerto Rico's residents to all be stripped of the US citizenship and US nationality (clearly Congress can strip the nationality of Americans as they did with the Filipinos in 1935 ahead of independence) if Puerto Rico were to vote in favour of independence (either in true free association or not). In the long run this might be a good thing if it gets the status debate moving away from the myths of the current status quo (that you can get an "enhanced Commonwealth" and still remain a part of the United States or that the Commonwealth of Puerto Rico currently isn't an actual Territory of the US for which Congress has final and absolute authority, notwithstanding the Commonwealth Constitution of the island) and towards the realities. And the realities would seem to suggest that in the long run the people will become more inclined to vote for statehood since:

(a) lobbying for Congress to do a copy and paste of Section 5 of the Hawaiian Islands Organic Act of 1900 is pointless - Congress would still have full legislative control as happened with the Puerto Rico Oversight Act. The only difference is that the full constitution applies.

(b) The US government might well be unwilling to enter into a Compact of Free Association with a former territory of over 3 million people when all of those people would gain the right to move freely to the United States to live and work (though they would not have the status of US permanent residents). This could see a surge in migration from the island to the mainland as some residents would anticipate an end to the Compact and its free movement provisions and thus wish to protect themselves from this by moving to the US as early as possible and starting their families there so that their children would have US citizenship.

......thus leaving statehood as the ultimately safest (or least worse) option.

And yes, the second option I referred to was in reference to the status quo (which is what Puerto Rico is currently - a simple Territory, but with a very advanced Constitution terming the Territory as a Commonwealth and a convention by US Congress to get feedback from Puerto Ricans before altering things - but as the Puerto Rico Oversight Act shows; convention is not the same as a legal guarantee).