Puerto Rico is Sinking in Debt and GOP Mistakenly Offers a Life Vest

The ink is not yet dry on Speaker Paul Ryan's (R-Wis.) capitulation to President Barack Obama on the omnibus spending bill and he seems prepared to hand the big spenders another major, and perhaps, a more dangerous victory.

Lobbyists on Capitol Hill are pressing the GOP Congress to allow Puerto Rico to declare bankruptcy, allowing them to get out of their $72 billion financial debt obligations from decades of liberal spending programs and anti-business regulations. The same interests that pushed through the massive Wall Street bailout, also known as TARP, are paying lobbyists to make sure that Wall Street investors are not held responsible for bad investments – yet again.

[sharequote align="center"]A liberal dream come true: Spend and spend some more; never have to worry about paying it back.[/sharequote]

Kevin Williamson writes at National Review Online that politicians are “looking to help Puerto Rico avoid a default on its bonds, partly because it wants to protect the bondholders, which include the usual assortment of Wall Street jerks (one in five U.S. bond funds is invested in Puerto Rican debt) and institutions with a high appetite for risk. Puerto Rico has something like an island-wide commitment to screwing its creditors, for instance by commandeering funds earmarked for future debt payments for other purposes. Puerto Rico intends to steal money intended to pay bondholders and use it to continue paying its bloated and underfunded pensions. Republicans, incredibly, intend to help ease Puerto Rico’s way toward doing that.”

Of course socialist Sen. Bernie Sanders (I-Vt.) is demanding that all debt incurred by the island be "set aside."

Remarkability, Speaker Ryan appears ready to agree with Sanders and allow Puerto Rico to escape financial obligations without any major requirements for free market reform so desperately needed on the island territory. Allowing Puerto Rico to wash its hands of its debts without requiring critical structural reforms will become a blueprint for states like Illinois, who want to continue to spend without repercussion or responsibility, to do the same. In fact, government workers even get 30-days off a year and in anticipation of a bailout from Congress, received Christmas bonuses this year costing another $120 million.

People ride atop a vehicle waving a Puerto Rican flag during elections in San Juan, Puerto Rico, Tuesday, Nov. 6, 2012. (Photo: AP)

If liberal New York Times columnist and economist Paul Krugman were correct that big government spending is a formula for prosperity, Puerto Rico's streets would be paved in gold.

Social Security disability payments show that in 2010, nine of the top 10 zip codes for people receiving disability checks are on the island nation. Peter Schiff has noted that the 2013 median income in Puerto Rico was just over half that of the poorest state in America (Mississippi) but welfare benefits are very similar. That shows it is easier to get on welfare than to get a job and fewer than half of working age males are employed. Incredibility, 45 percent of the island's population lived below the federal poverty line. Puerto Rican residents can make $600 more per month by receiving means-tested programs than they can by working a minimum wage job.

To be fair, some of the economic shackles under which the island must navigate come from our own Congress. Congress made the island subject the American minimum wage laws thanks to the same liberals who now want to bail them out. Congress offered many federal welfare benefits that ensure people stay on the dole rather than on payroll. Congress even eliminated some of the tax breaks that make the island an investment haven.

Rather than a package of regulatory and tax reforms, Congress is prepared to leave the bad economic policies in place while allowing the island to escape the burdens of its big spending policies. It's a liberal dream come true. Spend, spend and spend some more and never have to worry about paying it back. Without the pressure of reform, there will be no reform.

There is much Congress can do to help the island back on its feet. It can eliminate the federal minimum wage; enact a Right to Work law; restore tax incentives to invest and help the Puerto Rico become an American version of Taiwan. Allowing them to declare bankruptcy will only ensure they will, in the future, be back begging for more taxpayer money and federal support. It's time for tough love and a reminder.

Congress also needs to remember that bailouts, and a special bankruptcy protection, is bad politics. Tea Party voters are not going to look kindly on Republicans acting like Democrat-lite politicians and engaging in socialist economic policies. This is a big mistake and Ryan needs to take a deep breath before he pushes through another bailout of Wall Street.

The former governor of Puerto Rico Luis Fortuno recently said, "bottom line, you can never tax yourself out of a hole." Truth is, you can't spend your way out of one either.

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