The government of Puerto Rico put forward an official plan on Wednesday to tackle its looming $72 billion debt crisis. In exchange for demanding some concessions from the island’s hedge fund creditors, the government is promising to pay workers less than the minimum wage, slash retirement benefits, limit collective bargaining, cut funding to universities, and shut down more K-12 schools.
In a speech Wednesday, Puerto Rico’s Governor García Padilla said the hedge funds and other creditors had a moral obligation to meet them halfway, otherwise the island will run out of money next summer.
“That path…will result in years of litigation and defaults and a major humanitarian crisis,” he said. “It will force us to choose between paying a creditor, a teacher, a policeman or a nurse.”
The Working Group that created the plan, whose members spoke to reporters on a conference call Tuesday night, said this trade-off “equitably allocates the pain.”
But this Friday, labor unions and other activist groups on the island plan to march in protest of the plan. “The rich should pay for this crisis!” the Socialist Front posted Wednesday in its announcement of the march. “Come out and defend your rights.” Other organizations like Todos Somos Pueblo have been meeting in local churches, denouncing the proposal for targeting “the most marginalized sectors of the country” through cuts to social services and tax hikes.
In laying out the new plan, the Working Group members acknowledged that the Puerto Rican people have already endured more than a decade of austerity, including policies that disproportionately burden the island’s low-income residents. Over the last few years alone, the government has hiked the sales tax to be the highest in the U.S. They have raised tuition at public universities, raised the cost of water and electricity, twice upped the tax on gasoline, and lifted the retirement age. Now, the Working Group is proposing, among other measures, that the government waive minimum wage laws for workers 25 years old and younger, saying on the conference call: “A job is better than no job.”
Puerto Rican journalist and commentator Julio Ricardo Varela told ThinkProgress that that attitude reflects the “ivory tower” Puerto Rico’s political class and their outside advisers live in, and their “disconnect” from the lives of struggling islanders.
“Who really gets hurt in all this are poor, non-white Puerto Ricans who don’t have access to education,” said Varela, the Digital Media Director of the NPR show LatinoUSA and founder of the blog Latino Rebels. He added that it’s telling that this call for lower wages comes at a time when conservative and liberal states across the mainland U.S. have raised their wages in order to benefit workers and the overall economy.
“It proves that Puerto Rico is the financial experimental lab of the U.S.,” he said. “Going below the minimum wage, cutting pensions — those are policies that they don’t have the political appetite for on the mainland, but they are tested and implemented on the island. Can you imagine if they tried it in New York?”
Another of the most controversial aspects of the plan is the creation of an independent financial control board that would force Puerto Rico’s government to adhere to the plan in the future.
In a conference call with reporters Tuesday night, members of the governor’s working group explained the members of this board would be chosen by “interested parties” including the hedge fund creditors, and it would have power over the democratically-elected local government. This is an idea that the billionaire Koch brothers and the groups they fund have been lobbying for, but Varela told ThinkProgress many on the island see it as “an attack on our sovereignty and identity.”
“It’s the colonized agreeing the colonizers should come back,” he said. “There are many who say, ‘Here’s the latest example of American neo-imperialism.’ But there are others who think it’s a good idea because the political class on the island has completely failed its people. They’re saying, ‘Our own government has proven they can’t fix it, so bring in the Americans.’”
A rare point that the Puerto Rican government, activists, and many in the growing Puerto Rican diaspora agree on is that the federal Congress has to intervene. The plan calls on lawmakers in Washington to pass a bill giving the island the right to declare bankruptcy in order to restructure its debt, and to give the island the same Medicaid funding as mainland states.
“The U.S. government has a moral obligation to its own citizens, because we are citizens, to come in and help,” Varela said. “But they basically are saying we’re on our own. It’s really upsetting and frustrating to see the lack of federal leadership. Puerto Rico helped deliver a Florida victory to President Obama in 2012, and now the White House is standoffish and not active. So I think Puerto Ricans on the mainland, who actually have representation, are going to their representatives in Congress and saying, ‘Look, you need to help my island.’ I predict you’re going to start seeing a more vocal, organized PR diaspora speaking out about this issue.”