Donald Trump told CNN‘s Wolf Blitzer on Wednesday that Puerto Rico has “far, far too much debt” and that the U.S. government should not bail out the island.
The presumptive Republican nominee called himself “the king of debt” during the interview, referring to the fact that his long business career has included four bankruptcy filing by companies he owned. However, the billionaire real estate mogul made it clear that he had no interest in giving Puerto Rico a helping hand should he be elected president.
“I wouldn’t bail them out,” Trump told CNN in an interview. Trump had only one recommendation for the troubled island: cut spending.
The island of Puerto Rico is a small U.S. territory in the northeastern Caribbean currently experiencing a massive financial crisis. It has $70 billion in debt, a crushing amount for an island country with a population of under 3.5 million people. Puerto Rico’s economic recession continues to worsen as residents leave the island, deepening the financial crisis. This has put the 3,500-square-mile (9,100-square-kilometer) commonwealth in a tough spot; it owes an enormous amount of money, but due to a declining population, it can’t afford to pay and has slipped into default.
On Monday, May 2, the island failed to pay a debt payment to bondholders of nearly $40 million. The default was the largest in history by a commonwealth entity. Puerto Rico’s governor, Alejandro Garcia Padilla, says that there simply isn’t any money to pay back their creditors, and that Puerto Rico will not be able to pay its roughly $2 billion debt by the scheduled due date of the first of July.
Governor Garcia Padilla did not seem impressed with Donald Trump’s words, and told CNN that Trump has no idea what he’s talking about.
“Puerto Rico is not asking for…a bailout,” he told Maggie Lake on Thursday. “What we are telling creditors is that a deal has to be comprehensive and tackle the crisis. I don’t want to bring Puerto Rico back to the same problem in a couple of years.”
Governor Padilla stressed that he doesn’t want the United States to give them money to pay off the debt, but wants the laws changed so that the island can restructure the debt it has. Puerto Rico’s economy is in dire straits by all accounts, and has been in recession for the last decade. Residents have been leaving the island at a record pace to take up residence in the mainland United States. Currently, Puerto Rico is not legally able to declare bankruptcy or restructure its debts, and the crisis only seems to be getting worse, according to Bloomberg.
“The Planning Board, which calculates the island’s economic growth, released its fiscal 2017 forecast, estimating a 2 percent drop in gross national product for the fiscal year beginning July 1. The commonwealth agency revised its forecast for the fiscal year ending June 30 to a 1.2 percent drop. The earlier estimate was for a 1.3 percent decline.”
The report notes that the island’s economy has shrunk 16.5 percent since 2007, and commonwealth officials and institutions borrowed money to fill budget shortcomings as the population dwindled. Now, they owe $70 billion, and the massive exodus of residents shows no signs of slowing, as Bloomberg reports.
“A record number of residents left the island last year for work on the U.S. mainland. Another 240,000 Puerto Ricans are forecast to leave by 2025, according to the Planning Board. Its 11.7 percent jobless rate is higher than any state and double the national average.”
Vox criticized the way the U.S. government has been handling the crisis in one of its own territories, and had particularly harsh words for Congress.
“Under normal circumstances, a city or county or business in this situation would file for bankruptcy to reduce its debt burden, but the existing bankruptcy code doesn’t let Puerto Rico do this. The White House and many congressional Democrats have proposed creating a bankruptcy process for Puerto Rico, but Republicans — at the behest of distressed debt funds that bought up Puerto Rican bonds — have blocked it.”
The Obama Administration has been calling for Congress to change the law so that Puerto Rico can restructure its debts through Chapter 9 bankruptcy, similar to what the city of Detroit did in 2013 to negotiate with its creditors.
[Photo by Joe Raedle/Getty Images]