Can Promesa Meet the Hastert Rule?
When U.S. Rep. Rob Bishop (R-Utah) circulates draft legislation with changes made to the Puerto Rico Oversight Management & Economic Stability Act (Promesa) this week, Gov. Alejandro García Padilla’s administration will be lighting candles in hopes that the amendments are palatable enough to see the bill make its way to markup in committee.
We should throw in a little prayer too—sources on Capitol Hill told Caribbean Business that presentation for markup will be ever more difficult because House Speaker Paul Ryan is using the Hastert Rule as a litmus test.
This unofficial guideline mandates that the House Speaker pass legislation with a majority of the Republican majority once the bill makes it to the floor—a political strategy followed religiously by former House Speaker Dennis Hastert as a rule.
To ignore that dictum is tantamount to political suicide, particularly in an election year. Just ask former House Speaker John Boehner, who repeatedly ignored the rule and found himself unable to pass legislation opposed by the Freedom Caucus. Trust the Republican House to follow a tactic named after a convicted pedophile—only in Congress.
In reporting on the chances of Promesa passing muster, this newspaper talked to lobbyists and staffers on both sides of the aisle, who let on that several sticking points remain to be ironed out. Front and center are issues over the collective-action mechanisms included under Title VI of Promesa. In meetings that have been held with Bishop, the U.S. Treasury has been insistent that the collective-action clauses be activated automatically as a way to guarantee binding the holdouts. Creditors would like to see the collective-action clauses implemented on a case-by-case basis.
Complicating matters are also a few battles among creditor groups—general-obligation bondholders continue to insist their credits are divine, senior Cofina (Sales Tax Financing Corp. by its Spanish acronym) creditors want equal hierarchy, while monoline bond insurers do not want to be left footing the bill—the perfect congressional storm in the making.
In exclusive interviews with Caribbean Business several weeks ago, two creditor groups insisted that the control board was essential to ascertain the level of restructuring needed—they want the board in place to see what is really needed before they agree to the shape of restructuring deals. Fueling their drive to essentially replace elected officials in their mandates to balance budgets is a lack of transparency by the García Padilla administration, which has failed to present audited financial statements for fiscal years 2014 and 2015.
Here is where things start to really bog down—Democrats on the Hill, including Puerto Rico’s nonvoting member of Congress, Resident Commissioner Pedro Pierluisi, oppose full control over all of Puerto Rico’s financial affairs because they see it tantamount to throttling democracy.
So, the draft legislation is being tweaked, but we should not expect a “We are the World” video featuring co-sponsors Bishop and Rep. Sean Duffy (R-Wis). No, first things first—can the bill make it to markup? That will be determined in large part by a representative from Idaho. Rep. Raúl Labrador (R-Idaho), a member of the Freedom Caucus who is of Puerto Rican descent, has been described by lobbyists on the Hill as a person who could determine if the Hastert Rule threshold is met.
Labrador is said to wield tremendous influence among the 60 representatives belonging to the Freedom Caucus. He is taking the position that it is about the rule of law. El congresista does not want to see credits thrown into one big tranch because their hierarchies should be respected. All about the rule of law—sí, Pepe.
Labrador’s power to determine whether the threshold to bring Promesa for markup underscores the true shame in all this. We have put our fate in one bill—at the mercy of others—without addressing the solutions that will return Puerto Rico to economic development.
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