19 July 2017

Puerto Rico Fiscal Fiasco: Congressional Abdication of Territorial Clause Power

by Howard Hills

Legal counsel in the National Security Council for territorial status issues in the Reagan Administration; and author of the recent book on Puerto Rico

In 1961, President Kennedy signed an administrative order that limited federal oversight in Puerto Rico, creating conditions for the fiscal “perfect storm” now engulfing the island. The federal control board included in the House recovery bill for Puerto Rico appears to be the most direct and practical way to correct the mistake Congress made by going along with JFK’s intrusion into its territorial clause powers. Those in Puerto Rico who oppose the control board have offered no viable alternative, and want federal assistance without accountability.

But accountability at the federal level is the topic of a recent commentary published by Puerto Rico Report that examines President Kennedy’s 1961 directive drastically limiting federal management of Puerto Rico policy affairs by the U.S. Department of the Interior. With the stroke of a pen Kennedy exempted the “commonwealth” regime of territorial government from coordinated federal oversight that had been provided by territorial policy staff at DOI for decades, and continues to this day for all territories except Puerto Rico.

Just as Congress has accepted for more than a century the federal court decisions that say that the U.S. Constitution applies to Puerto Rico by analogy to the states rather than directly, for more than half a century Congress allowed Puerto Rico to take on debt using the illusion of federal backing. The local political party favoring the current status quo even invented the myth that “fiscal autonomy” was a “pillar of commonwealth, ” at the same time the illusion of federal backing was being used to debt finance expansion of local government programs and services.

The local party propounding “autonomy” opposes statehood or true nationhood, the only two status options that would mean real autonomy for Puerto Rico. Indeed, a former Governor from the autonomist party favoring the current status boasted recently that he had helped kill a 1998 bill that passed in the U.S. House of Representatives but died in the U.S. Senate. That bill would have allowed a federally sponsored vote in Puerto Rico between statehood, nationhood and the current status as defined by federal law, but the autonomist party lobbyists — including the same former Governor — joined forces with those who denied democratic self-determination to 3.5 million U.S. citizens in the last large U.S. territory.

Yet, only statehood or nationhood would end the current territory status in which a federal control board is within the power Congress exercises over the island. That is why 54% of voters rejected the status quo in a 2012 referendum, and 61% chose statehood, leading Congress in 2014 to authorize and fund a federally recognized vote to confirm the 2012 results.

The current fiscal meltdown has been used as an excuse by the anti-statehood autonomist party to delay that vote. Instead of recognizing that the non-sovereign status is the problem and statehood or nationhood is the solution, Republicans and Democrats in Congress are in denial that the “commonwealth” regime that abused its credit authority is a creation of Congress.

It is Congress that allowed the federal entity for administration of local civil affairs it instituted under a local constitution in 1952 to incur $70 billion in unfunded debt obligations. Yet, beguiled by wily Wall Street lobbyists, whose clients are scrambling for priority in any federal debt workout program for Puerto Rico, most in Congress have been chanting a “No bailout” and “Blame it on Puerto Rico” mantra.

As Congress evaded and avoided its historical and constitutional role in guiding territories to a permanent status, the local government emulated its “parent” government in Washington by making promises it could not keep without borrowing more money than it could afford to repay. Those who argue that is not Congress’ problem need to think again.

Congress retains full, unrestrained, plenary powers of sovereignty over Puerto Rico. The “commonwealth” regime of territorial government exists at the pleasure of Congress, and its delegated powers of “internal sovereignty” are limited to purely local matters not otherwise governed by federal law. So if we are talking about blame, let’s begin with the advent of the so-called “commonwealth” model of in Puerto Rico since 1952.