The Limits of the Law and PROMESA
Absent the support of the executive and legislative branches of the federal government, the Puerto Rico debt readjustment plan will fail.
February 25, 2020 at 11:00 AM
8 minute read
During Constitutional Law, I learned of an important concept concerning the judiciary and the practice of law: the limits of the law. In federal constitutional law, the judiciary is authorized to adjudicate disputes and issue decrees; however, it is usually another branch of government that must enforce that decree. PROMESA is a classic example of the limits of the law. On June 30, 2016, PROMESA was signed into law by President Obama. PROMESA has established an elaborate process for the restructuring of Puerto Rico's debt. The Federal Oversight Management Board (the FOMB), which is authorized to oversee the financial affairs of Puerto Rico and to oversee Puerto Rico's debt restructuring, has been in existence for over three years. The FOMB has proposed a debt restructuring plan for Puerto Rico. Nevertheless, absent the support of the executive and legislative branches of the federal government, the Puerto Rico debt readjustment plan will fail.
The executive and legislative branches of the federal government have failed to adequately address the crisis in Puerto Rico. In particular, the federal government has failed to address the economic conditions that precipitated Puerto Rico's debt crisis; the federal government has failed to repeal federal legislation that has impeded Puerto Rico's economy; and the federal government has failed to adequately address the devastation caused by Hurricane Maria and the recent earthquakes. The recent earthquakes have brought back to the forefront the urgent need to rebuild Puerto Rico because of the fragility of its infrastructure.
Puerto Rico's economy has been moribund for over 15 years. Puerto Rico has never recovered from the repeal of the 936 tax legislation and the 2008 recession. The lack of revenue compelled the Puerto Rican government to borrow incessantly. Historically, Puerto Rico has relied on federal tax incentives to attract industry. Puerto Rico is in dire need of federal legislation that will reignite its economy. Absent a robust economy it will be difficult, if not impossible, for Puerto Rico to service its debt under a debt repayment plan and maintain essential services. A strong economy will help to stem the migration from Puerto Rico, and thus preserve its tax base.
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