While there remains some attention on the humanitarian crisis in Puerto Rico after last year’s devastating hurricanes, scant attention is being paid to the debt crisis that has financially paralyzed the island.
In the last week the Puerto Rican government revealed previously undisclosed and secret bank accounts that currently hold a total of $6.9 billion on behalf of a variety of public agencies. In recent weeks Puerto Rico Governor Ricardo Rossello requested an astounding $94 billion from taxpayers for the island’s economic recovery efforts. Puerto Rico is still dealing with the fallout from the embarrassing $300 million Whitefish Energy fiasco that continues to cost taxpayer money as it heads into a protracted legal battle.
Mistakes like these can be avoided if the proper leadership and expertise is brought in to deal with the dire economic conditions plaguing Puerto Rico. The current Oversight Board, which was created by Congress during the Obama administration, is dysfunctional, corrupt and continues to waste taxpayer money and precious time.
How dire is the debt crisis in Puerto Rico?
For years now the Commonwealth of Puerto Rico has struggled with a debt of over $70 billion (on an annual GDP of about 100 billion), which came to a head in July of 2016 when the territory defaulted on its debt. At the urging of President Obama, Congress created the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) shortly after the default. As part of this law, seven members were selected to an Oversight Board and tasked with approving a fiscal plan by reducing spending while putting in place pro-growth reforms, which would be drawn up by Puerto Rico officials.
When the Oversight Board was created many objected, and continue to object to the choices made for who sits on the board as the seven members of Puerto Rico’s federal oversight board were installed improperly, without approval from the U.S. Senate.
Congress created the Oversight Board with the intention that the board would make the tough and necessary measures to put Puerto Rico on a path towards economic growth and debt restructuring. Instead, the Oversight Board has been slow, sloppy and inefficient. It is time for Congress to bring about needed changes.
The Oversight Board has no accountability, is without any real scrutiny, and is protected from electoral ramifications.
The head of the board is executive director Natalie Jaresko, former Minister of Finance of Ukraine (2014-2016). Ms. Jaresko, a Trump administration appointee, is building her reputation as a corrupt administrator who continually looks to benefit herself financially ahead of the people she has been tasked with helping. Her past is riddled with abuses of power to the tune of millions of dollars worth of American taxpayer money.
Before becoming Minister of Finance, Chicago-native Jaresko ran a $150 million regional fund called Western NIS Enterprise Fund (WNISEF, a U.S. government funded investment fund via the U.S. Agency for International Development (USAID). During her tenure at WNISEF Ms. Jaresko collected $1.77 million in bonuses in 2013 despite being limited to a compensation of $150,00, claiming bonuses by using a loophole that allowed them to pull money from the fund’s profits, enriching themselves by claiming money generated from U.S. taxpayers’ dollars while avoiding any personal financial risks. This is just one of a few examples where Ms. Jaresko has put self-interest ahead of public interest. Ms. Jaresko’s past begs the question: How was such a disingenuous and corrupt person hired to lead one of the largest financial recovery efforts in U.S. history?
Her self-interest efforts did not stop when she was appointed by President Trump to lead the Oversight Board. Of the $60 million taxpayer funded budget for the OB, Ms. Jaresko, receives a salary of $625,000, which is roughly 31 times the median household income in Puerto Rico. And yet when grilled on her knowledge of the Jones Act by Congressman Luis Gutiérrez (D-IL) in November, she showed her lack of knowledge about the inner workings of the economy she is paid so handsomely to fix.
With nearly 40 percent of the island still in darkness it is time to get rid of Ms. Jaresko for her disastrous inaction and mismanagement before she finds new ways to profit off the American taxpayer.
Puerto Rico’s debt crisis can be solved and there are recent examples that provide helpful examples.
In Detroit, the Financial Review Commission was given broad powers to approve or reject city contracts, budgets and spending. Now, after three years of meticulous oversight and improvements, Detroit’s credit has been upgraded among rating agencies, its employment rate is up and property values are climbing.
The status quo is not sustainable. Structural changes are required.
The Oversight Board and the Puerto Rico government have refused to disclose basic economic statements and indicators with creditors. PROMESA was created to chart a path forward to restructure Puerto Rico’s debt to provide for a mutual debt agreement between creditors and the island, but they have failed.
It is time for a change at the Oversight Board. It is time for Natalie Jaresko to be removed from her post, one that should not have been awarded in the first place. The Trump administration should appoint someone with the proper expertise and management skills to step in. Puerto Rico residents deserve better. If Congress does not act swiftly, American taxpayers will be on the hook for the island’s fiscal disaster for years to come.
Matt Mackowiak is the president of Austin, Texas, and Washington, D.C.-based Potomac Strategy Group, a Republican consultant, a Bush administration and Bush-Cheney re-election campaign veteran and former press secretary to two U.S. senators. His national politics podcast, “Mack on Politics,” may be found on iTunes, Google Play, Stitcher and on the web at MackOnPolitics.com.