Puerto Rico Declares Bankruptcy

[pbrower2a]

With its creditors at its heels and its coffers depleted, Puerto Rico sought what is essentially bankruptcy relief in federal court on Wednesday, the first time in history that an American state or territory had taken the extraordinary measure.
The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.

While the court proceedings could eventually make the island solvent for the first time in decades, the more immediate repercussions will likely be grim: Government workers will forgo pension money, public health and infrastructure projects will go wanting, and the “brain drain” the island has been suffering as professionals move to the mainland could intensify.
Puerto Rico is “unable to provide its citizens effective services” because of the crushing weight of its debt, according to a filing on Wednesday by the federal board that has supervised the island’s financial affairs since last year.

The total includes about $74 billion in bond debt and $49 billion in unfunded pension obligations.
While many of Puerto Rico’s circumstances are unique, its case is also a warning sign for many American states and municipalities — such as Illinois and Philadelphia — that are facing some of the same strains, including rising pension costs, crumbling infrastructure, departing taxpayers and credit downgrades that make it more expensive to raise money. Historically, Puerto Rico was barred from declaring bankruptcy. In the end, however, financial reality trumped the statutes, and Congress enacted a law last year allowing bankruptcy-like proceedings.
Puerto Rico has been in a painful recession since 2006, and previous governments dug it deeper into debt by borrowing to pay operating expenses, year after year. For the last two years, officials have been seeking assistance from Washington, testifying before stern congressional committees and even making fast-track oral arguments before the United States Supreme Court.


https://www.nytimes.com/2017/05/03/busin....html?_r=0

I predict political consequences far beyond Puerto Rico. What do you think?

[pbrower2a]

(05-05-2017, 10:37 AM)X_4AD_84 Wrote:

(05-05-2017, 08:43 AM)pbrower2a Wrote: I predict political consequences far beyond Puerto Rico. What do you think?

I agree PR won't be the last. So many states are now upside down due to future pension commitments and other future costs. Here in California, in spite of a nearly miraculous recovery from where we were early this decade (we were essentially a West Coast version of a Rust Belt state), due to our crumbling infrastructure on top of the pension issue, new taxes are being levied in the form of an increased fuel tax and vehicle registration fees. More of these to come. While this method will probably prevent BK it will harm our quality of life in other ways even as the potholes get filled and the future pension fund gets bolstered.

I was thinking along the lines of a rush to statehood.

Some states have problems. Infrastructure built all at the same time can fall apart at the same time, and infrastructure that was once inexpensive to maintain becomes in turn fiendishly  expensive to maintain and in turn in need of renovation and replacement. Highways may be the most visible. In general the older a segment of freeway the heavier is its traffic. Sections of Interstate 94 in Michigan are now over sixty years old, and the entire route from the Indiana state line to Ann Arbor is now all at least 55 years old.  It has been repaved, but two lanes in each direction are now inadequate between Kalamazoo and Interstate 69 at Marshall; the interchange between Interstates 69 is an obsolete cloverleaf with tight turns. Having driven that stretch of freeway I can tell you that it is dangerous because of the disparity of truck and car speeds. I-94 should have been rebuilt as a six-lane expressway when the opportunity existed.

But traffic jams are obvious enough for someone to see and experience. Sewage systems are arguably more critical.

Michigan was the "California of the Midwest" in building its freeway system early, especially in Detroit. Except in mountainous areas that get heavy snows. California could get away with limited maintenance on most freeways because of mild weather. But even that has its limits. California's freeway system used to be one of the technological wonders of the world, but it now looks primitive and worn out.

Back to Puerto Rico. Political entities can go bankrupt for many reasons. One is projects that do harm. Detroit was a pioneer in freeways, but the freeways took middle-class people quickly out of Detroit and with them the funds from the tax base. Detroit may be a wreck for other reasons, but its vanishing middle class is much of the cause of the biggest municipal bankruptcy in American history. I'm not sure where Puerto Rico went wrong... misplaced priorities? Corruption? Neglect of maintenance? Trying to do too much too fast?

Maybe someone from Puerto Rico can tell us.

[Odin]

PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

[Eric the Green]

Right, but "constantly being fucked with by American corporate interests" could describe US states too.....

Why you can't ignore Puerto (not so) Rico
https://www.usatoday.com/story/money/201...101284402/

[Galen]

(05-06-2017, 09:26 AM)Odin Wrote: PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

I don't see how that will help since public pensions are in the process of eating state budgets.  I suggest you consider Illinois to be prime example of this.  Just another example of the fiscal mismanagement that is so common in the public sector.

[David Horn]

(05-06-2017, 06:36 PM)Galen Wrote:

(05-06-2017, 09:26 AM)Odin Wrote: PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

I don't see how that will help since public pensions are in the process of eating state budgets.  I suggest you consider Illinois to be prime example of this.  Just another example of the fiscal mismanagement that is so common in the public sector.

Yeah, they should just cancel them like the private sector has done.  And I say that without defending the PR government.  They've done a miserable job for a long time, but they didn't just flush their employees down the drain with they didn't need them anymore.

[Galen]

(05-08-2017, 10:02 AM)David Horn Wrote:

(05-06-2017, 06:36 PM)Galen Wrote:

(05-06-2017, 09:26 AM)Odin Wrote: PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

I don't see how that will help since public pensions are in the process of eating state budgets.  I suggest you consider Illinois to be prime example of this.  Just another example of the fiscal mismanagement that is so common in the public sector.

Yeah, they should just cancel them like the private sector has done.  And I say that without defending the PR government.  They've done a miserable job for a long time, but they didn't just flush their employees down the drain with they didn't need them anymore.

Your wishes do not trump mathematics and the limitation of finite resources.

[David Horn]

(05-09-2017, 03:52 AM)Galen Wrote:

(05-08-2017, 10:02 AM)David Horn Wrote:

(05-06-2017, 06:36 PM)Galen Wrote:

(05-06-2017, 09:26 AM)Odin Wrote: PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

I don't see how that will help since public pensions are in the process of eating state budgets.  I suggest you consider Illinois to be prime example of this.  Just another example of the fiscal mismanagement that is so common in the public sector.

Yeah, they should just cancel them like the private sector has done.  And I say that without defending the PR government.  They've done a miserable job for a long time, but they didn't just flush their employees down the drain with they didn't need them anymore.

Your wishes do not trump mathematics and the limitation of finite resources.

So you favor the private enterprise example of underfunding and abandonment then?  There are no good actors here.  The fact that entities of all stripes were systematically allowed to underfund their pension systems reflects badly all around.

[Skabungus]

David Horn Wrote:

Galen Wrote:

David Horn Wrote:

Galen Wrote:

Odin Wrote:PR needs statehood ASAP. It's current status puts it at the mercy of Congress, it's a colony that has no legal autonomy other than what is granted to it. Independence would be bad because IMO it being a US state with it and it's people protected under the US Constitution would be far better than it being just another Latin American nation constantly being fucked with by American corporate interests.

I don't see how that will help since public pensions are in the process of eating state budgets.  I suggest you consider Illinois to be prime example of this.  Just another example of the fiscal mismanagement that is so common in the public sector.

Yeah, they should just cancel them like the private sector has done.  And I say that without defending the PR government.  They've done a miserable job for a long time, but they didn't just flush their employees down the drain with they didn't need them anymore.

Your wishes do not trump mathematics and the limitation of finite resources.

So you favor the private enterprise example of underfunding and abandonment then?  There are no good actors here.  The fact that entities of all stripes were systematically allowed to underfund their pension systems reflects badly all around.

David's right.  Pensions in both the private and public sectors have been chronically under funded and poorly managed.  That said, there are still more solvent pension plans in the public sector than you'll find in the private sector. 

I've worked in the public sector for 23 years.  I've worked in the private sector (real estate finance and development) for 9.  Pensions in the public sector are essentially gone.  Most pensioners have long retired.  I can think of only a handful in my current agency and they all have 30+ years of service.  Pensioners are just living too long!!! The industry standard in the public sector is the 401(k) with employer contributions.  Some agencies do pretty well as far as matching the employee's contributions up to around 12-14%. 

My time in the private sector is what sent me back to the public sector.  Even large companies offer...........shit for retirement, and little in the way of annual and sick leave.  You are supposed to grind away for that bonus.  It's a scam.   I took a huge cut in salary moving back to the public sector, but frankly the annual leave, retirement plan and truly outstanding health coverage (I belong to a group with 55,000 members) made the decision quite easy. 

We might also benefit from taking a long look backward.  The concept of "retirement" at the ripe old age of 65, with all your subsistence needs paid for, vacations and golf memberships, etc. is the current expectation.  Really though we should see it as an experiment started at the close of WWII and ending for the bulk of Americans in the early part of the 21st century.  Retirement isn't practical for any society.  Having the lion's share of your elders sitting idle, playing bingo, golfing and eating discounted meals is societal death sentence.

[Eric the Green]

Galen writes about the finite limits of resources, then sets loose corporations that destroy the Nature we depend on.

[pbrower2a]

Pensions, private or public, were an enticement for people to stay with the same employer over a long time instead of moving to another employer. With the gig economy that we now have, most people's loyalty goes no further than to do nothing that results in being fired.

[pbrower2a]

(05-09-2017, 10:51 AM)Eric the Green Wrote: Galen writes about the finite limits of resources, then sets loose corporations that destroy the Nature we depend on.

He believes in nearly-untrammeled power of giant corporations to mistreat employees and corner markets.

[Galen]

(05-09-2017, 05:59 PM)pbrower2a Wrote:

(05-09-2017, 10:51 AM)Eric the Obtuse Wrote: Galen writes about the finite limits of resources, then sets loose corporations that destroy the Nature we depend on.

He believes in nearly-untrammeled power of giant corporations to mistreat employees and corner markets.

You forget that markets are very good at allocating resources in a finite environment.  Unfortunately, you are too clueless to learn anything useful.  Not unexpected, given your understanding of science is limited to about the seventeenth century.

[pbrower2a]

(05-18-2017, 04:21 AM)Galen Wrote:

(05-09-2017, 05:59 PM)pbrower2a Wrote:

(05-09-2017, 10:51 AM)Eric the (Green) Wrote: Galen writes about the finite limits of resources, then sets loose corporations that destroy the Nature we depend on.

He believes in nearly-untrammeled power of giant corporations to mistreat employees and corner markets.

You forget that markets are very good at allocating resources in a finite environment.  (pointless insult redacted)

Magnates can also be extremely efficient in allocating resources  -- especially when they manage and exploit a scarcity of their own design. Of course we know how that works.

[Galen]

(05-18-2017, 06:18 AM)pbrower2a Wrote:

(05-18-2017, 04:21 AM)Galen Wrote:

(05-09-2017, 05:59 PM)pbrower2a Wrote:

(05-09-2017, 10:51 AM)Eric the Obtuse Wrote: Galen writes about the finite limits of resources, then sets loose corporations that destroy the Nature we depend on.

He believes in nearly-untrammeled power of giant corporations to mistreat employees and corner markets.

You forget that markets are very good at allocating resources in a finite environment.  Unfortunately, you are too clueless to learn anything useful.  Not unexpected, given your understanding of science is limited to about the seventeenth century. (Sad fact of reality put back.)

Magnates can also be extremely efficient in allocating resources  -- especially when they manage and exploit a scarcity of their own design. Of course we know how that works.

Here is what happened when big business tried that in the nineteenth century.  There is also no such thing as as natural monopoly.  

[Eric the Green]

(05-17-2017, 09:45 PM)Rorence Wrote: After reading the whole post, I have learned more about this topic. Thank you so much.

Thanks for your participation and interest.

[Bob Butler 54]

Puerto Rico bankrupt.  Is Illinois too far behind?  From CNN, How Illinois became America's most messed-up state.

[Galen]

(06-29-2017, 08:45 PM)Bob Butler 54 Wrote: Puerto Rico bankrupt.  Is Illinois too far behind?  From CNN, How Illinois became America's most messed-up state.

Its not just Illinois that has problems.  The following sums up my feelings about the situation: