It's the "crisis" you never heard of, but thanks in part of Anita Dunn (who was forced to resign from the White House after showing affection toward Mao) and her public relations firm, you soon will.
The bill for decades of liberal spending programs fueled by borrowing by politicians in Puerto Rico has come due. Not surprisingly, the politicians want a bailout in the form of bankruptcy protection. Paying off the debts is the last thing on their minds.
Now the media is filled with stories designed to pressure Congress to give the big spenders another blank check. President Obama and his Treasury Secretary Jack Lew are demanding Congress act to save Puerto Rico from itself. House Minority Leader Nancy Pelosi reports that Speaker Paul Ryan has agreed to move some sort of legislation before the end of March.
There are many problems but one of them, according to conservative lawyer Bruce Fein, is passing bankruptcy would be unconstitutional:
The contemplated bankruptcy legislation, however, would enable Puerto Rico to discharge or plunge the value of its existing debt without doing these things. The beneficiaries would be government employees, enterprises and contractors who profit from Puerto Rico's bloated and wasteful expenditures and handcuffs on free markets.
But the Contracts Clause of the U.S. Constitution, as expounded by the U.S. Supreme Court in U.S. Trust Co. v. New Jersey (1977), would invalidate a retroactive bankruptcy law for Puerto Rico. Congress should stand pat, and members should honor rather than evade their oaths to uphold and defend the Constitution. Puerto Rico and its creditors relied on existing laws when they negotiated lending terms, and there is no constitutional justification for changing the rules in the midstream.
Article I, section 10, clause 1 stipulates: “No State shall … pass any … Law impairing the Obligation of Contracts.” The text excludes the federal government. But Supreme Court decisions such as Eastern Enterprises v. Apfel (1998) have equated federal due process or takings clause limitations on retroactive impairments of property rights as coequal with Contract Clause limits on state impairments of contract obligations.
James Madison, father of the Constitution, defended the Contracts Clause in Federalist 44 as a bulwark against crony capitalism:
“The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less informed part of the community.”
In Federalist 62, Madison expanded on the cronyism and economic mischief that spring from mutability in the laws:
“[I]t gives [unreasonable advantage] to the sagacious, the enterprising, and the moneyed few over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any way affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow-citizens. This is a state of things in which it may be said with some truth that laws are made for the few, not for the many… “What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government?”
In addition to the questions of the constitutionality, there remains a bigger political question -- why should the GOP hand the big spenders another lifeline? The time has come from free market reforms not for bankruptcy protection. Cut the size and scope of government in san Juan. Eliminate laws that drive out business. Reform welfare. Enact Right to Work provisions that protect workers from forced unionism. These are some positive steps the GOP can take. But giving Obama and his allies an escape route is not only bad politics, it is bad policy.