By Stephen Moore

From Investor’s Business Daily:

Congress will hold hearings Thursday on how to handle the financial calamity that is Puerto Rico.

The debt of the unincorporated U.S. territory is now $70 billion – about 100% of its GDP — and the government is already in technical default because of nonpayment of interest on some of the bonds that have come due. Left-wing Gov. Alejandro Garcia Padilla says the territory is out of cash.

The bitter fruits of socialism are on full display here after a decade of rampant overspending and fiscal mismanagement by an obese welfare state. One out of every four employees on the island works for the government.

Half of young people are unemployed or on some form of welfare, which pays about 50% more than a minimum wage job. The island has lost 250,000 people in the last decade because private-sector jobs are so scarce.

The government has dealt with its economic stagnation not through free-market reforms or slashing costs, but by raising sales and energy taxes while continuing to borrow.

The “solution” in Washington that seems to be gaining bipartisan political traction is to give Puerto Rico “full restructuring authority” of all its debt. The government is not currently permitted under federal law to declare Chapter 9 bankruptcy, so it would need this new authority to restructure.

Read more at Investor’s Business Daily.

Photo Credit: Jose Oquendo