Second opinion Puerto Rico doesn’t need another costly legal battle

This editorial is excerpted from The Washington Post.

As the Atlantic hurricane season heats up, Puerto Rico finds itself caught up in a home-brewed storm: a power struggle between its elected government and the federally appointed control board that Congress created to manage the bankrupt island’s public finances. Unless the government makes peace, the losers will be ordinary Puerto Ricans and their fragile hopes of economic recovery.

The fight was sparked when the island government upended a budget compromise earlier this month. In return for restoring budget cuts of $300 million and a bonus for workers targeted by the board, Gov. Ricardo Rossello agreed to push through labor-law reforms designed to lure outside investors. But Puerto Rico’s legislature balked, passing its own budget in defiance of the board’s budget authority. The governor then repudiated his own agreement; he and legislative leaders subsequently filed suit challenging the board’s powers.

These legal challenges are unlikely to succeed. The chairman of the congressional committee that created the board has affirmed its “extensive powers” to enforce compliance with any fiscal plan it approves.

Keep in mind that the legislators now bucking the board helped land Puerto Rico in its current predicament. A recent Government Accountability Office report details the lax financial management and oversight in the legislative and executive branches that yielded all-too-elastic budgets, $70 billion of outstanding debt and $50 billion worth of unfunded pension liabilities.

The attack on the board’s authority stands to annoy lawmakers in Washington, whose help Puerto Rico badly needs. (This week’s ruckus over the island’s purchase of a $245,000 armored SUV for the governor won’t help.) Congress has already appropriated several billion dollars in disaster assistance and additional funding for Medicaid and food stamps. But most of the recommendations made by a congressional panel to spur economic growth remain unfulfilled.

Austerity and reform alone won’t rekindle opportunity in Puerto Rico. (Indeed, as Greece has shown, too much austerity could have the opposite effect.) Debt forgiveness and investment are also essential. But no progress is possible until the commonwealth appraises its own shortcomings and demonstrates the discipline to transcend them.