Puerto Rican bankruptcy: A
prelude to savage austerity and pension cuts
By
Rafael Azul and Jerry White
5 May 2017
Puerto Rico formally declared bankruptcy on May 3 before a special
tribunal created last year. The island, a US territory, had budgeted $800
million for the next five years’ debt payments, far short of the $3.5 billion
creditors are demanding. As expected, the creditors, which include large Wall
Street hedge funds, rejected the offer.
With this declaration, Puerto Rico became the first US territory
or state to place itself into a process like the municipal bankruptcies, which
have become increasingly common in the United States. Officially Puerto Rico
owes some $72 billion to various vulture funds and another $50 billion for
so-called unfunded pension liabilities to public employees.
Since January 2, when newly elected governor Ricardo Rosselló
declared the island in a financial emergency it has been an open secret that
the MIT-educated leader of the New Progressive Party (Partido Nuevo
Progresista-PNP) and former Hillary Clinton delegate at the Democratic National
Convention would throw the island into bankruptcy.
While Puerto Rico was historically barred from declaring
bankruptcy, Congress enacted a law last year allowing bankruptcy-like
proceedings. According to the PROMISE Act legislation passed last year in
Congress and signed by the Obama administration, a US Supreme Court justice
will now appoint a tribunal to oversee the bankruptcy process. While this
includes forcing creditors to accept a reduction in the principal and
accumulated interest, it is certain that the interests of Wall Street will take
precedence over those of working-class Puerto Ricans, just as it did in Detroit
in 2013-14.
During the Detroit bankruptcy, US federal judge Steven Rhodes used
the bankruptcy law to override state constitutional protections and slash the
pensions and health benefits of city employees while organizing a fire sale of
public assets. Rhodes was hired as an advisor by former Puerto Rican Governor
Alejandro García Padilla in 2015, along with former New York Lt. Governor
Richard Ravitch, who co-chaired Obama’s “State Budget Crisis Task Force” that
called for nationwide pension cuts and financial restructuring.
At the time, Rhodes declared that Puerto Rico “was exactly like
Detroit.” In fact, the island’s debt of more than $120 billion is larger than
Detroit’s by a factor of nearly seven, and its liquidation will require even
more savage attacks.
Accumulated interest represents at least two-thirds of the debt.
The hedge fund managers and their high-powered legal firms are expected to
fiercely oppose any measure that reduces their anticipated gains.
The new, and unelected, tribunal will be in charge or
“restructuring” the island’s economy, i.e., destroy education, pensions, social
programs; privatize public property; sack and further destroy the living
standards of Puerto Rican workers, in the interests of bondholders.
As the New York Times noted Wednesday, “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.”
The outcome is likely to be even worse than the fiscal plan
outlined by Governor Rosselló, which calls for shifting all current government
workers from pensions into 401(k)-style retirement plans. Current retirees will
continue to receive their traditional monthly pensions, but the amounts are to
be reduced by about 10 percent on average. The governor says this is the only
alternative to the sacking of 45,000 public sector employees.
The declaration of bankruptcy crowns a decade-long process of
recession and austerity affecting the living standards of the Puerto Rican
middle and working class, and causing an exodus of emigrants to the US mainland
(an option not available to the thousands of undocumented Haitian, Dominican,
Jamaican workers, and those of other nationalities, residing in Puerto Rico).
Up until June 2015 the collapse in living standards had been tempered somewhat
through the issuance of Puerto Rican bonds.
The bankruptcy declaration occurred two days after a general
strike and massive Mayday protests and by thousands of Puerto Rican workers
denouncing plans to gut workers’ pensions and benefits. The demonstrators
marched on San Juan’s financial district, many wearing black shirts, and
chanting, “Ricky is selling our island!” in a reference to the hated governor.
The marchers demanded an end to backroom deals and public meetings
and participation on the debt negotiations and on restructuring. Large numbers
of workers consider the debt illegitimate and refuse to pay for it.
The trade unions, however, are determined to block any serious
struggle against the political establishment and the Wall Street banks. After a
meeting with the governor last week, Lee Saunders, the president of the
American Federation of State, County and Municipal Employees called on Rosselló
to include the unions in the restructuring process. AFSCME has 13,000 members
in Puerto Rico inside the Union Servidores Públicos Unidos (SPU).
In an interview with elnuevodia.com, Saunders said, “We think we
should have a seat at the table, especially in discussions that have to do with
the reducing health benefits and pensions. We may have ideas that should be
heard.
“We are not alien to these problems. Although in the case of
Puerto Rico this is a larger problem, we were involved in the bankruptcy of
Detroit and we were responsible partners but with a seat at the discussion
table. Some of our ideas were accepted, and the union proved to be a
responsible partner.”
Indeed, AFSCME and the other unions played the key role in
blocking the mobilization of the working class against the looting of pensions,
health care and public assets and preventing the “civil unrest” bankruptcy
officials anticipated.
Wednesday’s announcement is bound to increase social tensions and
the class struggle on the island as the population faces the same predatory
measures imposed on the workers of Detroit, Greece and elsewhere.
Since the announcement in June 2015 that Puerto Rican debt could
not be paid, most of the austerity measures, including those under the terms of
the PROMISE act, such as the closure of hundreds of schools and sacking of
thousands of teachers, have impacted the working class and poor people. Already
two-fifths of Puerto Ricans live in extreme poverty, by US and Caribbean
standards.
Among those who oppose any federal rescue package is President
Donald Trump himself, who declared his opposition in Twitter, saying that there
should be “no bailout” for the island. However, the bankruptcy restructuring of
Puerto Rico will set a new precedent for savage attacks on workers throughout
the United States.
As the Times noted, “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.”
Higher education and
upward mobility increasingly inaccessible to poor in the US
By
Kathleen Martin
Higher education and
upward mobility increasingly inaccessible to poor in the US
By
Kathleen Martin
5 May 2017
As the gap between rich and poor grows, so does the disparity in
the attainment of higher education and, in turn, upward social mobility.
A study published in late April by the Urban
Institute focused on wealth and social mobility shows that individuals from
high-wealth families are more than 1.5 times as likely to complete two to four
years of college by age 25 than those from low-wealth households.
Household wealth is measured by total family wealth relative to
others in the study (including home equity), and upward social mobility is
defined as “the likelihood an individual whose parents did not graduate from
college completes at least two or four years of college.”
Participants of the study were broken into four household wealth
quartiles: high, $223,438 and above; middle-high, $45,000-$223,437; low-middle,
$2,000-$45,000; and low, $2,000 and less.
Data released last year in a separate study by the Pew Charitable Trusts gives a
better idea of how many people in the population would fall into each category
more generally. While both studies break data into different wealth brackets,
loosely comparing the correlating statistics to correctly understand the
placement of most Americans into these quartiles gives a better idea of how
many people are actually likely to climb out of economic despair, or to have
“social mobility.”
Nearly one-fifth, or 19.34 percent, of all US households total
have negative wealth. Negative wealth means that the total sum of all debts
exceeds the value of that household’s assets. If correlated to the results of
this study, one-fifth of the population would automatically fall into the
“low-wealth” quartile of $2,000 or less used in the Urban Institute study.
Others have noted that this section of the population
with negative wealth is expected to increase rapidly in the near future due to
the massive amounts of student loan debt weighing on millions of young college
graduates today, with small likelihood of repaying the debt and even less
likelihood of being able to afford a house or even a car of their own.
The authors of the study note: “We analyze total wealth, not
relying exclusively on housing wealth.” However, the poorest households lost the
greatest total portions of their wealth following the 2008 mortgage crisis,
including what is commonly the largest contributor to a working class person’s
wealth: their home. The youth participating in the study from this section of
the population have only a 30 percent chance of completing two years of
college, and a 14 percent chance of completing four.
“[O]nly 29 percent of youth from the bottom quartile of the family
wealth distribution complete two or more years of college education,” the study
notes, “and only 26 percent are upwardly mobile—that is, complete at least two
years when neither parent graduated from college.” In comparison, 78 percent of
youth in the top quartile complete two or more years of higher education, and
61 percent are upwardly mobile. The study also notes that this latter disparity
widens when contrasting the differences between the quartiles and four-year
degree completion.
The next quartile, low-middle, is a household whose wealth is
anywhere from $2,000 to $45,000. According to the Pew data, 13.42 percent of US
households have wealth ranging from zero to $19,999, with over half of that
percentage falling closer to the low end. The remaining 6.31 percent makes up
households with $5,000 to $19,999 in wealth.
The study did not gather specific information on academic success,
employment during college, whether or not the participant had children, and
what kind of institution the participant was enrolled in. This, too, makes a
difference, given that the majority of low-income (and likely low-wealth)
students cannot afford to attend 95 percent of American higher education
institutions. Youth with family responsibilities and full-time jobs, unstable
housing, and a host of other challenges are much less likely to have success
academically than their wealthy peers.
While the parents of students from low-income and low-wealth
families are not expected to contribute as much financially to the cost of
their child’s tuition, and while overall the cost of attending a junior or
community college is much less expensive than a traditional four-year college,
the financial strain is proportionally greater on families with less money.
“These results suggest that family wealth can help children
complete college, even holding constant other characteristics such as family
income and education,” the authors of the Urban Institute concluded. “Wealth
might provide the needed resources for families to get their children in and
through college, or wealthier families may live in areas with better schools
and social networks that help them get to college.”
Plenty of money for ILLEGALS……AMERICA’S
OPEN BORDERS
HOMELESS ELDERLY in AMERICA UNDER
MEX OCCUPATION
A Nation dies young, poor, addicted
and homeless…. It’s the American dream as the rich get super rich!
According to the National Alliance to End Homelessness, the number
of elderly persons who are homeless in the US will have doubled by 2050.
America’s Super-rich Live 15 Years Longer!
………….. America’s Bludgeoned Middle-Class Dies Young, Addicted and Poor!
THE IMPACT OF TRUMPERnomics
AND THE MASSIVE
TRANSFER OF WEALTH TO
THE SUPER RICH
AMERICA: One paycheck
and two illegals away from homelessness.
"The economists found that the pre-tax share of
national income received by the bottom half of the US population has been cut nearly
in half since 1980, from 20 percent to 12 percent, while the income share of the
top one percent has nearly doubled, from 12 percent to 20 percent."
SOARING POVERTY IN AMERICA’S OPEN
BORDERS
TRUMPERNOMICS FOR THE SUPER RICH:
“In the US, the working class will confront a government unlike
any other in American history, which will continue and intensify a decades-long
social counterrevolution overseen by the Democrats and Republicans. The
incoming Trump administration is manned by billionaires, generals and arch
reactionaries. It is a government of, by and for the oligarchy, committed to
destroying every remaining gain won by workers over the past century.”
EVANSTON, ILLINOIS surrenders to LA RAZA
THE MEXICAN OCCUPATION and LA RAZA SUPREMACY EXPANDS BORDER
TO BORDER!
A
municipality just outside Chicago, Illinois has now pledged itself to be a home
for illegal aliens who want to be shielded from federal immigration law,
officially claiming the mantle as a sanctuary city.
HEROIN!
MEXICO INVADES, LOOTS AND EXPANDS
ITS HEROIN MARKETS IN AMERICA’S OPEN AND UNDEFENDED BORDERS
JUDICIAL WATCH:
“The greatest criminal threat to the daily lives of American
citizens are the Mexican drug cartels.”
Much more here:
http://mexicanoccupation.blogspot.com/2016/12/the-american-border-with-narcomex.html ……post
on your face book
“Mexican drug cartels are the “other” terrorist
threat to
America. Militant Islamists have the
goal of destroying the United States. Mexican
drug
cartels are now accomplishing that
mission – from within, every day, in
virtually
every community across this country.”
OBAMA-CLINTONOMICS
pounds America’s youth as they build a border to border Mexican welfare state
on our backs!
AMERICA’S YOUTH STARVE
…… ILLEGALS SUCK IN BILLIONS IN WELFARE… they also get our
jobs!
The new reports show that in addition to
“traditional” coping strategies of skipping meals and eating cheap food, these
teens and pre-teens are increasingly forced into shoplifting, stealing, selling
drugs, joining a gang, or selling their bodies for money in a struggle to eat
properly.
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