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tv   Politics and Public Policy Today  CSPAN  February 12, 2016 4:45pm-6:46pm EST

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>> no regulator similar to the fda in the world is involved in that way, okay? they have separate entities that are tech assessors and others that manage drug pricing. so the regulators -- however, what i told one of the senators, if they give us directions to prioritize in a certain way based on certain criteria somebody else develops, we could do that. but we can't -- you know, it's a slippery slope to get us involved in that part of it. we need to stick to the science, i think, in that safety and effectiveness and the level playing field and the fairness. we are thrilled the other part of the generic review process, we don't talk about much and didn't put statistics in the legal maneuvers from approving generics. and that's a very massive workload. and if you have ever read any of
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our responses, and all the science and so forth throughout all of them, that's a great deal of work that also has to be done. so any further elements that are introduced where we are to prioritize this or that are other opportunities just like the r.e.m.s. to delay things where things are fair. we need to respond to directions from some other body. most of generics are still decreasing in price. so this is a problem for a small area. the report shows that for the medicaid spending, prices for generics went down for 64% of the drugs over the last several years. >> that silver slice you were talking about, that's really what you were -- >> the silver slice is the
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innovator drugs don't have any generic competition. >> and no submission. >> and no submission, yeah. >> nobody waiting. >> nobody waiting. or things are complex drugs, they might be ones that don't have a bioequivalence test. orphans, the market space may just be too small. if you have four or five other entrants into that space, then they are not going to be able to make money. >> do you think these guys should be thinking about that, what to do about that silver slide? >> i think we just wanted to present the reality to the committee about where the vulnerabilities are. it's people -- we think in the press, so you guys can correct this, are presenting this as a giant problem across. and it isn't. i go to the drugstore and bought a generic the other day. it was like 23 cents or something like that. that's my co-pay, but i'm sure
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my insurance company didn't pay very much. so in general the generic drugs are affordable but there's a small segment. that's what we want to present. where they don't have a lot of competition. there's only one generic, that little bar we showed, they may have -- the innovator may not be marketing. so there could be only one in that space. and the silver part, there's no competition whatsoever. even though there could be. so why is that? so those are the areas where without competition they have a lot of freedom to change things around. >> do you have thoughts about -- you say why is that, what do you think, why is that? >> well, i think it's generally driven by the opportunity, business opportunities. and if people don't see business opportunities in these small markets, or if there's a barrier because it's hard to do -- you would have to do clinical trial. that is a barrier. that's why we're doing this research. spending millions of dollars on research. and the industry gave us that
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money because they see if they can get a bioequivalence test instead there would be a generic in its place. but the small markets, i think what senator collins was talking about, you're talking about the small volume perennials hard to make, they have to be sterile, right? everybody's learned that. they have to be sterile and they aren't big. nobody takes them chronically, okay? they just sort of stock the emergency carts with it so it's not a big market. so how many players or where is the business opportunity to enter that market? that's where we also have working on advanced manufacturing. so if we could make manufacturing more agile and flexible and so forth, then we think that would help people enter lower barrier entries as well.
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>> thank you. >> thank you. former secretary of state hillary clinton and vermont senator bernie sanders will be in minnesota tonight for will b in minnesota tonight for a democratic fund-raiser. they're speaking at the democratic farmer laker party dinner in st. paul. it begins at 8:00 p.m. eastern and you'll find it live on c-span. saturday night c-span will have a discussion on silicon valley tech experts on how to improve government's online services. you'll hear from mikey dickerson and he'll talk about the disarray he found when arriving in washington, d.c. here's a quick look -- >> if you just walk in as an engineer and walk in and look at a bunch of other engineers and see what they're doing and how they're doing it, and it was just total insanity, like, when you first looked. there were 55 different companies contracted to work on
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different parts of healthcare.gov. which is a fairly complicated operation, but it ain't that complicated. and there were, i don't know, conservatively -- this is another piece of insanity. literally nobody knows how many people were, engineers, developers, whatever you want to call them, technical roles on the project, at least hundreds. they're in dozens of different buildings and not only did they have any kind of habit or custom of working together, they were in most cases explicitly forbidden for communicating with each other because of the way contracts are managed in the government. and this was set up. there was nobody -- the government reserved for itself the job of coordinating how all this would go and the problem is the government doesn't really have that skill set and i'll just leave that where it is. i could elaborate on that. but the government just doesn't -- it wasn't really equipped to do that job. and so the -- the -- what was
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going on just made zero sense. >> mikey dickerson and his team participated in an event at the computer history museum in mountain view, california. you can see the entire event saturday night at 8:00 eastern on c-span. pennsylvania governor tom wolf delivered the annual address on the state budget. he said the commonwealth is in crisis and that he and the general assembly need to act quickly to come to a budget agreement and address pennsylvania's $2 billion budget deficit. this is a half hour. >> governor, it's all yours, right here. >> thank you. thank you. thank you so much.
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lieutenant governor, thank you. thank you, please. thank you. lieutenant governor stack, speaker turzai, president scarnati, leader reid, leadlead members of the judiciary and cabinet, i'd like to welcome the auditor general and the attorney general and the treasurer and also my wife frances. most importantly, my fellow pennsylvanians. this will not be an ordinary governor's budget address. usually this speech is an opportunity to lay out an ambitious agenda for the year ahead. under ordinary circumstances i'd outline my 2016-17 budget proposal, a proposal full of ideas to move our commonwealth
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forward. i'd talk about new measures i'm proposing to ensure that every child in pennsylvania has a world class education that starts before kindergarten and goes all the way through college. i'd talk about the new partnerships we can create between the public and private sectors to help create jobs and grow our economy. i'd talk about the new innovations that can build on the progress we've already made in modernizing our state government so that it works better and costs less. and i'd talk about some long overdue steps that we can take to help our commonwealth fulfill the promise of equal opportunity and economic security for all. including protections for the lgbt community and housing and the workplace. the legalization of medical marijuana. a raise in the minimum wage. and criminal justice reform that will bring fairness back to our system and save tax dollars. but i can't give that speech. not under these circumstances.
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my fellow pennsylvanians, our commonwealth is in crisis. a crisis that threatens our future. and today i want to be clear with each member of the general assembly and with every pennsylvanian about the actions we must take to resolve this crisis. and the consequences that we'll face, all of us, if we don't. first, let me be very clear about the nature of the problem. the problem is not that republicans in the general assembly and i don't see eye to eye. after all, pennsylvanians are used to seeing political leaders disagree even strongly. and in 2014 in that election the people of pennsylvania chose divided government. a democratic governor, republican legislature. and i doubt anybody was surprised when it turned out that we have different priorities. no. this crisis is not about politics at all. this is about math. pennsylvania now faces a $2 billion budget deficit. that's not a democratic fact.
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and that's not a republican fact. it's just a fact. it's a fact supported by standard & poor's, an independent rating agency. they've done the math and they agree pennsylvania faces a massive structural budget deficit that will only continue to grow if we fail to address it responsibly. this deficit isn't just a cloud hanging over pennsylvania's long h long-term future it's a time bomb and it's ticking away right now even as i speak. if it explodes, the people in this chamber, if you allow it to explode, then pennsylvania will experience a fiscal catastrophe the likes of which we have never seen. please understand, we're not talking about a long-term budget projection. we're talking about pennsylvania failing to meet its basic obligations this year. we're talking about pain that will be felt all across our commonwealth this year.
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if the general assembly does not approve a responsible plan to solve this crisis, every pennsylvanian -- every pennsylvanian -- will suffer the consequences. and those consequences they'll be real. they will be immediate. and they will be severe. nearly three-quarters of pennsylvania homeowners will see their already too high property taxes skyrocket even further. if a member of this body were to stand up and propose a tax increase on property taxes, a property tax increase, he or she would be booed off the floor by both democrats and republicans. but, in fact, that is exactly what will happen if we do not act. we have seen this play out over the last four years, since 2011 school districts have been forced to increase local property taxes by $1.2 billion. all because of our irresponsibility right here in harrisburg. in the last year alone, 83 school districts increased property taxes above the index
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because harrisburg did not produce a responsible budget. and another 175 school districts increases this year for the same reason. this tax shifting is not sustainable. and it will only continue to squeeze families and seniors if we do not stop passing the buck on to local communities. meanwhile, even as pennsylvanians will pay more, they'll get less from their state government. far less. for example, our education system, already thread bare after years of underfunding at the state level, will take a ruinous hit. thousands of teachers will be laid off. guidance and career counselors will be handed pink slips. in all, more than 23,000 education professionals will be immediately yanked out of pennsylvania schools. across pennsylvania already crowded classrooms will become even more so. class sizes will balloon by 30%
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to account for all those teacher layoffs. worse, the consequences will not be evenly distributed. classroom crowding will be more severe in the schools that can least afford it. but all across our commonwealth our children, all children, will receive less attention, less instructional time, less opportunity to gain the skills we all need them to have for the 21st century. technical education, those programs will be cut. special education programs, they'll be cut. head start programs, cut. and tens of thousands of pennsylvania children will lose access to pre-kindergarten depriving them of the early childhood education we know is key to their success. this is not political threat. this is not political posture i ing. this is simply math. this is the reality that teachers and parents and children in our commonwealth will face if the general assembly does not act and the
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damage will not be limited to our schools. basic state services will also face devastating cuts. we will lose nearly $200 million in services to pennsylvania seniors including prescription drug assistance and home and community-based services. pennsylvania seniors who depend on that assistance will be forced to pay more out of pocket. some will have to choose between paying for groceries and the medicine that keeps them alive. these are our elderly parents. these are our neighbors and they're counting on this funding to pay for the medicine they need. but if we don't have a budget, we can't help. we'll lose $180 million in assistance for people living with mental illness or intellectual disabilities. these pennsylvanians are the most vulnerable among us and they are counting on our help to live full lives and contribute fully to their communities. but if we don't have a budget, they'll be denied significant opportunities to improve their lives.
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we'll lose $40 million in state funding for child care and thus forfeit nearly another $50 million in federal matching funds for a total cut of nearly $90 million. that's hundreds of thousands of working parents who are counting on our help to have some peace of mind and the ability to earn the living upon which they can raise their families. but if we don't have a budget, 211,000 pennsylvania children will have nowhere to go. we'll lose $11.5 million in funding for domestic violence shelters and rape crisis centers. survivors of domestic violence and sexual assault rely on these safe havens to have somewhere to go in the midst of unthinkable pain and unspeakable terror. but if we don't have a budget, those shelters and crisis centers will have to shut the doors to people who need them. critical programs such as these make up nearly three-quarters of our human services budget. simply put, the commonwealth of pennsylvania cannot meet its obligation to its citizens if
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the general assembly does not meet its obligation to pass a responsible budget. and while my administration will always strive to tackle fraud and be as efficient as possible in the government operations, even these new harsh -- these harsh cuts that we're talking about here, that you're talking about, cuts, they're going to harm single mothers. they're going to harm seniors on fixed incomes and those who are down on their luck. even those cuts will not solve our mathematical crisis. anyone in this chamber who simply claims we can cut our way out of this mess without also increasing revenue is just ignoring the math. they're also ignoring history. if we don't have sustainable revenue sources in our budget, the result will be billions of dollars in new property tax hikes at the local level. pennsylvanians need to prepare for these consequences. and i don't say this with any joy whatsoever. but someone in harrisburg has to start telling the people of pennsylvania the truth about the mess we're in.
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you know, before i ran for governor, i ran a business. and in challenging times i know that you can be fiscally responsible while still looking out for the people you serve. these values are not mutually exclusive. in fact, they're closely linked. if you're in business and the numbers don't add up, you can't ignore the problem or wish it away or spin it away. you have to take a clear-eyed look at how the problem arose and then you have to solve it and fast or you won't be in business for very long. pennsylvania businesses don't have the luxury of pretending their problems don't exist. neither do pennsylvania families, sitting around the kitchen table trying to make ends meet. and the truth is, neither do we here in harrisburg. so, let's be honest about where we are and how we got here. after all, this fiscal crisis did not appear from out of nowhere. this was no act of god. we are in a hole we dug ourselves right here in harrisburg.
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and if the consequences i'm describing sound familiar, it's because pennsylvania has been building up to this moment for years. for years our leaders have tried to balance our state budget on the backs of our children and our schools. when i took office pennsylvania ranked near the bottom of the country in the percentage of state-level k-12 investment. the burden of funding our schools, therefore, fell on our local communities. and that in turn meant huge spikes in property taxes for pennsylvania homeowners. that's a bad way to solve a budget problem. although it's a great way to create an education problem. we were left with tens of thousands of teachers laid off. crowded classrooms across most of our school districts. and that was just part of the problem. you see, even these huge cuts to education weren't really enough to balance the budget. but instead of finding a sustainable way to deal with the real deficit, harrisburg chose to paper over the problem with a
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series of budgetary gimmicks and quick fixes. maybe you can get away with that for a little while, but sooner or later the rent comes due. and the folks here in harrisburg thought the sleight of hands with a real long-term solution to a budget problem, then the only people they were fooling was themselves because nobody else bought it. the three major ratings agencies, fitch, moody's, again, standard & poor's have each downgraded our credit a total of five times over the last five years. and it's been downgraded three times in the last two years alone. and each time the rating agencies have explained the downgrades are a direct result of the little tricks pennsylvania has deployed to avoid facing up to the reality of its fiscal situation. when harrisburg doesn't take our budget seriously, the folks who rate our debt, well, they don't take harrisburg seriously. today because of years of budgetary irresponsibility, the commonwealth of pennsylvania is
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considered to be among the least credit worthy states in america. this is embarrassing. but embarrassment isn't the only point. you see, because our credit has been downgraded so much we're actually paying a higher interest rate on that $17 billion of debt that we have. this is going to eventually cost us an extra $139 million a year. that's if the interest rates don't keep going up. that's $139 million a year that doesn't go to improving our schools. it doesn't go to making our business environment more competitive. it doesn't go to reducing our taxes. it's a $139 million penalty that the people of pennsylvania pay for harrisburg's fiscal irresponsibility. that's how we got here. and it's why when i took office last year i proposed a different kind of budget. instead of shortchanging our schools, i proposed a historic commitment to education, beginning to restore the $1 billion that had been cut from our schools under the previous administration. making new investments in early
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childhood education and community colleges, increasing our state's share of funding for public schools and directing more of that funding to the districts that needed it most. and instead of using sleight of hand to avoid dealing with the deficit, i proposed a serious plan to balance our budget and set us on a more sustainable course. no more gimmicks. no more quick fixes. a new approach in harrisburg, a fresh start for pennsylvania. now, i expected that republicans would not agree to everything in my proposed budget. what i didn't expect was what i got. a budget that didn't even balance. incredibly the budget that they sent me relied on the same gimmicks and quick fixes that had gotten us in trouble in the first place. in that case the june 30th budget, $1.5 billion worth of optical illusions that would have made our actual budget problem even worse. if you were running a business and you took a budget like that to your banker, you would be
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laughed out of the room. but pennsylvania's creditors don't have a sense of humor about this thing and actually either should we. while i came to the table ready to talk. ready to negotiate. ready to compromise. it took months of bargaining. it took some painful sacrifices from both sides. but in the end all that hard work paid off. we had a deal. the compromise budget i worked out with members of the legislature last year included some of the things that i wanted, but not everything. but it did have a historic investment in our schools. it included some of the things that the republicans wanted, but not everything. including changes to our pension and liquor systems. and i continue to believe that we should solve these decades-old problems. we still need changes that provide taxpayers savings and stability in our pension system and we need to bring our liquor system into the 21st century.
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okay. that's one person. however, these improvements -- these improvements by themselves are not magic bullets and changes in these two problems will not alone mitigate the consequences of a continued failure to acknowledge the basic math problem we face. again, the compromise budget included these republican pry ma priorities. but most important of all, the compromised budget balanced. it solved the financial problem. passing it into law would defuse the fiscal time bomb and set us on a more sustainable course. it passed the senate and had bipartisan support in the house. all that remained was a final vote before i could sign it into law and we could finally move forward. i was ready. pen in hand. and then the house republican leaders just walked away. they walked away from the table and went home for the holidays without holding that final vote.
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they still have not held that final vote. listen, i -- i understand -- i understand the frustration you all must feel looking at this huge mathematical problem, but yelling will not make it go away. wishing will not make it go away. we need to do what's right for the people of pennsylvania. we need -- we need a budget! because we still have a budget crisis. that fiscal time bomb, it's still ticking. our teachers still hear it. our parents hear it. our seniors hear it.
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our creditors definitely hear it. you need to hear it. the time for games is over. and now it's time to finish the job we should have finished last year. now, look, arguments over policy priorities, again, i get it. they're healthy. democracy entails disagreement. compromise is hard. but we had those arguments. we worked out our disagreements. we reached a compromise. republicans and democrats sitting in this chamber right now sat at a table with me and did the hard work to find common ground. we had a deal. and then the house republican leaders walked away. only in harrisburg could that be seen as an acceptable way to do business. do you know what? i'm not interested in the interworkings of the republican caucus. i'm not interested in politics. this isn't about politics. this, again, is about mathematics and so here's -- here's what's really -- it's about mathematics and here's what's really, really
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frustrating. when some republican leaders bailed on our agreement, i was handed a budget that didn't add up. another budget that would cut from our schools and zero out funding inescreacreases for hig education and a budget that still did not balance. we're sitting at the bottom of a $2 billion hole. it's simply unbelievable that some folks in this chamber want to address that problem by continuing to dig. i can agree and i can accept that we can disagree about the importance of education. i get that. i can accept that we can disagree about the proper role of government in securing a more prosperous future for our commonwealth. and i can accept that i won't get everything my way. but i cannot accept and pennsylvania cannot afford another irresponsible budget that ignores the facts of this fiscal crisis and pretends that our problems simply don't exist.
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i did not run for this office to be party to the corner cutting and budget gimmickry that got us into this mess. we can't afford to play political games while this crisis is casting such a dark shadow on our future. there is simply too much at stake. the train has been careening down the tracks for years and now the moment of impact has arrived. and whether or not we crash is up to the people in this chamber. it's up to the people in this chamber to save our children. to save our seniors. to save our most vulnerable populations from bearing the brunt of devastating cuts. it's up to the people in this chamber to save our taxpayers at the local levels getting handed the bills that harrisburg wasn't responsible enough to pay right here. it's up to the people in this chamber to save pennsylvania's putz. it's time for the people in this chamber to get back to work.
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the good news is, i still have my pen. and we still have a budget that reflects months of hard work and honest negotiation. a budget that has been approved by bipartisan majorities in both chambers of our legislature. a budget that averts this fiscal catastrophe and gives us a chance at a fresh start. we can get it done. send that compromise budget to my desk and we can put our commonwealth on more secure footing than it's been for years. but let me be very, very clear with each of you.mñ we are going to have to stop playing games with our fiscal future. we are going to have to stop closing our eyes and just hoping that our problems are going to go away. we are going to have to face hard facts. so, don't send me another budget full of gimmicks that are too
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cute by half. don't send me another budget where the numbers really, really don't add up. i'm not going to be amused by that. i'm not going to be fooled by that. i'm not going to be convinced that dime store magic tricks are a substitute for a real, responsible budget. and more importantly -- and more importantly, neither will our creditors, nor the people of pennsylvania. if you can't agree to the budget reforms i've proposed, then help me find a sustainable alternative. but if you won't face up to the reality of the situation we're ticking, if you won't take seriously your responsibility to the people of pennsylvania, then find another job. because this, this is not the
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time for denial. this is not the time for obstruction. this is the time for leaders to come together and honestly and sincerely take on the crisis we're facing. because if we don't solve this crisis, whatever partisan game you think you may win will be dwarfed by the enormous losses this state will suffer. nobody in pennsylvania will care one iota about the politics of a disaster that cost the commonwealth so much. i refuse to let that happen, but i cannot stop this catastrophe alone. the people of pennsylvania need you to do the right thing. i'm not asking people in this chamber to give up their political beliefs. i am asking, you join me in mustering the political courage to meet this crisis head-on. i am asking that they do their job. that you live up to the promise to uphold the constitution that we all took, to defend the commonwealth of pennsylvania's constitution. that's what we all did when we took our oath of office. this doesn't require anyone to walk away from his or her
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principles. it merely requires that each of us declare that our highest principle is the responsibility each of us has to the people of pennsylvania. the people of pennsylvania deserves schools that teach, jobs that pay and a government that works for them. they deserve leaders who are willing to work hard and sacrifice to build a better commonwealth. because that's what the people of pennsylvania do every day to build a better life for their families. their strength, resilience looms before us. after all, i ran for this office because i believe deeply in our commonwealth. in our spirit of innovation and entrepreneurship, in our long-standing tradition of tackling our challenges and seizing our opportunities with boldness and courage, with integrity and honesty. in our potential to build a
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bright future, as bright and prosperous as our past. i know many of you entered public service for the same reasons and last december a number of republicans and democrats came together to prove that there are leaders in this body who can put their differences aside and get things done. after a year as governor, despite the overwhelming challenge we now face i still believe in pennsylvania. the possibilities before us are still limitless. a bright future is still within our grasp. i still believe in the enormous potential of our commonwealth, and i'm counting on everyone in this chamber, everyone, to do the right thing so we can fulfill that potential. i'm ready to do the hard work to build a brighter future for pennsylvania. i hope you're ready to join me. thank you. god bless the commonwealth of pennsylvania.
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"american history tv" on c-span3 features programs that tell the american story. and this weekend we kick off a three-week special series on the 1966 vietnam war hearings, 50 years later. senate historian emeritus donald richie -- >> the vietnam hearings were probably some of the most extraordinary hearings ever held by congress. they were hearings and an
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investigation into a war that was still being fought. that the congress and particularly the senate wanted to know why we were in vietnam, what the administration's policies were and they wanted to hear from opponents of the war. they gave equal status to critics of the war as they did to supporters of the war. it was a real debate. >> this weekend two witnesses who opposed president johnson's vietnam policies. first, a february 1966 abc news special report that includes the testimony of former ambassador to the soviet union george kennen. then retired general james gavin, followed by questions from senators including chairman jay william fulbright. >> in korea we had learned that air and naval power alone could not win a war and that inadequate ground forces cannot win one either. it was incredible to me that we had forgotten that bitter lesson so soon that we were on the verge of making that same tragic error.
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well, general, as far as you know are the conditions in indochina any different today than they were at that time? >> next weekend we'll hear from special consultant to president johnson general maxwell taylor and on saturday, february 27th, secretary of state dean rusk gives his testimony defending johnson's vietnam policies. for the complete "american history tv" weekend schedule, go to cspan.org. puerto rico's debt is now estimated to be about $72 billion. a discussion now on how to deal with it. panelists include a counselor to treasury secretary jack lew and former washington, d.c., mayor anthony williams who also served as the city's chief financial officer during its financial crisis. the hour and a half event was hosted by the bipartisan policy center. >> good morning.
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my name's aaron klein. i'm the director of the financial regulatory reform initiative. i'd like to welcome you all here at the bipartisan policy center for our indepth analysis of the upcoming super bowl. we're all here on friday morning to discuss an issue that's incredibly important to millions of americans, both on the island and commonwealth of puerto rico and throughout america. and it's a great privilege here at bbc, we are committed to advancing the common conversation that involves principled compromise on complicated issues. i can think of no issue that is more complicated, more important, or more in need of principled compromise than how to deal with the problems going on and the finances of the commonwealth of puerto rico. so, what we've tried to do here is to assemble an all-star panel of folks with varying perspectives, differing lenses and experiences to come together
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to have this conversation. i think it's incredibly important for everybody here to understand that the treasury department ably led by secretary lew and the point person on that who is here, counselor antonio weiss has put out a thoughtful proposal about what to do. speaker ryan from the house of representatives has committed that the house will come out with a proposal that he hopes to move through the chamber sometime next month and as we'll hear from our panelists there are some real and important deadlines that will require tough choices and action necessary to turn the situation around. so, with that as the backdrop, let me introduce the panelists and then i'm going to join them on stage to begin the conversation where we will then eventually turn to the audience for questions. i'm going to start to the left as i mentioned is antonio weis he's a counselor to the secretary at the department of treasury. antonio advise's the secretary
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on domestic and international issues related to job creation and broad-based economic growth. i can tell you from having served for four years in the obama administration's treasury department, the role of counselor is key to providing insight, analysis, ideas and solutions to the secretary. antonio is distinguished in many ways. he earned his bachelor's degree from yale and his mba from the harvard's business school and he's a member of the council of foreign relations and a regular participant and leader in public policy fora and thought. thank you very much for being here today, antonio. seated next to antonio is tony williams, for those of you like myself you know tony because he was the mayor. mayor williams served from 1999 to 2007. he's currently the ceo of federal city council. we owe all of us who were in washington owe a great debt of gratitude to tony.
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he's widely credited with leading the comeback of washington, d.c., during his two terms as mayor. he restored the finances of the capital and all while lowering taxes and investing in infrastructure and human services. it sounds like a bipartisan group of outcomes. before his election he importantly served as the chief financial officer of the district's financial control board and howl be hearing more about those thoughts from 1995 to 1998. like antonio, williams is a graduate of yale with a master's in public policy and a j.d. from harvard. seated next to mayor williams is hector negrone. hector is the co-founder, co-ceo and chief investment officer of fundamental credit opportunities. hector's been a pioneer in the municipal market over the last three days leading infovation and prioritizing trading, public/private financing, securitization. before that he had a distinguished career on wall street working at goldman sachs,
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societe generale and in a variety of leadership roles. he's from the island and has a distinguished history on the island of puerto rico. in addition he earned his b.a. from the wharton school at the university of pennsylvania, and before this turns into a university of pennsylvania lovefest, i'll turn to david skiel who is from the pennsylvania university of public law, he is an author of many different books and he's a leading thought thinker, frequently quoted in the press, and as important to his contributions to public policy, he's distinguished in the classroom as well. he's won several teaching awards including the harvey levin award three times for outstanding teachers and robert gorman award of excellence in upper level
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teaching so hopefully we'll all learn something today. so, with that, it's my pleasure to join this great panel. i thought we'd kick it off, antonio, with you. you and the secretary were down on the island last week. you've put -- you've been at the forefront of this issue for quite some time. set the table for us. what's going on today in puerto rico and where do things stand here in washington? >> well, aaron, first, thank you. and thank the bpc for organizing this event today and bringing greater attention to this crisis. very simply and this is a question of 3.5 million americans. had is an american crisis. this is also a puerto rican crisis. and it is one which started as an economic recession, developed into a fiscal crisis, and is today a liquidity crisis which
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shows signs of becoming a humanitarian one. let me give you just a few elements of that. the commonwealth ran out of cash in june approximately of this year. the only way in which they have been able to fund essential operations has been to delay payments to suppliers, to take funds out of insurance funds including workers' compensation funds, to borrow from the already depleted pension funds, $46 billion. virtually unfunded. and not to send out tax refunds. taxes with respect to 2014. what does this mean? the revenue forecasts have already fallen short. these actions which are necessary to provide liquidity are forcing the economy into
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deeper recession. and this is a fragile case. i should remind everyone that 58% of puerto rican children today live in poverty. that more than 40% of puerto ricans live in poverty. there is no room for error in this economy. and i think what has changed in the many months we have been traveling to puerto rico and receiving puerto ricans and puerto rican officials in washington is that there is a palpable sense of fear and a justifiable expectation on the part of our fellow citizens in puerto rico that we collectively -- and by we, i mean not those of us gathered at the bpc, but the administration and congress will act as we have always acted when there is a crisis that affects americans,
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which is to do what's necessary to stem the crisis, to protect the people, and to allow the economy to continue on the path towards growth. so, we are encouraged by speaker ryan's commitment to introduce legislation by the end of march. there are very positive discussions taking place on both sides of the aisle. there is a broad and generally accepted recognition that this crisis needs to be addressed now. and we look forward to working with both chambers of congress in designing the appropriate response. >> so, there's an urgency it sounds like and a note of progress being made. is that fair? >> there is -- there is undeniable urgency and a need for action immediately.
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and there are promising discussions that are taking place in congress, and there is a full-blown effort by the broader administration, and this is not just treasury. i should mention that this comes from the white house. this comes from all agencies of government. and -- but the proof will be in the action we take together. and that has yet to happen. >> so, antonio laid out kind of a dire situation, and many folks in the room may not remember as i do that washington, d.c., faced a pretty dire situation not at the humanitarian levels that were described, but, mayor williams, you know, you've been part of a turnaround where you've come into a situation that had a problem and left a city that was just booming. from your experience, what can the local government do when they're facing this type of situation? what can't they do? and what are the pros and cons of structures that enable them to do that, particularly the one
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that you were a part of which was the d.c. control board? >> i think there are a lot of similarities between the experience we had in washington, d.c., and philadelphia under its control authority and mayor rendell, new york and the control authority and ed koch and talked to both of them as i started here in d.c. and then senator, govgovernor, mayor, and then his highest job in cleveland with their issues. a lot of similarities between them. but i think the differences -- i'll just start off with the differences in terms of truth in lending. when i was in washington, d.c., you had a secretary department, very, very able. economic counsel, very, very able, focused on d.c. despite the acrimony in the 1990s -- and there was political
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acrimony. you had a consensus, basically a bipartisan consensus between the republicans and the clinton white house that we had to do something for d.c. d.c. had to be successful. i hope that that is the case now. then, you know, financial experience, financial expertise throughout the country was valued. i'm not sure it is now. look at last night's debate. goldman sachs is evil, so that's weird, that's hard to deal with all those issues and people suffer froímuy going through al that commotion and shenanigans. in fairness, not trying to be superman, we did have a booming economy in the '90s. here the global economy is not really cranking on all cylinders and you have real economic issues in the commonwealth. but with all that said, i do believe that there are some similarities. while i believe there's always moral hazard in any kind of financial crisis, you know, to use antonio's example of an emergency, if somebody builds
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their house on the shore and a hurricane comes and threatens the people in that house, you don't tell them, well, we're not going to rescue, you know, because you shouldn't be living on the shore. no, you go and take care of the immediate problem and then you take care of the longer issues. certainly the immediate issues have to be taken care of because people's lives are at risk. but i do think it has to be done in the context of improving accountability, improving systems, settling expectations for citizens and investors on which you could address the issues of bad relationship with the federal government in terms of programs, in terms of fiscal relationship. address the issues of economic recovery in the context of greater accountability, i do believe that. >> so, what is the mechanism? how -- what have you -- you're both a student and a graduate of the program of control. control boards and such.
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what is theo@+my mechanism that you've seen from your experience in your communication with others that have worked well that you think could work in puerto rico? >> i think the control -- i think, you know, like in puerto rico, here in washington, d.c., we have issues with the dominance and we believe sometimes our subrogation to use not too strong a word by the federal government. we don't have full representation. and on the island there are obviously different ways to address it is. some people would like independence. some people would like statehood, but everybody recognizes this unfair relationship with the federal government. my only point was, look, while we're dealing with longer-term relationship, we can reset the table, deal with our, you know, short-term, mediummedium-term, longer-term issues and do it in a way that's politically defensible. you know, i worked under the authority of the control board, and i was later elected mayor, so when people say the control board's the end of democracy and people hate control boards
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forever and forever, that's just not true. i think if you use the control board setting, again, with the right kind of leadership on the ground with elected officials in puerto rico -- i don't know where my voice is going and very, very importantly you use this opportunity to do good, public education of where we are, explain to the people in puerto rico here is where we are. here are the steps we have to take. very importantly we're going to take these steps, some of these steps may be tough, but i think all of us would agree we're taking these steps toward a better future. i think all of us would also agree -- this was certainly the case in d.c. -- you don't say we're going to take these tough steps and then we're going to fall off a cliff. no, we're taking these tough steps and we're going to get to a better place. this is i think really underestimated in these fiscal situations the role of leadership on the ground, the role of good public education.
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the ability to explain the financial situation in layman's terms to your constituency is so very, very important. you know, a great example of explaining financial distress in layman's terms, i say this as a financialer. and i'm not as his marketer, i don't know the guy, i would recommend to you time geithner's book, it lays out, explains to the layman a financial crisis and how you approach it. >> always a pleasure to have a former boss complimented. tim really understood the issue in just an amazing way and i think guided america through a challenging problem, crossed time in a way that was to all of our benefit. but i'm pretty biased on that one. hector, there are a lot of conversations about tough choices. you advised many bondholders both on and off the island, you know, who were thinking deeply about this. what is the outcome that they think the best way to solve
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these problems? what does it include that would work and what should we exclude that won't work? >> so, thank you very much for having us and terribly important topic both, you know, as a serious matter for our country and obviously intimately important to me personally as i have had family in puerto rico for a very long time. i think one of the greatest challenges we face and hopefully this is helpful to resolving it is, there's a fair amount of confusion around the facts and a healthy dose of conflation of what is the crisis and what is the catalyst for the crisis. the challenges that puerto rico faces on the social front in the size and scope of its obese government and its, you know, not particularly great governance for the last fair bit of times have been around for a long time. i don't take great pride in s saying that. puerto rico has not run itself particularly great, but what happened overnight something has changed rapidly that we have to
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have some huge response from the federal government to set aside the rule of law in order to slice a knot that can't otherwise be untied. the truth is puerto rico has done a not particularly good job of collecting taxes and addressing an underground economy. it has not done a particularly good job of right sizing its government. government needs to decide what business they're in and not in. with 78 unique municipalities is like having 78 dmvs. doesn't sound particularly efficient. and 60,000 other municipal issuers contend with this decision all day long, that's what govern entails making the difficult decisions and governing and living within that context and then lastly is, of course, we do have some very near-term issues with respect to kind of getting some equitable treatment under the kind of federal programs that exist. puerto rico does have some challenges with respect to the head winds of lack of harmony
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within the federal program it's under. so, in our view, the most important thing is to separate fact from fiction. this is a liquidity crisis. in fact, it's a municipal finance liquidity crisis. puerto rico is not a sovereign third world country when i go down to visit my family, i don't see rows of strife on my streets. my family is not particularly well off. we go down there and i see hardworking american citizens but they are facing an immediate problem around the liquidity concerns and it's resolved by a couple things. first of all, we have to think about being very transparent in the financials. that's been a very big challenge. there's no recent financials and, you know, on one look you could look at the commonwealth financials and say, do you know what, they raised revenues almost 20% this year. they tookly took down their cost of borrowing and they are out of cash. that's an oversimplification. but without the facts it's hard to separate the truth from fiction. what we know about puerto rico
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is not all expenses are knows y necessary and not all revenues are collected and not all debt is subservient to it. they have to choose to pay for something versus something else and the decision being mailed by puerto rico is that all expenses are senior to all debt. and as a consequence we have to preserve all expenses and consider restructuring of all debt. it's a very unhealthy narrative. so, as much as i talk about governance because that really matters to me from a puerto rican standpoint i look at it from the perspective of municipal recipient. setting aside special issues for that create solutions and upset trillion marketplace which finances nearly 70% of the necessary infrastructure of these united states. we can't set that aside. to solve this in a rush to
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hopefully make something politically appealing. so in our view the ultimate solution hinges on three points, you know, clearly there's a need for fiscal oversight. i think the mayor's experience on this is incredibly important and the effort made in d.c. can be a good example for a control board. clearly there has to be some package of equal treatment under a suite of programs in the federal government that allow puerto rico to enjoy some stimulus towards growth. this has to be about a vision towards the future. and lastly, puerto rico has a rack of debt. not all of it's the same. not all of it's insolvent. what we have to do is honor the constitutional obligations and the rule of law. and service the senior debt positions so we keep the municipal market people to function and then deal with the ones that are left so. in my view we can come up with lots of convoluted whiteboarded ideas but there's a tool in the marketplace that exists and it's
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acceptable in all other states and that's the framework of chapter nine. packaging them together seems an elegant way of solving the liquidity crisis so we can build a future for puerto rico. >> since we're all talking about personal connections in this space, i grew up here with my mother as a leading maritime lawyer and i will say this with some pride, i think she was the world's u.s. she was an expert in the jones act. i didn't know what it meant as a small child, of course, the island of puerto rico owned a steam ship company. sure, that made sense and you pointed out all these thing that municipalities -- that the commonwealth owned parts of industry, municipalities it's in. it's very hard for 78 municipalities to be the leaders as well. i'll be the one that gets subsumed. i'll be the office or branch that closed. what kind of structure do you see and what's the role if any of the federal government? in providing that framework to
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make those tough choices that you describe need to be made not just for the liquidity, solvency today but importantly for the bright economic future that we all aspire for for puerto rico? >> yeah, an independent control board that provides a fiscal -- fiscal oversight for the immediate purposes of, you know, arriving at budgets, keeping all the -- keeping expenses in check, making sure that there's process and control in a world where there seems to be less than there should be is invaluable. and then, of course, you know, facilitation of the, you know, of growth initiatives, you know, whether it be through the harmonization of programs or the consideration of privatization of assets. one of the things i often say not with respect just to puerto rico but in general, municipal governments have to decide the businesses they're in. not every government should be in the parks business or the airport business or the port business. you have to this decide what you can't afford to be in and why it suits you and your constituency
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and i think a control board would be enormously useful in guiding towards that end. >> so, david, i want to bring you into the conversation because the rule of law, bankruptcy, i mean, these are things on which you are one of the world's experts on. and you've done a lot of work in financial regulations where we've come to be particularly on questions about too big to fail. and the key theme in your work is the preference to bankruptcy and the consistency and application of the bankruptcy code to other things. kind of bankruptcy, not bailout. and i would say that's also a common theme among many folks in the republican party. what i'm a little bit confused about is kind of now the republican party seems to be coalescing around this idea of a control board, which has broad support here, but has been much more silent around questions of bankruptsy. and so why is that? why is bankruptcy so preferable in financial positions and should it be preferable in this as kind of hector alluded to in
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this position? and to start off for everybody in the room, why can't puerto rico act like michigan when they put detroit into bankruptcy recently and what are the ramifications of that and where do you think this situation ought to end up? >> thanks, aaron. >> sure. >> let me add my thanks to those of the other panelists. this is a very, very important conversation, maybe the most important conversation at this particular moment in time. and it's privileged to be part of it. so, why can't puerto rico use chapter nine, why can't they use bankruptcy or something like bankruptcy. there's a two-part answer to that question. the first is for reasons that are not clear to anybody that i know, puerto rico was excluded from chapter nine in 1984. the term "state" was defined for
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the purpose of the federal bankruptcy laws in a way that made puerto rico a state for every purpose under the bankruptcy laws except filing chapter nine petition. so, puerto rico municipalities are not permitted to use bankruptcy the way all of the states, the 50 states, can authorize their municipalities to use bankruptcy. so, against that backdrop, which everybody was aware of, puerto rico said, since we've been kicked out of chapter nine, and we're in this very severe crisis, what we'll do is we'll put in place our own restructuring law that will look a little bit like chapter nine. won't be quite as broad as chapter nine, but we'll be a territory restructuring law. so, puerto rico did this in 2014. they put in place a law that's known as the recovery act. and what has happened is that law has been struck down by two federal courts. it's been struck down by a
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federal trial court. then was struck down -- the striking down was upheld by a federal appellate court. and the rationale was there is another provision in chapter nine, not the entrance provision, but another provision, that says states can't enact their own restructuring laws. and what the courts have said is that other provision applies to puerto rico, prohibits it from enacting its own restructuring law even though the rest of chapter nine doesn't -- even though puerto rico doesn't have access to chapter nine. that issue is now in the supreme court. the supreme court agreed to hear the case. it will be decided this term. my suspicion, although as i was telling my bankruptcy students yesterday in class, my track record on predicting the supreme court is it's less -- it's above zero, but it's well below 50%. my guess is it won't be decided until the summer, and whatever
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happens will be too late to be a major part of the solution to this crisis is my view. it's possible i'm wrong about that, but the decision will come too late, and it's at best 50-50 that puerto rico's going to win i think in the supreme court. as crazy as that seems. and maybe i should note, i and a co-author of mine filed a little amicus brief saying the supreme court should reverse the lower courts. but back on the question of bankruptcy generally and why do republicans seem to be coalescing toward a control board plus check, something that sounds a little bit like a bailout approach. my first reaction to this that question is, i hope that's not where republicans are coalescing. my sense is, my sense may be wrong, but my sense is that that was kind of an opening bid. that the opening bid was -- was
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what i would call a bailout, a little bit uncharitable, what you might call a check, aaron. and not any kind of bankruptcy option. but there bankruptcy option. there has been hostility among republicans to a bankruptcy or restructuring option. why is that? it seems to me that there two factors. many have been hopeful that b k bankruptcy is not necessary. puerto rico may fix some of the things that hector was talking about and maybe we don't need bankruptcy. the group of people who hold
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that view has shrunk in the last few months. i think i heard them expressing sympathy for restructuring. the other reason why republicans have been leery of a bankruptcy alternative is there is a concern that this is the slippery slope to bankruptcy. if puerto rico is allowed to file for bankruptcy, particularly if it's not just the municipalities,the concern is illinois. we will be talking about a bankruptcy approach that would pull in and republicans have not been sympathetic to that approach. the same kinds of thinking that
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made republicans enthusiastic also applies here. it's a fix and creates better incentives to the future. the claims may be restructured and that will change the way you think about lending. bankruptcy doesn't usually affect it properly or not. >> i don't think bankruptcy is a good thing. i don't think it's a good thing to use it simply and solely to.
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you look at the structural issues that got you into the position in the first place. they take to you the emergency room and you are to rehabilitate the patient and you have it lead a different life. i am not a posed to a control board. the approach that i personally have outlined for puerto rico and not chapter nine. >> i want to turn it over because treasury in the white house is a ten-page plan. those of you in the room are watching and i strongly urge that you do. briefly it talks about fiscal oversight and restructuring authority and increase in federal funding that people have alluded to and i can say from my experience, puerto rico is randomly treated at varying levels for funding on a hop
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scotch level throughout a wide variety of programs, particular ly puerto rico's share of health care and citizens despite being american citizens are not counted at getting the proportional amount as well as they would in the state, particularly in health care. i want to commend you for leadership on this. it's easy to give the shop with the treasury of the white house is not providing leadership. you are out there and what response have you gotten? as i said at the out set, i will leave a little space for further comment. there is brought agreement that
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this is a crisis. there is no debate about that. second, even on this panel, you are hearing agreement that there should be a restructuring of the debt and disagreement as to which debt gets restructured. there is agreement that there should be a debt restructuring and there should be appropriate oversight. there may be a disagreement as to what constitutes oversight, but we are all talking about that as well. let me tell you why we believe all debt needs to be restructuring and the oversight should be respectful and we find that both of those are fundamental. number one, puerto rico's debt is equivalent. puerto rico has been shutout of traditional municipal bond
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financing for 2 1/2 years. it has been able to finance from hedge funds in 2014 and the yield to maturity was 8.5%. the lowest yield on the secondary markets in the debt today is 11.5%. the markets are telling us what we know which is that the debt is unsustainable as a whole. therefore any solution that deals with resetting the liabilities and establishing a path forward has to look at all of the debt. we do not say that that debt has to be treated with a brought brush equally. if one is with the holder, they will say that debt was backed by
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the full faith of the puerto rican constitution. if one has a revenue bond holder, that will say that that debt is backed by sales tax, gas tax, a lien on whatever the revenues are. we say there 18 different issuers and more than 20 creditor classes. there is already a default on up to four of those 18 issuers and the race to the court has already begun. it has already begun. and so the liquidity crisis will be exacerbated by litigation that will make it ever harder to resolve a consensual restructuring of the debt. we do not say that this
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restructuring authority needs to constitute a new chapter and do not say it needs to be modelled on the existing chapter 9 of the bankruptcy coat. what we say to the contrary is that a special legislative act is required. and consistent with neither for cities nor for states. puerto rico is puerto rico today because of the status as a territory and you refer to this has a completely different relationship with the federal government than any city or any state. this affects the funding and the rule of law that is in place. we say that puerto rico deserves
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they need to restructure debt and recognize the severity to agree in a bipartisan fashion. it's emergency legislation to deal with the emergency situation. as to the rule of law, i mentioned the $3.5 billion issuance in 2014. two walks on that. number one, there were no financials in place when the investments were made. we agree that the financials need to be produced and need to be produced in a timely manner. our proposal calls for as part of the oversight authority real involvement in greater transparenty and timely issuance of audited reports. second, the 2014 bond issuance had a as a clear risk factor and
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i invite anybody to look back at this that the federal government may amend the rules that govern the issuance of the debt. it's a risk factor. the market participants bought that with that risk factor and with no recent audited financials. this is not easy. you said at the beginning that this is one of the most complicated restructurings. we believe that the conversation needs to embrace all of the debt of puerto rico. we think there different ways of dealing with the relative seniority of one or another creditor, but without the back stop of a restructuring authority. the decade that i described has
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been a decade of recession could be another lot of decade as part of the litigation and the liquidity crisis and the cascading defaults. plank number one and i took time to do it, but plank number is a restructuring authority. we introduced principals and had flexibility as to how the particulars are drafted into law. williams can describe how it worked in washington. the particular problems that the mayor solved here. what works in place doesn't transport necessarily to another. for the common wealth with self governing status, it is our strong that oversight must
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accomplish two things. it needs to leave it in place and two needs to establish and the receipts as necessary a& th people know that the revenues and expenses will be. no doubt there is a history of fiscal mismanagement in puerto rico that extends for many years. one without the other simply won't address the reality that the debt is unsustainable and
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there needs to be enhanced governance. >> i can't recall a fiscal management crisis that didn't involve mismanagement. i want to react to this and bring in the panel to react to the planks they laid out. where do you think he is right or where do you think he took the direction a different way. ? this is the most important element. we heard from a lot of people. we call it the narrative of solvency denial. all debt is subordinate to all expenses. none of the debt can be service and it has to be restructured.
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not only is it not the case, but it flies in the case of the rules. by stratifying the priority of debt and expenses in accordance with the law and the gross revenues and the sustainability of the constitutionally protected debt of the common wealth, probably the most important across the market place is easily achievable with nearly two times service. >> the general obligation. the scientific type of debt. >> the most important thing is that there is clear and visible solvency across. secondly the idea that we would have to revisit the rule of law. in another case where we have
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evidence of the administration. putting at risk the municipal market place. through the tax code or the priority under the constitution and restructuring. they have that in the market place. nowhere near the crisis of puerto rico. can't achieve and having great difficulty achieving access to the market place and being told by the leaders, the people who invest saying i can't buy this deal because of the willingness to pay challenges being tolerated in skpreek because of the contemplation of unprecedented restructuring. it took 150 basis points. that's extraordinary for them to have to access a market place.
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now the yield is equal to that of puerto rico. the truth be told, it's insidious and it will create disruption in the market place. outside the rule of law and that expected of the market place, there is no way that someone else will say why don't i get that? what it means it it will create instability that is not terribly important for them to have basic services across the nation. thirdly the ability to implement a restructuring regime. in every offering statement for
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every one of the common wealths, saved the go itself. they are listed as instrumentality. under the definition of chapter 9, that makes them eligible. 75% of the total is available under chapter 9. we can debate what would or wouldn't be restructured. it's a vast universe of debt. we don't have to invent something special. unfair consequences and nearly 20 billion of whom are puerto rican residents and citizens and individuals who invested in the common wealth itself. >> so hector raises a good point. 20 billion is held on island and do you want to respond? >> what i'm hearing is there is
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a preference for making sure that the debt is made whole. this is a preference that has basis in the fact that that debt was and credited in the common wealth. the totality is 13 billion direct and 19 billion that is guaranteed. that's out of $70 billion in total debt. if you talk with someone, if you deprive the revenue bond of the claim on the revenues that have been attached, that will disrupt the financing. there is no easy out come for the common wealth here. this is the crisis that is
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unprecedented terms. that's which other class invites the professor to weigh in on this. they have varying opinions and ongoing litigation as to how that should be done. what we are seeing is that all of the creditors need to be part of the discussion. all of the creditors need to make their case in the discussion and if necessary, because the enemy of the common wealth is time, this has to be adjudicate and consolidated in a court of law in front of a judge who can make the determinations. again what worries us is this decades of recession which we have lived through and the american people in puerto rico have lived through could easily
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become voluntary case with them claiming one thing. they have been claiming yet another with no mechanism to bind any class of creditors to the agreement with any class. the debt is dramatically too high and we expressed flexibility in how the specifics are crafted. we are encouraged that everyone is agreeing that restructuring authority is needed. however let's go back to where
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you started. and statistic, 2.5% of puerto ricans are leaving the island annually. why are they leaving instead of staying? if you look at them, number one. they are working when they arrive whether it's in florida or texas or new york or pennsylvania or anywhere else across the country. they're disproportionately working. they are disproportionately led by families in the 18 to 65 year age bracket. they are bringing kids.
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the under 5 population on the island is dropping. think about it. there many more migrants, puerto ricans living in the continent that are able to stay. they would like to stay or able to stab with economic security and access to health care on the island. this does two things. number one, aside from separating in the same place, number one. this cuts into current year tax revenues. number two, it deprives the common wealth of the source of revenues which it needs over the long run. we are in a full-blown crisis. this is the largest wave of migration from puerto rico that has occurred since the 1950s. it is entirely due to economic insecurity, inability to find
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good paying jobs, anxiety over access to health care for families. and to think thatzoic÷ the fede government simply needs to impose a greater degree of control over this economy with the unsustainable debt and has nothing to do with restructuring the debt is totally unrealistic. this had to feel like deja vu all over again. with desirable residents leaving you with a more difficult situation. before jumping back to that, the rule of law issue kept coming up. we want to give them a chance to weigh in. we will do the old moderator of quoting something you said.
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you wrote in small publication that they should grant access to bankruptcy and make sure they have the authority it needs. i want to see if you think that is the right solution and if the panelists would agree or disagree as a package deal. i want to turn back to this kind of get the mayor's reaction with how you change the snirl is really in some ways the core issue about the long-term health of the economy. is that still your position from the times? >> in some respects my position is evolved a little bit. it involves restructuring and fiscal control. i have become convinced that the
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restructuring needs to be available for puerto rico as well as municipality. too much of the debt is directly owned or direct puerto rico debt or indirect. puerto rico itself had to be part of the process. on the rule of law point -- >> i'm sorry, if you did that, would that have a ramification throughout the market? park in my view, it would have much less of a ramification than the market claims that it would have. in my view, the claim that if we make bankruptcy or something like bankruptcy available to puerto rico and or the municipalities, the bond market will collapse it is based on an assumption that the bond market can't tell the difference between good and bad risks. the contagion of facts i think
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ever likely to be limited. >> now you are ordering degrees of magnitude and it will only be ten points across the market. that's across everybody's municipal borrowing throughout. i understand your point. i remember the crisis where investors thought they held a that was highly liquid and b, found out it was not in the crisis. they were issuing scrip and not that long ago. they were clamoring. we had a file called tarp for me. >> none of them got it and that was with the huge successful program. if the answer was yes, but
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small, that's fair. a small thing for a lot of people is big. ask the question what's the alternative? if you are comparing to a pure market where everybody gets paid to what effect does bankruptcy have? they will have the option where it didn't exist before. it will have a market on some effect on the markets. they are comparing that to a rule of law oriented structure for restructuring. that will be clear about who is getting what in consistence with market expectations. i could improve the markets.
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>> it's important to stress the market piece of this. just the market piece of this. this resolves this crisis in a defined period of time and a protracted and disorderly default across 18 different issuers. that gets litigated. we are not picking between a clean case and disorderly case. when we talk, we talk to creditors all of the time. we talk to creditors in creek and traditional bond investors.
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they say consistently that the best thing that can happen in puerto rico is for this crisis to be resolved and as quickly as possible. this becomes a protracted litigious case. they want us to find a mechanism to put it behind us. it's the traditional bond investors to which they lost access. the same investors need to start coming back. our proposal and july will make that happen sooner. >> the universe of traditional investors is well-known to me. i pulled two dozen of them prior to the hearings for the
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congressman on the bill on chapter 9. they bored chapter 9 as a viable framework. the handful of investors that are fearful from the litigation are concentrated and invested. the vast majority are particularly concerned about the outcomes in puerto rico unless they create a change under which they will invest. that is meaningful. we have a framework for general obligation debt. this is one that is probably the most relevant. especially at the state level. they enjoyed decades of access acting as a state. they approach a state. they are characterized and it is measured the same way. when they are going to change the framework, we introduce this
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scary notion that we will change the framework for the general obligation debt. to do so is disruptive. that will create that and manifest itself in a complete disruption. it will create meaningful cost to the borrowing and impair the market place from the return profile for investors. they don't understand the paths for which they are involved. when there is bad news and things go down, often they sell and panic and run for the door. it's a one-way long only market place. that's a technical framing. they are very, very clumsily structured upon which we risk
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staggering amounts of infrastructu infrastructure. we should be thoughtful and careful about disrupting that. it's awful cavalier to make sure we don't jump the shark here. this morning the paper of came out demanding the integrity and the ability to borrow in the future. and act under the constitution. this is a believe notion. in the willingness to pay and not the ability under the rule of law. park are mayor williams. you lived it. where do you come out?
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>> we have really not exhaustively, but comprehensi comprehensively talked about the debt. the patients and the houses on the shore, you deal with the emergencies and no other way to look at it. i experienced the issues that got you into that emergency and the steps you have to take to get you out of it. people invest and they live in a city like d.c. or live on the island of puerto rico. i have freedom to achieve and realize my opportunities. i believe i am going to be treated fairly and something we often overlook. it's key and central here. i overlooked it in school and i thought it was boring. coming into public service, it's essential. it's a notion of settled
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expectations. everything we do here, this is why i would want to be the hard teacher in november. i think we have to recognize the sovereignty and self governments of the people in puerto rico. we are at a point where you have to hit control altdelete and reset the management of the situation. what i fear is that you deal with the dead issues and that being too polite or differential and respecting too much the status quo. we don't get at the longer term issues. they include the relationship that created the migration. i think it's very important to do that.
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>> from the audience, i think i see burt. no stranger to restructuring of entities. >> and i want to touch on something i haven't heard about at all. someone suggested that and puerto rico is america's greece. one of the key aspects of dealing with the key problems in greece has been the insistence on a substantial restructuring of the real economy in greece and specifically among other things, privatization of various activities. i haven't heard one word about that today. i would be interested in your thoughts on some of the specific economic restructuring that puerto rico needs to address such as the electric utility.
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there was an article about the management, if you will, that was incredible and goes beyond that. my question is this. as part of the restructuring of puerto rico, to what extent is there an insistence of various economic institutions in puerto rico or is that snag will be pushed off to the future and only debt restructuring dealt with? >> they had a fair relationship with the federal government. one of the things we did in d.c. was after we had achieved this expectation and built confidence, we were able to go to the congress and build from 50-50 to 70-30. they would be able to work effectively and where in now it
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doesn't. that is important. >> puerto rico is america. puerto rico is simply and the large population that are in economic distress. what you touch on is correct. our debate has been about restructuring and has been about oversight thus far. i am encouraged by which creditor class gets which protection as opposed to all of this debt is payable. that represents significant progress from where we were several months ago. beyond repaying the debt, there is a whole set of initiatives that is critical. the economy needs greater investment. we have proposed an earned
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income tax credit. aaron asked me to describe it. we didn't get past the first two earlier. that is just one tool and a bipartisan tool that worked well for republicans and for democrats and has a triple effect in puerto rico. number one, that puts money in the pockets of families that need it. number two, it's a strong incentive to join the workforce. provides a financial return to join the official workforce. number three, it builds revenues over the long run. we have also suggested that the gross inequities in the health care system need to be remedied. we have suggested that the medicaid match needs to be increased. this is a keeper of our platform. nobody mentioned it.
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some of the migration is due to health care. there more than one doctor each day trained at the university of puerto rico leaving the island in order to practice medicine on the mainland and this has been going on for two years. a greater certainty would have health care and economic benefits. as to the broader question, there is no doubt for a private sect toror to play. no doubt. there is very high interest in investment into puerto rico on the part of alternative energy providers. there is interest in investment in infrastructure. none of that can happen with the level of uncertainty and crisis the economy is subject to. let's be clear. number one, stop the crisis and get to the end. reset debt. such that the economy and the
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government can make needed investments and allows capital to come into puerto rico. there is an interest in private capital to invest. the federal government has a to play in health care that the government has a role to play. we are talking about stemming the crisis. such that not only do the puerto ricans seeking opportunity on the mainland stop leaving en masse for better opportunity, but perhaps some of those families return. there is an interest in returning. the job is immense. they emphasized oversight because it's needed now.
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there is more that is needed overtime. >> in addition stemming off the immediate near term crisis, we have to have a vision towards the future and that includes improving the energy infrastructure and includes making it a welcome environment for business and investment and there is a staggering amount in the community. they want to wade into less choppy waters. the environment is such that a lot of people were interested. being part of the solution, myself, lots of other creditors, the leadership and private and private business leaders want to be part of the solution.
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a very well educated resource. it's a platform for growth. we can set a good tone for puerto rico by navigating the crisis. >> hi. just a fe on timing. how quickly does washington need to act before things really spiral out of control and is that view of a deadline shared on capitol hill, what's the consensus for action. >> aaron said it in his opening remarks. what has changed between last year, there is broad recognition that something has to happen now. they set a deadline of march
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31st for a responsible solution on the house floor. he held two hearings through the energy and natural resources committee and he will be holding a third. there is a discussion taking place in the senate. it is a leadership as a whole and the seriousness with which the discussions are now taking place. >> if it's super bowl sunday and this being a conversation about baseball, it's fair. are we looking at opening day? where are we here? >> this needs to happen now. what you heard from the panel
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and some of the statistics that i have given, we are not talking about a possible future hypothetical problem. please. you asked at the beginning how is our trip with the secretary to the common wealth. this is a problem today. the common wealth is looking to us today to design a comprehensive solution to resolve this crisis. this is recognized in congress and recognized in the broader administration. it's our view that we will meet this deadline and we will do everything in our powers to work with members of both sides of the aisle in both chambers to find the solution that comprehensively allows puerto rico to navigate the crisis. it's now. >> i think another -- i visited one of these educational research and they have to be
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structured. you can't go to lecture and go to the beach. it has to be a week of stuff. the thing that struck me, the place to be just to take off and be breathtaking. one of the things for americans, we have to think about not just the urgency that antonio is talking about, but just in terms of san juan, puerto rico. you will lose a key opportunity. they are waiting to be open and to be a huge capital again and the opportunity ought to be seized in san juan. not to preempt it, but to get moving.
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you are exactly right. tourism is right there. bacardi, one of the major brands of the islands of puerto rico originated on a different island. real competitive issues. you have more experience with the island than all of us combin combined. >> we're don't need to pick industries. we need to make the ground fertile and let the market find the best opportunity. there are natural resources to draw from in the strength orred education of the workforce and the fact that it is the rule of law and make the environment welcome. you can't have a consistent flutity.
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they want to grow from it. that's a big part. we have to have a vision. >> we will take you and it makes it easier. probably hard for antonio to talk to other people. as a personal matter, i think it's unrealistic that we use this to solve the situation. i say that as a family of puerto rico that arrived in the early 1800s and was there for the transition and has family that fought for this country and served in public service.
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we greatly want to be as equal as anybody else. wear my citizenship like anybody else. it shouldn't be different than from being from oklahoma. truth be hold, it's a big lift. it's asking a lot and a little unrealistic. it would be great, but it's unrealistic to conplate the issues. it has been a problem in this crisis and confusing a lot of things at once. we need to separate fact from fiction and get to the needs of what will solve the crisis and deal with it. with great leadership and more firm foundation, we can make the decisions about status. >> i would say somewhere between here and status, i think it is appropriate. like puerto rico and d.c., we have been troubled from the founding with our relationship with the federal government and lack of representation. one of the reasons, they said let's deal with the immediate
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issues. we can deal with the representation. we can address the longer term strategic relationship issues. about two years into the recovery, we had a productive discussion with the administration about our relationship and the federal government. on the balance sheet level. >> what are the things the federal government should do. does it make sense to run a prison system? it makes sense to do that system and we can continue that discussion as we went. we got into the health care issue and issues of education. when you are talking about restructuring, this is part of what they called a balance sheet. with the restructuring, the point i keep hammering, you have to deal with the other
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liabilities and deal with how you manage assets in a comprehensive way. >> i would like to briefly weigh in on this. there is no question with the status that is vitally important. why are we proposing that restructuring authorities and the fair medicate treatment to puerto rico. the territory with puerto rico's status does not afford it adequate tools in those areas. and so we believe that as congress as the broader administration, we need to afford the common wealth of those tool that is it needs now such that it can navigate this crisis.
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status contributed to the crisis and we provide the tools to resolve this issue in the areas of restructuring and health care. i gave the bankruptcy here, but on the democratic party, i'm a proud democrat, but i came here to ask myself the tough questions.
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it's this funding pot and not that funding pot. they are not taking a step back and saying puerto ricans are citizens and americans. we said that repeatedly here. america say country that started and i have been struck. >> truth be told i think we have
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got to use this crisis. i know this it will exist and speak spanish and you don't look like the mainland. they have to be dealt with. i am not answering your question. i just think the truth of it is, it's hard. it's unlikely. as much as the club has to invite people in, they have to realize what the consequences are for joining that club.
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i'm an advocate of state hood and it's just a personal thing. it's not clear that the club wants us invited in and both sides of the aisle. i do believe the majority does. we have to get past before we can entertain. we have to be understood by everybody. >> even for those people who would like to be a state. this is true in d.c. in d.c., the reason why we are not a state was people thought we were a wreck and a badly managed rap. we were a city where they want green pastures. americans didn't like cities in the 20th centuries. there is that now, but the thing that remains is we are a democratic entity. i don't think they want two more
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democrats. if d.c. or puerto rico were staunch republican entities. >> the last time we added, alaska and hawaii came in as a pair. hawaii was a staunch republican place and alaska was full of democrats. trust me, i don't think i'm breaking news that the election night in november. we are not great at predicting the future of political alignment. they need to put it on a timeline. he has done a lot to force the issue and he is probably to be commended for doing that. >> i think we are going tori

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