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Tuesday, July 28, 2015

Hedge funds: Puerto Rico, it’s us or the kids

Posted By on Tue, Jul 28, 2015 at 4:49 PM

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Earlier this month, we reported on Puerto Rico’s financial crisis: How the island, with its staggering $72 billion debt, is in an economic death spiral as thousands of Puerto Ricans flee to the United States, especially Florida. Puerto Rico's governor has said the U.S. territory's debt is unpayable, and legislators have opposed allowing the island to declare bankruptcy.  

Now, hedge funds who have bought Puerto Rico's tax-free bonds for decades are calling for the island to lay off teachers and close schools to pay them back, according to The Guardian.

The funds commissioned a report from former International Monetary Fund (IMF) economists misleadingly titled, “For Puerto Rico, There is a Better Way.” The report tells the island it needs to collect more taxes, sell public buildings, cut education spending, reduce teachers and cut excess Medicaid benefits. Puerto Rico spends too much on education, the report says, despite the fact that 100 schools have been shut down this year, and the colony spends $2,000 less per student than the U.S. average. 

The report also makes sure to remind the island: Bond holders come first, according to your constitution. Before your education. Before your health. Before your citizens.

On Tuesday morning, U.S. Rep. Luis Gutiérrez presented to his colleagues in the House of Representatives a lesson on Puerto Rico’s economic crisis.  

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