When squabbling politicians fail to provide effective public services, and spend all the people’s money, it can be tempting to wish a giant hand would reach down and make everything right.
That’s what Congress has tried to do over the past six years in Puerto Rico, a state-sized U.S. colony with twice the population of Philadelphia. A [University of Pennsylvania Carey Law School] bankruptcy professor, David [A.] Skeel, headed the effort for most of its existence, climaxing in January with the plan’s approval by federal Judge Laura Taylor Swain.
Under U.S. law, individuals, businesses, and even cities can go bankrupt, but states and colonies cannot. So what’s happened in Puerto Rico is a blueprint for what could happen as aging U.S. states, such as New Jersey and Pennsylvania, continue to spend money they don’t have.
In 2015, Puerto Rico owed Wall Street investors $72 billion, which then-Gov. Alejandro García Padilla said the island could not pay. It also faced a pension deficit of over $50 billion — almost as large as Pennsylvania’s, for a population less than one-fourth its size.
So Congress in 2016 approved the oversight board, known locally as la Junta, comprising a small group of businessmen, financiers, and scholars. It was appointed by President Barack Obama and his successors to restructure Puerto Rico’s debt, taxes, and spending after elected leaders couldn’t agree on a working plan. Natalie Jaresko, the American-born former Ukraine finance minister, is its paid executive director… .
Skeel is the S. Samuel Arsht Professor of Corporate Law at the Law School. He is the author of True Paradox: How Christianity Makes Sense of Our Complex World (InterVarsity, 2014); The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences (Wiley, 2011); Icarus in the Boardroom (Oxford, 2005); Debt’s Dominion: A History of Bankruptcy Law in America (Princeton, 2001); and numerous articles on bankruptcy, corporate law, financial regulation, Christianity and law, and other topics.
Skeel has also written commentaries for the New York Times, Wall Street Journal, Books & Culture, The Weekly Standard, and other publications. He has received the Harvey Levin award three times for outstanding teaching, as selected by a vote of the graduating class, the Robert A. Gorman award for excellence in upper-level course teaching, and the University’s Lindback Award for distinguished teaching.