Trump said he wants to bail out Puerto Rico. His budget head says he didn’t mean it.
“I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” Mick Mulvaney, director of the White House budget office, said in an interview Wednesday.
Puerto Rico, ravaged by Hurricane Maria on Sept. 20, is dealing with a disaster worsened by the long-term debt crisis that led it to declare a form of bankruptcy this year. The commonwealth’s government for decades has been plagued by budget deficits and borrowed $74 billion in a spree enabled by a yield-hungry Wall Street.
After the president suggested that the debt must be erased, a benchmark general-obligation bond due in 2035 plunged 12 cents on the dollar Wednesday morning. The price later rebounded.
On Wednesday morning, Mulvaney tempered Trump’s comments in a Fox News interview after the president surveyed damage on the island.
“We are going to work something out” on Puerto Rico’s debt, Trump said.
“We have to look at their whole debt structure,” Trump said. “They owe a lot of money to your friends on Wall Street. We’re going to have to wipe that out. That’s going to have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”
Mulvaney said Wednesday that the administration is devising an aid package to send to Congress that will deal with rebuilding and repair.
“We are not going to bail them out,” he said. “We are not going to pay off those debts. We are not going to bail out those bond holders.”
Mulvaney didn’t directly address the president’s suggestion that the debt simply wouldn’t be paid.
Puerto Rico began defaulting on its debts two years ago, seeking to avoid Draconian budget cuts officials said would deal another blow to an already shrinking economy. With nearly half of its 3.4 million residents living in poverty, the government sought protection from creditors in May.
At a press conference in San Juan on Wednesday, Gov. Ricardo Rossello dismissed Trump’s remarks and said Puerto Rico will resolve its debt through the bankruptcy process.
“As far as the comments made about wiping the debt clean, that is the opinion of the president. Puerto Rico is already involved on a judicial front,” he said.Trump visited the island Tuesday, where he met local officials and offered consolation to residents who’ve been without power and short of drinking water since the storm struck. At least 34 people were killed by the hurricane and about 93 percent of homes there still lacked electricity Tuesday.