Washington D.C. elites in the so-called House of Representatives have decided to bailout spendthrift Puerto Rico. This tiny island has a $2 billion out of a $70 billion debt payment due on July 1st. Of course, lawmakers refuse to call it a bailout. They say the federal government is “restructuring” its debt. Speaker Ryan declared no “extra” money will go to Puerto Rico. Yeah, right.
These people act like this hasn’t happened before. During the 1830’s and 40’s, states ran up outrageous debt by issuing bonds for infrastructure projects. An economic crisis ensued rendering irresponsible states insolvent and unable to pay back investors. Foreign governments lobbied Washington D.C. for a bailout. They wanted the general government to guarantee states’ debts which, of course, it refused. Our federalist system didn’t allow such an infringement upon self-government.
Eventually, states paid off their debt without federal government help and were the wiser for it. Here is an excerpt from America’s First Great Depression by Alasdair Roberts.
“Self-government is no longer a theory, it has been demonstrated,” said John Pettit, an Indiana delegate who had served in both the state and federal legislatures. And time had shown its frailties: “We have not that perfect confidence in ourselves…and we take our cool and calm moments to bind and restrict ourselves - to protect ourselves against the sudden and dangerous impulses of passion and prejudice…It is to prevent the evils resulting from excitement and passion, that we take our calmer and quieter hours to bind ourselves and our fellow man.”
Many states had, indeed, bound themselves in the years following the crises. This was manifest in constitutional reforms and new tax policies, but a more important alteration, which both caused these changes and made them durable, could be seen in political culture. Humiliated by the experience of default or near-default, pressed by angry lenders, and oppressed by new taxes, states had abandoned the internal improvements movement. They had replaced their sunny views about popular sovereignty with a darker conception of the rationality of political processes. The economic crisis seemed to have taught them a lesson: that liberty without discipline was a formula for ruin.
Indeed. Puerto Ricans should have to suffer through a crisis they created; in the end, they will be the wiser for it. Something tells me the United States will follow shortly.