WASHINGTON – Treasury Secretary Jacob Lew on Monday warned of widespread consequences if the Senate fails to act before Friday on a rescue package for debt-stricken Puerto Rico.
The U.S. territory owes a $2 billion debt payment to creditors on July 1. The House already passed legislation to create a new control board and restructure some of the U.S. territory's $70 billion debt.
In a letter, Lew said the crisis in Puerto Rico "will ratchet up to an even higher level" if Congress doesn't act in the next four days. He said that if the island defaults on the July 1 payment, the government may be forced to lay off police officers, shut down public transit or close a hospital.
"While we do not know the full ramifications if Congress fails to act before the end of the month, we know for certain that it is the 3.5 million American citizens who live in Puerto Rico who will be further harmed," Lew said.
Senate Majority Leader Mitch McConnell, R-Ky., has said the Senate will consider the House bill this week, but he will need support from both parties to surmount a certain 60-vote threshold to advance legislation. The House is out of session until July 5, so the Senate will have to pass the House bill unchanged for it to head to the president's desk for his signature before the Friday deadline.
Last week, Senate Democratic leader Harry Reid said his caucus has serious concerns about the bill despite President Barack Obama's support for it.
Reid said Democrats may want to try to strike a provision in the bill allowing the Puerto Rican government to temporarily lower the minimum wage for some younger workers.
"At the very minimum we need some amendments," Reid said.
At the same time, some Republicans have expressed concerns that the package could serve as a precedent for financially stressed states.
The House overwhelmingly passed the bill 297-127 on June 9 with the support of House Speaker Paul Ryan, R-Wis., and House Minority Leader Nancy Pelosi, D-Calif.
Like all U.S. states and territories, Puerto Rico cannot declare bankruptcy under federal law. The legislation would allow the seven-member control board to oversee negotiations with creditors and the courts over reducing some debt, but the bill does not provide any taxpayer funds to reduce that debt. Creditors have heavily lobbied to ensure that their interests are protected by the board.