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Senate to begin voting on Puerto Rico rescue package: 'Failure is not an option'

Treasury Secretary Jacob Lew, joined by Sen. Ron Wyden, on Capitol Hill Tuesday, June 28, 2016.

Treasury Secretary Jacob Lew, joined by Sen. Ron Wyden, on Capitol Hill Tuesday, June 28, 2016.  (AP)

The Senate is set to begin voting on a rescue package for debt-stricken Puerto Rico, just two days before the island is expected to default on a $2 billion debt payment.

The White House-backed measure faced some opposition from both Republicans and Democrats, but party leaders endorsed it and promised to complete it before the July 1 deadline.

"Failure is really not an option," Majority Leader Mitch McConnell, R-Ky., told reporters after meeting with his GOP caucus Tuesday.

Puerto Rico is in a decade-long recession and has $70 billion in debt. The bill, passed by the House earlier this month, would create a control board that would oversee the island's finances and could supervise some debt restructuring. It would also require the territory to create a fiscal plan and fund public pensions, which the government has shorted by more than $40 billion.

Treasury Secretary Jacob Lew made a last-minute visit to Capitol Hill Tuesday in a bid to persuade some reluctant Democrats concerned that the board would be too powerful. Democrats have also opposed a provision that would allow the island's government to lower the minimum wage for some younger workers.

Lew urged senators to vote for it Wednesday even though it isn't perfect.

"The fact that this works and it gives Puerto Rico the ability to move forward is just an overwhelming reason to pass this in a timeframe that prevents the descent into chaos," Lew said.

Senate Minority Leader Harry Reid, D-Nev., said he would vote for the legislation, though he criticized McConnell for not allowing amendments to the bill. 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.

Some Democrats said they would back the bill, though unenthusiastically.

"I'm not going to let the adequate be the enemy of the barely sufficient," said Oregon Sen. Ron Wyden, the top Democrat on the Senate Finance Committee.

Sen. Richard Blumenthal, D-Conn., said he was supporting the legislation and warned of the consequences if the Senate doesn't act: "If it's just rejected, there's no clear path," he said.

Others remained staunchly opposed. Democratic Sen. Bob Menendez of New Jersey monopolized the Senate floor for more than four hours Tuesday evening, arguing that the bill adopts a colonial approach to the territory, which is home to 3.5 million United States citizens. He said ordinary Puerto Ricans get little say and the package favors hedge-fund creditors over island pensioners.

Sen. Bernie Sanders, I-Vt., spoke out against the legislation for similar reasons, calling it "disastrous."

Some Republicans planned to vote against it as well.

"I'm just not sure we have enough in this bill to ensure they will make the difficult decisions they need to," North Carolina Sen. Thom Tillis said of the Puerto Rican government.

A bipartisan group of lawmakers from Ohio and West Virginia threatened to try and block the bill in an effort to force action on unrelated legislation that would help coal miners' pensions.

"If we're going to help Puerto Rico escape bankruptcy, we should also be helping the 90,000 coal miners in Ohio, West Virginia and elsewhere who are also suffering," Sen. Rob Portman, R-Ohio, said.

Other Republicans said it was the best path forward.

"We're not going to let Puerto Rico go off a cliff here, it's too important," said Florida Sen. Marco Rubio.

The legislation is needed because Puerto Rico, like all U.S. states and territories, cannot declare bankruptcy under federal law. Mainland municipalities and their utilities can, while municipalities and utilities in Puerto Rico cannot.

As several senators remained uncommitted, some bondholder groups worked to turn them against the bill, arguing it doesn't sufficiently protect bondholders and is tantamount to a bailout for the territory. Several labor unions also lobbied against the measure, arguing in a letter sent to senators that the minimum wage provision could take money out of the Puerto Rican economy.

Like Lew, Puerto Rican Gov. Alejandro Garcia Padilla made a last-minute visit to Capitol Hill to lobby for votes.

"It's not perfect, but we need it," Garcia said between visits with senators.

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