In essence, it consists of a broad new bankruptcy regime, increased Medicaid spending, a "tax credit" for labor supply, and a financial control board. The most prominent policy debate to date has been the possibility of providing Chapter 9 bankruptcy protection for governmental-owned entities; the administration expanded this idea to include the government itself. It is always dicey to change the rules midstream. Moreover, bankruptcy would not increase economic growth or alter the fundamental fiscal trajectory. There may be a place for bankruptcy protection of some sort, but this idea should be at the end of the line; not the front.

Similarly, there is nothing about increased Medicaid spending that will help the economy or budget problems. It may be the case that superior health policy would involve more federal dollars, but that is an issue separate from the fiscal crisis.

The administration argues that Puerto Ricans should be allowed access to the Earned Income Tax Credit. The EITC has been successful in raising labor supply – particularly among single mothers – but it is odd to argue that the island's workers should receive a federal income tax credit when they do not pay the income tax. This is a proposal to pay the Puerto Ricans to work, an outcome that is better generated by broader economic reforms.