Nathan Bomey

USA TODAY

The confrontation between debt-swamped Puerto Rico and its creditors is intensifying as the U.S. territory will default on payments due Monday, deepening the island's financial crisis and placing additional pressure on Congress to intervene.

The debt crisis threatens to resuscitate moribund ideological debates over the propriety of federal bailouts and the impact of fiscal mismanagement on the lives of real people faced with insufficient services.

Puerto Rico Gov. Alejandro García Padilla said Sunday afternoon in a televised address that he had ordered the island's Government Development Bank not to make certain payments owed Monday, stacking another round of missed payments on multiple previous defaults.

"This was a painful decision. We would have preferred to have had a legal framework to restructure our debts in an orderly manner," García Padilla said. "But faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice. I decided that essential services for the 3.5 million American citizens in Puerto Rico came first."

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Puerto Rico was expected to default on about $422 million in bonds Monday, plunging the U.S. territory deeper into arrears, Moody's Investor Service said last week in a report.

Treasury Secretary Jacob Lew sent a letter to congressional leaders Monday reiterating his push for legislative assistance. Under federal law, Puerto Rico cannot file for Chapter 9 bankruptcy protection, a process that would allow the island's government to negotiate with its creditors and restructure its debt.

Lew wrote about the litany of services that are being affected, from rationing medications at hospitals to a diminished ability to combat the Zika virus that has hit Puerto Rico hard. The Centers for Disease Control and Prevention and Puerto Rico's health department found that at least 683 people have been infected by the virus, which claimed its first victim in Puerto Rico.

"Unsealed septic tanks, abandoned homes, cemeteries, piles of old tires, where mosquito larvae grow, for example, must all be treated, but the government is struggling to pay for the work to be done," Lew wrote. "Unless Congress passes legislation that includes appropriate restructuring and oversight tools, a taxpayer-funded bailout may become the only legislative course available to address an escalating crisis."

Municipal Market Analytics analyst Matt Fabian said Sunday that it's clear the island can't pay its debts in full.

"Frankly the risk in Puerto Rico is that bonds aren’t cut enough initially to create a sustainable base," he said.

The island's lawmakers recently enacted a debt moratorium bill designed to ease the legal implications of defaults, but bondholders are furious and could mount a legal challenge. The governor cited that law as justification for his action Sunday.

"Whether they occur in the context of federal oversight legislation or under the local moratorium law, the impending non-payments will constitute defaults by Moody’s definition," Moody's said.

Debate is swirling in Congress over how to aide Puerto Rico, which has some $71 billion in bond debt and an estimated $44 billion unfunded pension shortfall, according to U.S. Treasury Department estimates.

By all accounts, population loss, an economic malaise, sky-high taxes, retiree costs, government bureaucracy and federal policies have conspired to undermine Puerto Rico's finances. The island's debt currently trades at prices ranging from 10 cents to 70 cents on the dollar, according to Treasury.

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But how to address the crisis remains a divisive matter on Capitol Hill.

García Padilla implored Congress to create a legal framework that would allow Puerto Rico to restructure its debts expeditiously. "We can’t wait longer. We need this restructuring mechanism now," he said.

Generally, Republicans are opposing anything that sniffs of a bailout without concessions on pensions, while Democrats are pressing for greater protections for unions.

The need for a financial control board with veto authority over spending appears to be gaining traction. Similar boards were appointed to oversee New York and Detroit following their respective financial crises.

"There's some consensus" that a financial control board is necessary, Fabian said.

One of the major bond insurers at risk in Puerto Rico, Ambac Assurance, told shareholders last month in a letter that it "believes that our insistence on establishing an independent control board with meaningful authority will be part of any solution for the commonwealth."

What's unlikely, however, is that Congress will agree to extend Chapter 9 bankruptcy — the municipal kind — for Puerto Rico's beleaguered governmental institutions, Fabian said. Although García Padilla has pressed for access to Chapter 9, the concept is combustible on Wall Street since investors lent money to the island when bankruptcy was not an option.

About 45% of Puerto Ricans live in poverty, compared with a national average of 16%, according to the Treasury Department.

Some 1,500 residents of Puerto Rico are leaving the island every week, further diminishing the tax base.

While debt restructuring is considered vital to the island's future, economists say economic reforms are similarly important. For example, businesses complain that they are subject to federal minimum wage laws that make it difficult to do business in Puerto Rico, where median household income is $19,000.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

Contributing: Alan Gomez in Miami.