The bill will come due

FEW words raise as many hackles in America as “bail-out”. To left and right alike, it speaks of waste and corruption: the exploitation of hardworking taxpayers by the rich and the feckless. That is bad news for Puerto Rico, a small, broke American territory in the Caribbean which missed payments on some of its debt this week (see page 33).Barack Obama wants Congress to amend its laws to let Puerto Rico declare bankruptcy and to stump up some money to help it through a transition that will inevitably be painful. Righteous lawmakers harrumph that this sort of bail-out would reward the island’s profligacy. Its tattered accounts stem in part from a bloated public sector, unaffordable pension promises, unduly restrictive labour laws and a tax code that is full of holes. They fret, too, that it would set a bad precedent. Many of America’s 50 states have big debts and even bigger unfunded pension liabilities. There is no bankruptcy procedure under American law either for states or for territories like Puerto Rico. If Congress throws Puerto Rico a lifeline, the theory goes, spendthrift places like Illinois will soon request one.