While at the Milken Global Conference 2016 put on by Milken Institute, Douglas Holtz-Eakin, president of right-leaning think tank American Action Forum and a former director of the Congressional Budget Office under President George W. Bush, spoke with TheStreet and weighed in on Puerto Rico's financial crisis and income inequality.
Puerto Rico said it would miss the majority of a $422 million interest payment on its debt due Monday, causing the U.S. commonwealth to default. With obligations of more than $72 billion, Puerto Rico's fate may ultimately be left to the federal government.
"I think Congress will ultimately put together some legislation," Holtz-Eakin said. "It's going to be very difficult. You've got a whole bunch of claimants on a very limited amount of revenue. They are trying to structure the priorities for any workout that might happen," he continued, referring to the myriad creditors the commonwealth has.
Puerto Rico's debt structure pits numerous competing factions against each other, including holders of general obligation bonds, those used to finance public works projects, against people owed for pension benefits. The complex question policy makers must grapple with is who gets paid, how much they get paid and in what order.
"Inevitably, that takes a long time," Holtz-Eakin concluded.
Holtz-Eakin was slated to speak on a panel entitled "Income Inequality: The Moral Issue of Our Time?" at a time when income inequality has taken center stage in the 2016 race for the White House, particularly in the Democratic nomination contest. This is not out of the ordinary, Holtz-Eakin said.
"It's always an issue in the presidential campaign. We forget this," he said. "In preparation for the panel, I was looking at headlines from 1992 -- 'A Return to the Great Gatsby Era' and 'The Greatest Inequality in Our Lifetime.' Inequality is a potent political force, so it does come up in presidential years."
When advocating for solutions to remedy the gap between those at the lower end of the income scale and those at the top, Holtz-Eakin cited the need to focus lifting up those that have the least.
"For me, if you are worried about inequality, you should worry about the bottom end, and worry about poverty," Holtz-Eakin said. "I think we need strategies that focus on not poverty, per se, which sounds like not enough money and tempts you to just throw money at it. We've done that. We need to work on the capacity for self-sufficiency.
Holtz-Eakin said that focusing on self-sufficiency means ensuring that people have the necessary abilities and knowledge base to be successful in the workforce.
"What that means, then," Holtz-Eakin said, "is giving people skills starting with the education system, giving them the social skills, and there's some tough cultural opportunities but they need opportunities. That's where the jobs come in."