This is the Cato Daily Podcast for Thursday, March 3rd, 2016. I'm Caleb Brown.

Puerto Rico is a small U.S. territory in massive debt, and it's finally coming to a head.

The choice now appears to be between a standard issue bankruptcy that would look a lot like what any state would have to face, and a full-scale bailout to creditors and those owed money.

Ike Brannon is a visiting fellow at the Cato Institute.

He comments.

Right now, Puerto Rico is $72 billion in debt.

It's a per capita basis that exceeds just about any, by far exceeds the debt in any state of the union.

They've begun defaulting on certain bonds. They just don't have the capability of paying.

They've been in recession for over a decade and there's no evidence that they're going to bounce

back anytime soon.

And last year or so, investors have been very wary about putting more money in Puerto Rico,

and the price of its bonds have fallen precipitously.

There is a discussion about whether or not the feds ought to be involved in Puerto Rico's fiscal problems.

So where does that stand?

So right now, there's two different fronts so Treasury has their own

proposal led by Antonio Weiss the appointment for Treasury on this when he

is proposed is something that he calls a super chapter 9 bankruptcy.

In bankruptcy law chapter 9 is part of the code that governs bankruptcies by municipalities.

It covers all 50 states, but it does not cover territories like Puerto Rico or the District

of Columbia.

So Chapter 9 bankruptcy was used by, for instance, by Michigan.

Michigan allowed Detroit to declare bankruptcy a couple years ago,

...