BAM'S BOONDOGGLE BONDS: ANOTHER 'STIMULUS' BUST

NY Post ^ | July 1, 2009 | Meghan Clyne

[Scanian]

PRESIDENT Obama has blamed our economic woes on the "bursting of a debt-based bubble" and a culture of "easy money." Funny: The Build America Bonds program, an obscure part of this year's vast "stimulus" package, sure seems to be encouraging reckless and irresponsible borrowing.

Maybe the administration thinks reckless borrowing makes sense if it's being done by local governments?

"Build America" securities work like normal municipal bonds: Localities issue them to raise cash for projects or to pay down other debt -- except that the federal government covers 35 percent of the interest costs.

Subsidized borrowing? Needless to say, state and local governments love it. Indeed, as the Bond Buyer reported earlier this month, the program's far more popular than lawmakers had predicted: Official budget estimates for the program's cost this year ranged from $50 million to $91 million -- yet, in less than half the year, more than $250 million in payments are already scheduled.

The paper cites municipal-bond analyst Philip Fischer estimating that taxpayers could bleed billions a year by the time the program winds down.

"The bond program's costs are skyrocketing because we've created an easy-money system for pet projects around the nation," says one critic of the program, Sen. Jim DeMint (R-SC).

Pet projects? The Treasury Department promises public disclosure soon of just who's issuing the bonds, and for how much. But we already know that the biggest issuer so far is near-bankrupt California, which has already sold more than $5 billion worth.

You can understand why the Golden State would jump at any chance to reduce its multibillion-dollar load -- but why should taxpayers in New York be giving bunglers in Sacramento a backdoor bailout?

[CutePuppy]

Good additional info on these bonds and why "states and municipalities are loving it":
Building America With Obama Bonds Signals Munis’ Fall

[grey_whiskers]

Yes, but once people realize they get *taxed* on it -- and a certain wise Latina changes the balance of power on the court, so that ALL interest on these bonds is taxable -- demand for them will wither and die.

Cheers!

[GreenAccord]

Just like Jim Quinn (of Quinn & Rose) says, “whenever the government subsidizes anything, you get more of it.” From single moms to crops, all the government has to do is throw money at something and you’ll get more, a lot more, of it.