Build America Bonds (BABs) – Another scheme for more debt

Update 10-30-12: DART (Dallas Area Rapid Transit) plans to issue $552 million in new debt to help subsidize the transit system and hope BABs will subsidize that debt and thru sales tax revenue.

These are federally subsidized bonds for local municipalities to raise money for light rail projects, sports or convention centers, or sometimes hotels…all money losers.

About $174 billion has been issued under the program…California issued about $30 billion.  The Federal Government already subsidizes $450 billion in municipal bonds through income tax deductions…Wall Street firms have pocketed about $1 billion in fees.

Municipalities hold about $2.8 trillion of outstanding debt and $3 trillion in unfunded pension and health care liabilities.

Why am I writing about this?

First, municipalities going into debt is terrible – but going into debt to build projects that lose money is criminal.

Second, when will we learn not to go into debt beyond our means?

Third, who is watching this massive debt?

Our economy is more fragile than some would admit and we must not toy with massive long term debt.

Source:  WSJ, 12-8-2010, A22

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