Jobs, offshore profits and infrastructure

Our nation is in a serious economic crisis. Both political parties dance around each other with varying demands for cuts in entitlement programs, tax increases and a rise in the debt ceiling. It’s a doomsday prospect and the American people are feeling the chill of economic malaise.

The policy response thus far has mainly been to engage in deficit-spending, to give tax breaks, to broaden the social safety net and to print money. It sounds potentially inflationary to me.

It’s time for the political class to stop acting so small and embrace a way to rebuild our nation. It’s time to face the fact that we have a twentieth-century infrastructure at the beginning of the twenty-first century. But building new high-speed transit, offshore wind power, solar power arrays and new energy transmission grids is hugely expensive. Who will pay the cost?

Public infrastructure is a common good and must be financed as such. We can borrow financing models from the private sector but we must look more creatively for solutions. The first and most obvious place to look for public funding is from the defense budget. Diverting part of the money spent on wars to develop alternative energy infrastructure would allow us to begin to break our dependence on foreign oil. This crushing addiction has kept us involved in wars and nation-building in Iraq, Afghanistan and  Libya, among other places.

The other place to look for infrastructure funding is the $1 trillion of profits U.S. corporations are storing overseas. American companies are lobbying Congress to repatriate profits earned in overseas subsidiaries at tax rates as low as 5%. Perhaps Congress could legislate a compromise and tax half of returning profits at 0% if corporations loaned the other half of profits to a national infrastructure bank for a term of 10 years and at an annual interest rate of 5%.

Muni sweeps: Happy “Bike to Work” day

House Committee launches ‘YourWitness’ program

From YouTube:

The [House] Financial Services Committee has launched a new program, Your Witness, which allows Americans to submit questions they want to ask a witness during a hearing. During an Oversight and Investigations Subcommittee hearing on the Stanford Financial Ponzi scheme, Rep. Randy Neugebauer asks the first question of Julie Preuitt.

From the House Financial Services Committee website:

@RandyNeugebauer asks question at a hearing using #YourWitness, our new program that allows Americans to get involved

California goes after it’s “wall of debt”

From the Bond Buyer:

[Governor] Brown released a revised budget Monday that dramatically reduces planned bond issuance as part of an effort to curb overall borrowing by the state that he termed the “wall of debt.”

Whitney’s new gloomy doomy

Mark Gongloff of the Wall Street Journal‘s Marketbeat blog wrote this today about Meredith Whitney:

Professional scary person Meredith Whitney took to the op-ed pages of The Wall Street Journal this morning to sprinkle some more of her fear dust on the muni-bond market:

Municipal bond holders will experience their own form of contract renegotiation in the form of debt restructurings at the local level. These are just the facts.

Borrowing from the future to fund today

This august gentleman is William Gibbs McAdoo, the Secretary of the Treasury in 1917 when Congress passed the Second Liberty Bond Act and set the first statutory limit on the public debt of the United States. Now the current Secretary of the Treasury, Timothy Geithner, is struggling with the Congress to raise the debt limit for the 11th time since 2001.

A debt limit applies to debt that is authorized but not yet issued. Debt limits are imposed for personal credit cards, home equity lines of credit, commercial loan covenants and the debt of public entities.

Here is data for the public debt of the state of California as of April 1, 2011:

Muni sweeps: Politicians can do it too


Blogging politicians

The House Financial Services Committee is blogging!

Right on!

Here is why they are doing it:

We believe that during this time of ongoing economic uncertainty there are questions being asked that are not being answered. We believe there are areas of financial services regulation and housing policy that are being overlooked which demand scrutiny.

We believe that there is a need for clear, concise appraisals of policies and ideas as opposed to “inside baseball” commentary.

We believe there are reporters, congressional staff, advocates, academics, constituents, and Members of Congress who have interest in financial issues, but don’t necessarily have the time to do the digging, and we hope this blog makes it easier.

Muni sweeps: Greenfields


Remaking our urban distressed areas is not easy. But cities are our economic and cultural centers. Reclaiming the exhausted areas opens up many possibilities.

The Brookings Institution has written a roadmap for renewal. It means changing some law. From the summary:.

Unfortunately, weak and antiquated state laws governing tax foreclosure, land banking, code enforcement, and other areas make it difficult for local governments to address vacancy and abandonment, and prevent them from unlocking properties’ productive potential. To give municipalities the tools the need to repurpose distressed land and buildings, states should:

Starving the financial cops

What is easier to regulate, financial markets or the nuclear industry?

If it is a matter of resources, financial markets must be very easy to regulate.

Congress sets the budget for the regulation of both industries and here are the numbers from 2009 (except nuclear industry revenue data from 2010).

I thought it would be interesting to compare industry revenues to the budget of the regulators.

Guest post: Bring Back BABs

Jordan Eizenga of the Center for American Progress shares the following:

Infrastructure projects across the country are not going forward as planned. The culprit is a weak municipal bond market.

Extreme predictions of widespread default, a lack of bond insurance, and tight credit conditions have weakened demand for tax-exempt bonds and increased borrowing costs. This has prompted issuers to put off financing important infrastructure projects and municipal bond issuance is currently at an eleven-year low.

Today, The Center for American Progress’ Doing What Works Project has released a plan that will help stabilize the muni market, lower borrowing costs for issuers, and provide crucial support to state and local infrastructure projects.

Muni sweeps: Strutting her stuff

Philly mummers 2009

She may not be the prettiest girl but at least she’s out there

The home of the famous Mummer’s parade struts its stuff for the bond markets.

The city of Philadelphia was named tops for transparency in a University of Illinois at Chicago survey of cities providing investors with financial information online.

Every municipality, like every person, has problems. Hiding them doesn’t instill confidence in investors. I’m glad to see Philly and other cities letting it all hang out. From the the Philadelphia Inquirer:

Issa’s municipal pension hearing


Congressman Darrell Issa’s Committee on Oversight and Reform meet today on state and municipal debt.

The hearing was really a dressed up fight over municipal pensions and collective bargaining rights.

The concern is that bond investors, worried about unknown pension liabilities, will increasingly require more yield for the risk of owning municipals. And some think a  solution is to remove the current form of guaranteed pensions.

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