Senate Finance Committee ranking member Charles Grassley, R-Iowa, has asked the Government Accountability Office to analyze who benefits from the federal Build America Bonds program, and the proportion of tax dollars that go to Wall Street banks for fees rather than for the infrastructure projects themselves.
“Some members of Congress are very enthusiastic about continuing and even expanding these bonds, but there’s been very little transparency about this program, including where the money goes,” Grassley said. “Most of the quantitative information that we have is from media reports or outside groups, not an official source. Congress’ investigative arm is a neutral third party that should take a look and account for how tax dollars are used, which parts of the country benefit from this program, and whether these bonds are any more or less effective than traditional municipal bonds.”
Grassley’s inquiry comes as Congress faces whether to renew the program. Grassley has a longstanding series of concerns about Build America Bonds. He believes the Democratic leaders of Congress who have advanced the stimulus-related program haven’t disclosed that according to media reports, a substantial portion of the taxpayer money that funds this program goes to Wall Street bank fees, rather than to infrastructure projects. “These fees are still higher than the fees Wall Street banks charge on municipal bonds, which is what Build America bonds displace,” said Grassley. “Also, Build America bonds cost the federal government more than municipal bonds lose in revenue.”
States and local governments that have been less fiscally responsible and therefore have a poorer credit rating are reported to get a larger federal check than states and local governments that have been more fiscally responsible and therefore have a better credit rating, according to Grassley.
Approximately one-third of the money for projects is flowing to California and New York, according to media reports, and Grassley wants the GAO to inestigate whether that is the case. “If that’s the case, the program might be better named the Build California and New York Bonds program,” Grassley said.
The program increases the size of the federal government, because it takes what used to be a tax-cutting program, municipal bonds, and converts it into Build America Bonds. “Build America Bonds is a disguised spending program run through the Tax Code,” Grassley said. “And taxpayers deserve to know where the money is going. Wall Street banks are in business to make money. They lobbied for this program and are now lobbying for an extension of what was originally pitched as a temporary program.”
