The elimination of the Build America Bonds program from the tax compromise could remove the...


The elimination of the Build America Bonds program from the tax compromise could remove the "last pillar" of support from the municipal debt market - a "black swan in the making." Without BAB, states will find it more difficult to fund a $140B shortfall next year, possibly pushing troubled states like CA and IL over the edge.

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Comments (14)
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    If CA and IL over the edge, it now appears that the US is prepared to see whether its political culture and federal system together are better placed to deal with fiscal crises of its constituent States then are the EU and Euro Zone to deal with the fiscal crises of its constituent States. Obviously in addressing this issue opinions within the US will differ fundamentally over what would represent an appropriate way to deal with such crises.
    8 Dec 2010, 02:26 PM Reply Like
  • Tack
    , contributor
    Comments (16378) | Send Message
     
    Bob:

     

    The solution here is always, in the end, the same, regardless of spirited public debate. (Remember the NYC crisis?) They just turn on the printing presses and/or buy more and paper their way out of whatever crisis appears. There's certainly not going to be any alteration of this approach in the current climate.
    8 Dec 2010, 05:25 PM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    Tack –

     

    Regardless of whether one may think that “printing presses and/or buy more and paper their way out” is one of the options that others are proposing, do you really think a House of Representatives with a Republican majority and several conservative Democrats would actually adopt what you would regard as such an option?

     

    My real concern is simply that there will be bloody-minded deadlock all around and, should a real crisis materialize the political process will not be able to respond coherently (leaving aside whether that response should be conservative, progressive or whatever).
    8 Dec 2010, 05:44 PM Reply Like
  • Tack
    , contributor
    Comments (16378) | Send Message
     
    Bob:

     

    I understand all that, but I've observed Congressional behavior for over 50 years, and if there's one thing I am dead certain about --notwithstanding all the fire-breathing rhetoric from either side of the isle-- it's that if it comes down to allowing Illinois or California to default and go bankrupt, or engineering a bailout in one form or another, it's no contest. Anybody thinking that the Federal Government, in any form, is going to stand idly by and allow a state to go belly up, they're just dreaming.

     

    It's simply not going to occur and any even-halfwitted politician realizes that it would be political suicide to allow it to occur. Not the slightest chance.
    8 Dec 2010, 06:20 PM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    Tack –

     

    You’re a US citizen and I’m a foreign observer so I defer to your greater knowledge of what to expect. However, I was struck at the fate suffered by several Republican Senate and House candidates in the Primaries because they had voted for various emergency measures in late 2008 and early 2009.

     

    I should have thought this would deter softening of the Republican hard line on State bailouts in any form. It would certainly delay any initiative by Republicans to soften their stand; a delay that in a fast moving crisis could mean that timely aid would not be forthcoming. I put this scenario quite independently of any discussion whether any aid to States in any circumstances might be warranted; my point remains that that the sort of bailout which you describe (and of which you, I think would disapprove) just appears to be a nonstarter.
    8 Dec 2010, 10:19 PM Reply Like
  • Tack
    , contributor
    Comments (16378) | Send Message
     
    Bob:

     

    I've seen this act far too many times to be alarmed that "this time it's different." Even now, in the immediate glow of post-election success, the Republicans are compromising on hated unemployment-benefit extensions in order to get tax cuts extended. Such is the nature of politics when all the TV lights and pre-election rhetoric die down.

     

    Republicans threatened NYC with bankruptcy years ago, then, waffled. They threatened to shut down Bill Clinton's government and budget. They gave in. It all sounds good to play "tough guy," but nobody will ultimately sign up for a scorched-earth policy, any more than we're seeing in Europe.

     

    No state is about to go belly up in the immediate future, in any event, but even if a crisis presented itself, I assure you that there would be some sort of compromise worked out that would prevent state defaults. It's even too hot a potato for the Republicans to support to the voting public, at large.

     

    It simply would not, will not be allowed to occur. I have not the least apprehension about this.
    8 Dec 2010, 11:05 PM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    Thanks Tack.
    9 Dec 2010, 12:03 AM Reply Like
  • youngman442002
    , contributor
    Comments (5123) | Send Message
     
    cut spending..cut spending..cut spending....
    8 Dec 2010, 02:29 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4296) | Send Message
     
    Let the profligate fail.
    8 Dec 2010, 02:30 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
     
    California won't be cutting any spending and won't be needing the Build America bond program next year. I'm certainly not confident on a comeback in the California economy but voters have now put in place all the pieces essential to raise as much revenue as legislators desire. In November, voters not only gave all power to the democrat party but more importantly they voted to change a previous requirement that taxes can only be raised if both state legislative bodies can reach a two-thirds vote requirement. Now its a simple majority making the raising of unlimited taxes a given. In the long term it will raise less money as more business moves to Texas and wealthier Californians move to Florida, but next year will see a balanced budget one way or another.
    8 Dec 2010, 02:36 PM Reply Like
  • youngman442002
    , contributor
    Comments (5123) | Send Message
     
    Yes it will be fun to watch California blame it all on Republicans...the Democrats control everything now......they are going to need a Berlin Wall to keep people in......the problem is those people leave and go to a conservative stable state....and then vote for the same liberal programs that destroyed their old state...
    8 Dec 2010, 02:46 PM Reply Like
  • realitybiter
    , contributor
    Comments (227) | Send Message
     
    I regularly shipped the Cal Franchise Tax Board checks for 6 figures a year. I got fed up with 25k prop tax not being enough to fund my local schools, yet having to pay an extra $1k per kid (guideline) so that we could have english language learners (ELL's)(code for "from Mexico by parents who snuck in illegally) get their own teachers. When I voiced my disgust in the local newspapers all I got was "don't let the door hit you on the way out, xenophobe." Okay you win.
    I left. In a short two years,my networth is up substantially, my house is 4 times nicer, and nothing pleases me more than to see the golden state out of options.
    Guess I didn't let the door hit me afterall....
    It is not xenophobia folks, it is basic math.
    8 Dec 2010, 03:43 PM Reply Like
  • kmi
    , contributor
    Comments (4598) | Send Message
     
    California can and has issued it's own currency... IOUs..

     

    Wonder what Illinois will do.

     

    The fact is if things don't get BAD enough, and the expectation of improving fortunes remains, and we drag this out instead of nipping it, real -fixes- just won't happen, and we will continue bouncing around like this.
    8 Dec 2010, 04:12 PM Reply Like
  • crawdads62
    , contributor
    Comments (2) | Send Message
     
    I am early retirement baby boomer, 60ish trying to stay above water after not buying and holding all the right stocks I had in my possession. Its is an oxymoron as to whether the buy and hold is dead. That would definitely depend on what u r holding and how long u have held it. My entire portfolio consisted of stocks I sold out of(impatient investor) that have gone 5x 10x and up to 100% Whats a mother to do?Thankful for all the posts and articles. Wish I had found this site earlier in my investing.I am a college grad(late bloomer) and I continue to enjoy the game. That's right, investing, it's a cat and mouse game
    8 Dec 2010, 04:26 PM Reply Like
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