The bailout included the $173.6 billion Build America Bonds program, a Treasury program subsidizing 35 percent of interest payments on state and local government debt, $103.1 billion for Medicaid spending, plus another $68 billion for government workers. However, the bond program ended in 2010, the last of the Medicaid money was spent in 2011, and most of the money for bailing out government jobs had already been spent by the close of the fiscal year that ended on July 1, 2010.
Not yet quenched for tax dollars, more Medicaid bailouts were instituted under Obamacare, and now the administration wants to set up a permanent bailout fund for state and local governments.
Tucked into Obama’s 2014 budget is $8.8 billion to fund a so-called “infrastructure bank,” giving the government the “ability to leverage private and public capital to support infrastructure projects of national and regional significance. In addition, the Bank will be able to invest through loans and loan guarantees in a broad range of infrastructure projects, including transportation, energy, and water, and will operate as an independent, wholly-owned Government entity outside of political influence.”
In other words, the $8.8 billion would be used as base capital over ten years to create tens of billions more in ready-made municipal bonds for states to borrow from Uncle Sam.
How much more?
If it’s anything like the Small Business Administration, which allocates $263 million in $17.5 billion loan guarantees plus $6.3 billion in guaranteed lending to finance “small businesses’ commercial real estate development and heavy machinery purchases,” a similar proportion of taxpayer funds leveraged by the infrastructure bank could total more than $500 billion in loans to states over the next decade.
Quite a payout for state and local governments.
And consider the fact that it will be a supposed “independent, wholly-owned Government entity” operating, they promise, “outside of political influence” even while it dishes out transportation and construction project loans to state treasuries, included states already heavily indebted like New York, California, and Illinois, which have some of the nation’s greatest infrastructure needs.
The primary beneficiaries are government bureaucrats and union workers as states get a backdoor municipal bond bailout, and taxpayers are stuck with the bill for paying back the loans.
The other big beneficiary of the infrastructure bank is the Democratic political machine, whose campaign coffers have historically been stuffed with public sector union dues money, a March 2012 Manhattan Institute study revealed.
That makes Obama’s highly leveraged infrastructure bank nothing more than a permanent political slush fund to reelect his political buddies. What political party wouldn’t want its own printing press? Political operatives will pocket the cash along the way.
But it’s even worse than that.
The proposal alludes to private capital being invested in addition to tax dollars, creating a de facto a public-private partnership. Who will be allowed to purchase a stake in this brand new government sponsored enterprise?
The Republican-controlled House Financial Services Committee should hold extensive hearings on this Obama slush fund proposal. Find out which unions lobbied for it. Find out who wanted to buy stakes. Beneath the surface of Obama’s infrastructure bank is nothing more than raw political graft for the privileged few.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.