WASHINGTON – Sen. Chuck Grassley today asked the Government Accountability Office to conduct an analysis of who benefits from the federal Build America Bonds program and what portion of tax dollars go to Wall Street banks for fees rather than to the infrastructure projects themselves, among other questions.
“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. One, the Democratic leaders of Congress who have advanced this 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. Also, Build America bonds cost the federal government more than municipal bonds lose in revenue,” Grassley said.
Second, 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, Grassley said.
Third, it’s been reported that about one-third of the money for projects is flowing to California and New York. “If that’s the case, the program might be better named the Build California and New York Bonds program,” Grassley said.
Fourth, the program increases the size of the already-bloated federal government, because it takes what used to be a tax-cutting program, namely municipal bonds, and convert that 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.”
Grassley is ranking member of the Committee on Finance, with jurisdiction over tax policy.
The text of Grassley’s letter to the Government Accountability Office is available here.