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The Manhattan Institutes Steve Malanga explains why reforms will make it more costly to borrow money and why he thinks it will hopefully make investor...
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The -- now is senior fellow at the Manhattan institute -- maligned and when we talk about cities in Munis we think about Steve Lego on this.
That this listen this is shocking to me that they would even consider this but the Wall Street Journal says that Republicans and Democrats are.
Talking about taxing.
These municipal bonds it'll -- want to -- the city.
School first -- not shocking to me for a couple of reasons the main reason is of the principal investors in municipal bonds are wealthier.
Individual -- had worked hard I don't know I don't know I don't that's shocking that I know -- the problem is it that the damage from a though is it like like that level does the individual investors resulted hammered and the cities and counties are gonna have to pay more so.
Signal it expected then that the Republicans because they're kind of the defenders in this case of this would be the ones who would step up and try to defend its.
Except they're not willing to defend it.
Because many Republicans in Washington believe that cities and states have been using this tax free debt.
To put themselves to move.
-- into debt yeah and that that's part of problem we have with the measles and they blame they've blamed there's the investment houses for how dare them talked him into Alec and frankly there have been on -- there have been some really -- Here's a difference.
Once upon a time.
We use municipal bonds to do things like build roads and bridges lives or all of yeah yes -- -- using -- robots buildings like sports stadiums and convention centers and speculative.
What's especially speculative investment.
It's -- if you build it they will come mentality.
In the states in the cities and so I think there is a little bit of a sense that they've all over use the UK they've abused.
Right let's assume less for purposes of -- say some half.
But still room for a lot of cities and counties there.
It seems to me that they're either going to if they have to pay more when they borrow when they have to borrow a lot to build roads and bridges and hospitals and libraries and schools.
That it's going to they're gonna have they're gonna pile on more taxes on used the local citizen.
Which means that even though the 215 above -- supposed to be -- gonna get everybody or they're gonna cut your.
Services first -- -- we as the local citizen actually.
Are supposed to control government.
Most states for instance have.
Constitutional.
Amendments or something and our constitution which limits the amount of -- you can you can you you can't just go out there and borrow money right politician right.
What's happened is that that citizens have been vigilant enough so here's -- let me let me put it quote -- -- express it this way.
Okay you're right it's gonna cost more to borrow money if they do this.
What I think that reformers say is that if it cost more money than the states in the cities will be.
More careful about what they borrow and will only borrow for essential infrastructure and instead of a lot of the speculative infrastructure.
In its -- the taxpayers to demand that.
Of cities and states well this -- -- are right.
Nice argument that I left and I think that's another item on -- well.
They've they've already been through this -- -- witness in the 2009.
Obama bailout -- a lot of that went to cities and counties and they went -- we made it through that.
But now -- was we're not coming back with more federal money so you guys have got to get your that's your house in order and they have been but there's.
There's grant right now.
Cities and states are strapped and frankly the thing that would change all of this has nothing to do with municipal bonds its economic growth because you cannot.
Because economic growth obviously produced tax revenues that makes it easier to pay off debt what -- going on now -- people are using debt.
In place of tax revenues -- the disappeared.
But it -- if -- increase to cost of borrowing for cities and counties it's gonna make those.
Citi treasures.
Just have corn I absolutely agree with -- I absolutely agree and they -- and we will go for a period of borrowing austerity as a result of that until we get growth again perhaps later will that be a good thing or bad thing from taxpayers point -- -- will have to say.
It'll change things Google definitely show yet -- that yeah thank you very much pleasure.
