Now that the new Republican Majority is in the House, we can start reordering our National priorities and are going to be cured of the Obamacare Debacle and fix our budget mess. Or are we really?...
As they say in show biz, "You ain't seen anything yet!" Ever heard of BABs?... No, it is not Barbra Streisand!
The $814 Billion Stimulus package in 2009 gave $280 Billion to states to patch their budgets which also includes their State Government Employee Pension Benefits. Before the 2010 summer break, Congress gave another $26 Billion. Despite these fixes, states' budget shortfalls will be $140 Billion in 2011. Also, states have promised over $3 Trillion in Retirement Benefits and are at least $1 Trillion short according to the Pew Center.
Now ask, how did the states get into this mess? Two ways.
First, States and Localities issue bonds that exclude interest payments on taxable income to U.S. investors. Quite normal, very traditional monetary policies and above-board or transparent.
Second, bonds created as a part of the Stimulus Package, called Build America Bonds, BABs. These bond issues do not exclude interest payments on taxable income. Why? Because they are sold to overseas investors who are not subject to U.S. Income Tax Laws. Quite risky, very unconventional monetary policies and leading to over-borrowing practices subject to back-door deals.
Bingo! What a great way to finance more state budget shortfalls, and many have done it. (California & Illinois, two big huge Union run states who had to finance their over-bloated State Employees Benefits Funds). But, what if these states and localities go bankrupt? Boo-Hoo! But wait, overseas investors can get their money back or can they?
THE PROBLEM: These foreign investors are now under the impression that the United States Treasury is backing these securities. Wrong! They are not and that is THE PROBLEM.
The Obama Administration pushed this program with a road show all through Europe this past 2010 summer. In fact, the State of Illinois, strangely enough Obama's home state, joined with Citigroup to sell over $900 Million. Does a Presidential someone have some political fodder in here and potential further self-embarrassment?
THE FACTS: This Bill is being voted on to be continued or not. It must be stated unequivocally and clearly on who stands behind these bond issues if this program goes forward in the future. (Estimated at $150 Billion) What do you think, will they continue it? You gotta be kidding!
YOUR MISSION: Send letters and emails to your Congressmen and tell Congress to include the "Disclaimer Clause" in the upcoming "Build America Bonds Bill" in the Christmas Holiday lame duck session about BABs.
GET THE WORD OUT NOW!
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