Republicans and Democrats agree that the U.S. is in dire need of a major infrastructure overhaul and, at the very least, that Congress should authorize significant repairs to roads and bridges. The fierce disagreement between the two parties begins over which provisions are worthy of running the federal deficit higher, as well as dispute over how to finance such a massive undertaking. And while Wall Street worries itself with the potential for future increases to the corporate and individual income tax rates, Democrats may soon turn to an Obama-era tool to finance their infrastructure plans: Build America Bonds, or BABs. BABs are special municipal bonds that allow states and counties to float debt with interest costs subsidized by the federal government. That underwriting not only served to ease jittery investors in the aftermath of the financial crisis, but also made municipal debt even more attractive with rates sometimes north of 7%.
Source: CNBC – Bonds
