[From May 1, 2020]
Why Isn’t Public Finance Being Used to Beat the Coronavirus?
Donald Trump is not really a businessman — he is actually a real estate promoter and showman. We know he is no manager from watching his failed performance during the Coronavirus Pandemic.
The few good businesspeople and finance-types that Trump had around him in his early cabinet have long gone — no doubt partly in exasperation and disgust — partly because he tired of hearing their advice and counsel. Remember the words attributed to former Secretary Rex Tillerson?
But, New York Governor Andrew Cuomo and his counterpart in California, Governor Gavin Newsom, have no such excuse. They should have unfettered access to many skillful and thoughtful public finance advisors and professionals. Likewise, the two governors have Congressional delegations that include the Senate Minority Leader, Charles Schumer and. the Speaker of the House, Nancy Pelosi.
As they go forward facing the exploding pandemic crisis within their respective States, it is past time to use the tools of public finance to strengthen their financial positions and that of their hospitals and healthcare centers.
A not so deep-dive into the recently passed over $2 trillion dollar relief package reveals the potential for some $450 billion dollars in funding through the Federal Reserve that can be available to. State and Local governments.
One way to actualize that federal spending is to start a program of local government bond issues that are qualified for exemption from federal taxation, and once issued, are purchased by the Fed from local and state governments.
These bonds can then be resold as zero coupon securities that will pay their fully accrued value upon maturity.
By making the bonds redeemable in five or ten years, long after the surcease of the virus pandemic, states and local municipalities can finance their response to the pandemic facing them today.
Moreover, this allows the States and their municipalities to manage, at least to a degree, their specific needs for additional funding and financing without being penalized by the prospect of losing emergency aid from FEMA or other federal government sources.
Should we ask why this has not been proposed under the “wartime” Administration of Donald Trump — the President who claims to be a businessman? No. We already know that answer. So, let’s just get it done.
Include bond purchases from local and State governments in the next round of CARES pandemic funding. Please.