Sometimes, the system works.

David Wessel, economics editor at the Wall Street Journal, reports on an experiment in the stimulus package that is changing the marketplace for municipal bonds in ways that allow cities and towns, investors and the federal government to benefit.

Infrastructure investment usually only gets attention when roads and bridges and economies fail. The collapse of the bond market for cities and states prompted the administration to include a provision in the stimulus bill that shifted the marketplace for tax-free muni bonds. The former system cost the federal governent “more than $1 in forgone tax revenue to give $1 of help to state and local governments,” according to Wessel. The new direct federal subsidies with higher interest rates on the bonds opens the marketplace to new buyers, and everyone seems to agree the system is “better, cheaper and fairer,” he writes.

Today, beneath partisan gunfire and ideological clashes in Washington, one of the few things on which Democrats and Republicans in the Senate agree is that Build America Bonds should be made permanent. The program probably will be.

“Sometimes, the system works,” he concludes.

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