At a time of mounting deficits and a need to cut costs from the
state to the federal level, there’s a strong case to be made for
bringing back the Build America Bonds (BABs) program. Created as
part of the Recovery Act, BABs are taxable bonds for which the
U.S. Treasury Department paid a 35 percent direct subsidy to the
issuer to offset borrowing costs. According to a new Treasury
analysis, state and local governments that issued BABs realized
considerable savings compared to what they would have paid to
issue tax-exempt bonds. The report estimates that BABs issuers
saved, on average, 84 basis points – or .84 percent – on
interest costs for 30-year bonds and also received significant
savings on shorter maturities, as compared to traditional tax-
exempt bonds. Due to the large savings in interest costs, state
and local governments that issued BABs saved an estimated $20
billion in borrowing costs, on a present value basis, as
compared to tax exempt bonds. In other words, had the state and
local government that