Hey, my @nytimes debut!

Amidst excruciating negotiations over "paying for" infrastructure and climate legislation that falls far short of what's needed, I look at proposals to cut the Gordian Knot by having the Fed backstop muni bonds for green projects nytimes.com/2021/07/16/opi…
@nytimes That sounds a bit wonky, so I'll explain: the federal government's ability to spend dollars is unconstrained: we guarantee our own debt with the Fed's money printer. But for political reasons we are all familiar with, centrist Democrats and the GOP refuse to acknowledge this fact
But markets know this is obvious. So they buy US government debt, ESPECIALLY in a downturn when tax revenues are falling, because they know that it's guaranteed. Who cares about tax receipts? Uncle Sam has a money printer.
States and cities don't have money printers. Their credit rating really does suffer when tax receipts fall. When Congress refused to bail them out for most of 2020, there was a chance the municipal bond market would demand soaring rates right when cities needed money most.
However, as part of the CARES Act, the Federal did something unprecedented: it created an emergency credit line for states and cities, the Municipal Liquidity Facility, or MLF.
Now, the MLF lent at pretty punitive rate, and only two borrowers actually used it (Illinois and the MTA, which have poor credit ratings), but it sent a message: states and cities will have cash if they absolutely need it. As a result, markets kept buying other local debt.
What does this have to do with climate and current Congressional negotiations? Right now Congress is watering down historically large but climatically inadequate green spending proposals out of a belief that expenditures must be paid for up-front with current taxes.
Meanwhile, politicians from states like New York have the political will to pass ambitious climate legislation — but not to fund it. nysfocus.com/2021/04/30/clc…
So we have a federal government that is fiscally unconstrained thanks to the Federal Reserve — but politically straitjacketed by Congress. Meanwhile, in cities and states where the politics increasingly favor climate action, financial conditions prevent doing what's necessary.
However, we know from the example of the MLF that the Federal Reserve can create much extremely favorable financing conditions for states and cities simply by extending them an emergency high interest credit line — and this is the wild part — WITHOUT doing much actual lending.
So the Fed essentially bailed out states and cities without themselves actually bailing out states and cities. Banking magic!
Why not do something similar to pay for a green transition? Have the central bank backstop the muni bond market at a DISCOUNTED rate so localities that want to do the necessary spending can raise money almost as cheaply as the federal government.
Much $ Congress may appropriate for infrastructure and climate will ultimately take the form of grants to local governments anyway. All this infrastructure is local. Power grids are run by states.

But centrists+GOP hate signing checks for "blue state bailouts."
Well, don't make them! W/ generous Fed backstop, state & local governments more democratically accountable than the Senate can raise HUGE amounts of money themselves.

These projects need not be public private partnerships — the debt could finance publicly-owned infrastructure.
And again, while the Fed might extend some loans itself, the big effect of a backstop will really be to induce private investors to offer municipal borrowers generous terms. This would reverse decades of brutal "market discipline" imposed since the 1975 NYC fiscal crisis.
The plans I discuss are, of course, workarounds for Congressional stalemate. Does that make them middling compromises?

I don't think so. In the absence of a federal GND, a muni bond backstop could let 1000 local GNDs bloom.
And just like the original Federal New Deal emerged after New York tried its own relief programs, so too these Fed-backed local efforts could actually build toward a comprehensive national plan.

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More from @AlexYablon

28 Jun
"He's going to continue saying a ton of really weird shit"
If I had to predict the most likely continuity between a de Blasio-Adams mayoralty, it would probably be the city's executive murdering large rodents, either by blunt trauma or by poisoning them in large buckets
Wiley and Garcia fell short in the first round because they aren't weird enough for New Yorkers
Read 4 tweets
9 May
New from me: Biden wants to pay for a climate plan with taxes, not the deficit, to calm the eldritch demons of finance: bond vigilantes. This limits the scope of his package.

But in the 21st century, markets will punish failure to spend ENOUGH on climate businessinsider.com/biden-reshape-…
Bond vigilantes, so the old scary story goes, will demand higher interest rates as the government does more deficit spending, which is believed to increase the risk of default. Higher rates will eat up the budget, making deficit spending counterproductive.
Except there is no indication investors actually can or want do this to the federal government. After a years of deficit spending, inflation adjusted treasury interest rates remain negative. No one thinks the federal government will run out of dollars, because it makes dollars.
Read 5 tweets
26 Apr
expecting it to be struck down by the originalists citing Scalia's terrible Heller decision, nevermind the fact that local bans on concealed carry are as "longstanding" (the Heller standard) any other kind of gun restriction smithsonianmag.com/history/gun-co…
That said, what would such a decision mean for violence, crime, and daily life in New York City? A lot depends on just how expansive the majority's opinion is, but it's not clear to me this would immediately translate into much higher rates of gun carrying and violence.
Read 9 tweets
6 Aug 20
You can draw a straight line from @mikespiesnyc' reporting on the NRA's self-dealing thetrace.org/features/nra-f… to Tish James' announcement today
Read my story from last year on how the NRA's bylaws and senior officers' personal fealty to Wayne LaPierre made it impossible for the group to reckon with its own corruption thetrace.org/2019/07/nra-re…
As a NY nonprofit law expert told me last year, Tish James' legal strategy could be a risky one and it's not clear that even if the suit succeeds, it would truly mean the death of the organization. thetrace.org/2019/05/heres-…
Read 6 tweets
4 Aug 20
a story: once in chicago's humboldt park nabe, i was walking to a friends house w some beers. i passed two teenagers with their girlfriends who made a joke about me giving them a couple. half a block later, they ran up behind me and tried to grab the beer out of my hands...
it was their bad luck that they happened to do this in front of an alley where a CPD cruiser ambled towards us. the cops saw chased the kids and caught them. afterward i told the cops i was fine, that they hadn't even managed to get the beer out of my hand.
two months later i showed up cook county juvenile court for the kid's court appearance. the prosecutor went over the police report. the cops lied about almost every detail of the encounter.
Read 11 tweets
9 Jul 19
In a new piece @VickyPJWard reports that New York Magazine was going to run a profile on Epstein by Michael Wolff that was killed out of fact checking concerns. Fun fact: I was the checker who killed it! One of my weirdest fact-checking experiences.
thedailybeast.com/jeffrey-epstei…
Wolff let Epstein dictate the the piece. He made some agreement that all fact questions would go through Epstein and only Epstein. In the piece, Wolff reported various powerful men still hung out with Epstein - but gave me no proof. I was not allowed to call them for comment.
Not surprisingly, NY Mag's lawyers weren't thrilled about a story that alleged various rich and potentially litigious men socialized with a sexual predator without any proof or calling them for comment. As I recall the editor wasn't even aware Wolff had made this agreement.
Read 5 tweets

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