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December 07, 2018 at 04:56 PM
A top House Democrat plans to propose that the federal government sell 40-year bonds to capitalize a U.S. infrastructure bank, indicating that the party may seek common ground with President Donald Trump on an issue that stalled in the Republican-led Congress.
U.S. Rep. John Yarmuth of Kentucky, who is set to lead the House Budget Committee, said he plans to introduce legislation in January that would authorize the bond sales and create the infrastructure bank. He expects it could get rolled into a broader public-works package that Democrats want to pass after taking control of the House in January.
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Details are still being finalized, but the idea is to sell as much as $300 billion of “Rebuild America Bonds’’ over time exclusively to public and private pension funds, with the revenue used to finance a national bank that would extend loans. It would be a big step toward financing work on roads, bridges and other aging infrastructure, amounting to nearly twice what states and local governments raise for new projects in the municipal bond market each year.
The interest rate on the bonds would be 2 percentage points more than the yields on 30-year Treasuries. The bonds would have a 40-year maturity and must be held for at least 10 years, according to tentative details.
“We’re going to throw it into the hopper of ideas and see if it’s something that makes sense to the rest of our members,’’ Yarmuth said in a telephone interview.
The Democratic victory in last month’s elections fostered speculation that Trump’s push for investment in infrastructure may be one of the rare issues to advance in the politically divided Congress. But it’s unclear how a plan that would add heavily to the government’s debt will fare, given the increase to the federal budget deficit from last year’s tax cuts, and there’s been no agreement on raising federal fuel taxes or other steps to pay for an infrastructure program.
Pension Funds
There’s plenty of money in pension funds available to buy the potentially higher-yielding debt: State and local government pensions alone have about $4.4 trillion of assets, about $280 billion of which is invested in Treasury bonds, according to the Federal Reserve Board’s figures.
