Democrats Pledge to Reinstate BABs if They Gain House

WASHINGTON — House leaders on Thursday pledged to reinstate Build America Bonds within 100 days in the unlikely event that they win back the majority of the House.

All 435 House members are up for re-election in November and Republicans currently have a 17-seat lead over the Democrats.

But House Minority Leader Nancy Pelosi, D-Calif. included the BAB proposal in announcing a 100-day legislative agenda for a Democrat-controlled House that was aimed at drawing distinctions between the two parties.

"Republicans blocked legislation to make long-term investments in our nation's aging highway system and opposed creating clean energy jobs of the future," the Democrats said in a release.

Instead, House Democrats said they would adopt the Build America Bonds Act introduced by Rep. Richard Neal, D-Mass, in February 2013 that would permanently authorize BABs with phased-in reductions in subsidy rates that would start at 30% in 2015 and drop to 28% in 2017 and thereafter.

BABs, created by the American Recovery and Reinvestment Act of 2009, are taxable munis for which the Treasury Department provides subsidy payments to issuers (in lieu of investors getting tax-exempt interest) equal to a percentage of their interest costs. About $182 billion of BABs were issued in 2009 and 2010 with 35% subsidy rates.

But they were not reauthorized after 2010, in part, because Republicans argued they provided lucrative fees for underwriters and encouraged weaker credits, like California, to issue more debt to take advantage of higher subsidy payments.

The Neal bill would also mitigate the subsidy cuts caused by sequestration. In addition, it would allow current refundings of BABs and would allow BABs to be used to fund capital expenditures for levees and flood control projects.

Several Democrats besides Neal have offered bills to reinstate BABs. Senate Finance Committee chairman Ron Wyden, D-Ore., also would like to see BABs reinstated. President Obama proposed direct-pay bonds by another name: America Fast Forward bonds to "build upon the successful example of the [BAB] program" in his fiscal 2015 budget request.

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