Muni Think

The policy case for federal support is strong: in the coronavirus era, the U.S. is looking at an emergency that is the equivalent of 50 states worth of hurricanes, fires and floods, lasting more than two years, with a very slow economic rebound.

An important corollary of the pandemic is bolstering the green bond market: a heightened level of investors’ attention and sensitivity toward social and environmental issues.

There are, in practice, a limited number of ways to invest in infrastructure and it is impossible to do so without getting involved in state and municipal financing from an effectiveness perspective — putting aside cost, because government entities are the primary way the federal government moves its money into the market.

It is feasible that not all COVID-19 filings are or will be material but one may want to err on the side of caution in this regard.

With tax revenues plummeting, one additional solution policymakers could consider would throw state and local governments a revenue lifeline: uncapping and funding the Community Disaster Loan program.

While the economic data are still bleak, signs of recovery may already be emerging.

Public finance has changed a lot since the Great Depression, so a repeat of that era’s default experience is not preordained even if this contraction matches the worst predictions.

The ultimate impact of the bear market on pension risks is likely to vary widely among issuers, making granular analysis more important and valuable.

The Fed’s new program, however, will not be enough to negate the serious financial consequences that are likely to befall some local governments as they begin to feel the full effects of shutting down the economy. Both the Fed and Congress need to do more.

It is the underlying economy and demographics that drive tax revenues, budget needs, policy decisions, and capital needs/debt issuance of governments. Economic data is objective and updated often which can be critical in times like these.