Congress returns to Washington this week as "Recovery Summer" withers to "Flatline Fall.” Both parties have their scripts for the off-year election campaign well-rehearsed.
Stage left, there is President Obama with a hastily assembled $50 billion dollar infrastructure bill. And stage right, the Republicans fight to keep Bush era tax cuts for nation's wealthiest households that we'll have to borrow hundreds of billions to pay for.
Both sides lay claim to be concerned about the exploding federal deficit. Meanwhile they appear to be oblivious to the multi-billion dollar debt crisis blooming across the country from local, regional and county independent authorities.
These anonymous entities, like your local "economic development authority" or "parking authority" are counted by the Census as "special purpose local governments." They are financed by selling tax free municipal bonds to investors often without a clue about what they are investing in.
The proliferation of these hidden fiefdoms was a bi-partisan accomplishment, often sold as a Reagan-Thatcher type efficiency that would reduce government's footprint and spending while making government more like the private sector. Usually nobody elected runs them but they have been
loading up public balance sheets with hundreds of billions of dollars in debt just the same.
In 1952, the nation had 12,340 of them according to the US Census. By 2002 there were 35,359 grazing on the American landscape. The public usually has no idea they exist and, though they are created by local, county or state governments, they have little oversight once they are up and running.
But these progeny can come back to devour their parents. Consider Harrisburg, Pennsylvania's capital, facing the prospect of bankruptcy because they missed bond payments for the Harrisburg Authority that built an incinerator in the 1960s.
In Florida, 122 "community development districts" are facing a $3 billion default on their bonds. Smart Money reported on a little West Texas town that bet on private prisons, but is now stuck with an empty prison and the likelihood of having to layoff police and fire personnel to cover bond payments. Bloomberg News reported that in 2007, there were only 31 such defaults by these "special governments". Last year, just two years later, there were 201.
Ah, the "private-public partnership.” More of that " risk free" capitalism that keeps requiring influxes of taxpayer cash. Take the sad saga of Xanadu, a massive $2 billion dollar vacant mega-mall that sits in the heart of the New Jersey Meadowlands that was supposed to open in 2007. That was a vision of the New Jersey Sports and Exhibition Authority. It leased state land to Xanadu's original developer, who eventually went under. Then, it proved too heavy a lift for a second developer.
All told, $2 billion in private dollars has already been spent to errect the two million square foot empty shell -- an empty shell with its own train stop. The New York and New Jersey Port Authority spent $200 million to build a train line to it for daily service. Now the line is used only for special occassions like a game or a concert at the Sports Authority's existing venues.
Now, Republican New Jersey Governor Chris Christie says the state is hoping to attract yet another developer to take on the cavernous concrete behemoth. But the Governor says it will take another $875 million to finish the mall. One option he's considering is using public tax-exempt financing under the auspices of the US American Recovery and Re-investment Act -- as known as "the stimulus bill."
Evidently if an empty mall is big enough, and the record of public-private miscalculations long enough, the mall becomes "critical infrastructure."