Why Not Sell Savings Bonds To Support Infrastructure Spending?

It seems to me that such a program would eventually be perceived as non-partisan and would likely generate great interest from the public, because it will be a program that helps everyone. The bonds would almost certainly get hung with a boring name like "Infrastructure Series F" but might end up being more popularly called "Make America Great" or "MAG" bonds.

Recent experience with funding via conventional Series E Bonds has been disappointing, but there is a simple explanation for it. Paper bonds stopped being issued in 2012, and the hassle factor in having to register online each little bond given to grandkids or held in small amounts has cut sales by around 51% since then. In fact the impact of the paperless bond decision was felt almost immediately.

Sales fell from $1.48 billion in 2011 (before paper sales ended) to only $719 million in fiscal 2013, according to Ann Carrns of the New York Times. This trend could easily be reversed by simply reinstating paper bonds. Even then the normal volume would be very low compared to the needed funding However, there is no specific purpose in Series E savings bonds nowadays, which undoubtedly limits their popularity.

Once we add in a specific goal for this new bond series (i.e., rebuilding US infrastructure), and we factor in the emotional appeal of letting almost anyone make a contribution (with the smallest denomination at just $25, as in the past), it is quite possible that significant major long-term funding for the infrastructure program will be provided by the general public. Not only that, the average maturity of the new MAG bonds would be a big improvement over the average maturity of US debt now prevailing, which is only about 6 years.

Plus, we would avoid relying on large private investors in the capital markets for all infrastructure funding, which would have the effect of lowering the cost and decreasing the risk associated with funding such huge projects. It is not unreasonable to think that 10%-25% of total spending for infrastructure, or about $100-$250 billion, could eventually be raised via MAG bonds.

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Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or ...

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