The House has passed the White House’s request for an extension of the Build America Bond program ’till 2012, and the Senate is getting there.

Just what state, local, and the federal government need: more “cheap” debt, thanks to an implicit federal government guarantee. The program repeats Europe’s mistake in allowing fiscally profligate states to borrow cheaply under a continental umbrella — but it’s worse than that.

“Build America” was part of last year’s federal stimulus. Under the program, state and local governments can issue taxable debt. This privilege allows them to widen their investor base beyond wealthy American individuals and financial institutions, which buy old-fashioned muni bonds for the federal tax exemption that they offer. Washington reimburses state and local government borrowers for the extra interest payments they must pay to attract investors who demand a higher interest rate, since the investors must pay taxes on the income (the House bill would lower the subsidy a little).

As the WaPo reports, the bonds have been a boon to investment banks, which have earned $670 million in underwriting and advisory fees. That’s 20 percent above normal muni-bond fees (the fees have come down a bit in recent months).

Although little more than a year old, the Build America Bonds now comprise more than a fifth of total municipal bond issuance, the Treasury department reported last month (new data will be out this week).

Just like Europe started to do a decade ago, America is allowing weak fiscal states to borrow under one big tent, lowering borrowing costs.

In Europe, the implicit guarantee was the euro, the common currency introduced a decade ago. Global investors in Greek debt, a few years back, figured that the euro-denominated bonds were safe, because “Europe” would never let the euro go under.

Similarly, a global investor who purchases a Build America Bond isn’t looking to assess the individual credit of, say, California. He sees the word “America” right in the title and is comforted by the idea that “America” will be there if California needs it to be (just like Warren Buffett said).

Just four states — California, Illinois, New York, and Texas — are responsible for nearly 49 percent of the nearly $97 billion outstanding in May, although these states comprised only 30 percent of the nation’s population as of 2009.

But America isn’t exactly like Europe. Indeed, it would be nice if that were the complaint — that Build America bonds were an income transfer to weak states from strong ones.

It’s worse. The four American states that have borrowed the most under the program pay more than their fair share of federal personal income taxes — more than 37 percent of such taxes nationwide, according to IRS data.

We’re getting the resources not from our own internal saviors, then, but from our enormous federal deficits.

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