“I have taken a very strong position that what the Fed is doing accelerating interest rates is not in the best interest of the people of the state of Rhode Island,” Mr. McKee said. “They need to stop the increases, halt any increases, and start decreasing that interest rate.”
If the Fed is to blame, it’s for leaving interest rates too low for too long, which spurred states, localities and private investors to bankroll dubious projects like a 10,500-seat stadium in a city with a population of some 75,000. The country is littered with profligate public-works projects that politicians use to buy votes.
Take San Francisco’s 1.7-mile Central Subway, which opened in January at a cost of $1.95 billion, three times as much as initially estimated. The subway is drawing fewer than 3,000 daily riders, no doubt because the design doesn’t make sense: Riders have to walk the equivalent of three football fields to connect to other transit lines and take three escalators to reach platforms 12 stories underground. That didn’t stop Rep. Nancy Pelosi, other San Francisco Democratic power brokers and their union friends from championing the project. When borrowing is dirt cheap, why not max out the taxpayer credit card?
Now that credit is more expensive, states and localities have come up with a creative new way to finance their political investments more cheaply: Market their bonds as “ESG.” New York City last autumn floated $400 million in “social impact” bonds to fund construction of affordable housing. Enormous demand from investors reduced yields the city had to pay.