Senator David Vitter (R-LA) introduced legislation yesterday to prevent the Federal Reserve from secretly bailing out states with budget problems.  Senators Jim DeMint (R-SC) and Mike Crapo (R-ID) have joined the effort and signed onto S.251, the State Bailout Prevention Act.  This legislation music to the taxpayer’s ears.

The Hill reports that Senator Vitter wants to use this legislation to slam the door on state and local bailouts by the federal government.

With the State Bailout Prevention Act, Vitter is looking to make legally binding an earlier commitment from Fed Chairman Ben Bernanke that the central bank would not make loans to states and municipalities struggling with budget gaps and large debt burdens. Testifying before the Senate Budget Committee on Jan. 7, Bernanke said states “should not expect loans from the Fed.”

Vitter is memorializing the Bernanke promise into law.  Because of Bernanke’s promise, one should expect the Federal Reserve to wholeheartedly support this effort by Senators Vitter, DeMint and Crapo.  This law would make it the iron clad promise of the federal government not to use taxpayer money or taxpayer backed loans to prop up, bail out and otherwise enable state and local governments in deep financial distress because of irresponsible budgetary decisions.

The legislation is a comprehensive effort to shut the door on all of the federal government’s financial tools available today to bailout states and localities.  This legislation follows on the heels of the termination of President Obama’s “Build America Bonds” (BABs) created in the President’s so called “Stimulus” plan.  The BABs were tax free federal bonds that served to provide a rolling blue state bailout for states that have spent more than they take in.  The BABs expired at the end of 2010 and conservatives blocked all efforts to renew these bonds.

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Recovery.gov has a vast and challenging mandate: “to allow taxpayers to see precisely what entities receive [stimulus] money in addition to how and where the money is spent.” To its credit, Recovery.gov offers a fascinating look into how government goes about spending $787 billion.

However, the website is troubled with inaccuracies, and these problems are undermining its credibility. Wisconsin Democrat Rep. Dave Obey agrees: “The inaccuracies on recovery.gov that have come to light are outrageous and the Administration owes itself, the Congress, and every American a commitment to work night and day to correct the ludicrous mistakes.”

Given that stimulus award recipients are responsible for providing much of the information you see on Recovery.gov, it’s reasonable to expect some errors in the reporting process. Alas, some of the information seems to come out of thin air.

Phantom Congressional Districts.

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