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Yesterday, a Bond Buyer reporter asked me why public water agencies are concerned about WIFIA’s declining loan volume if their tax-exempt bond alternatives are better anyway. Fair question — after all, they’re the ones who aren’t choosing WIFIA loans, thereby causing said decline.

My answer, as quoted in the article, was “[t]he immediate concern is that WIFIA might get shut down altogether and they’ll lose one option, even if that option was only occasionally useful for a kind of rate arbitrage.”

What I didn’t add was “an arbitrage that’s potentially very expensive for federal taxpayers but the cost of which only shows up as an off-budget technical item years after the loan is executed.” That is, an arbitrage that requires a huge amount of Mandatory Appropriations.

‘Occasional usefulness’ for some stakeholders might not be a sufficient rationale to enact a federal loan program, but it’s probably good enough to keep one going (e.g., US ExIm), as long as the program doesn’t cause any noticeable (or newsworthy) trouble for prevailing political narratives.

Under a Harris or Biden 2.0 administration, it’s hard to imagine that WIFIA’s mandatory appropriations would even have been noticed, much less become an issue. But under Trump 2.0 and especially with Vought’s radicalized and apparently detail-oriented OMB, I wouldn’t be too sure.