Hi
Do individual states in the US have the authority to borrow from other countries to shore us their economies?
I look forward to your feedback.
States issue bonds all the time. I don’t know of any rules that would prevent a foreign government from buying some of them. (And nowadays with the financial markets so complicated, it isn’t all that hard to disguise the original source of funds behind several layers of fake companies.)
States in the US are constitutionally barred from unilaterally conducting any form of foreign policy, including negotiating loans with foreign powers.
But they can sell bonds, and those bonds can be purchased by anyone, including foreign powers if they desire.
IANAL so not sneaky but can states avoid “negotiating” with foreign powers by using non-state intermediaries? What comes to mind: The state of East Krapola (EK) wants to raise cash by leasing excess properties like shuttered schools, prisons, parks, etc. The Republic of Lower Slimea (RLS) wants to possess such assets, at least temporarily. EK cannot directly talk money with RLS but can EK just hire a civilian broker?
Thank you all. Very helpful
IIUC, interest on most state-issued bonds is exempt from U.S. federal (and often state) income tax. Thus the state can sell bonds with a lower interest rate. BUT this low interest rate will make those bonds unappealing to foreign investors, who could arrange not to pay U.S. income taxes anyway.
(I think. IANATA. Consult your financial advisor. Fraudulent filing of Form W-8BEN may be punishable by 25 years in prison or a fine of $500,000 or both.)
That doesn’t sound much like a matter of foreign policy or a loan. It’s just negotiating the terms of a lease.