As the state’s fiscal position becomes more dire, in large part due to the tax cuts implemented last year, Governor Walker proposes to delay some debt payments.
From Jon Peacock at Wisconsin Budget Blog:
We finally learned this week one of the major tactics being used to fill the large hole in this year’s state budget. The Governor plans to push part of the problem further into the future by delaying a $108 million debt payment that is coming due in May.
A Legislative Fiscal Bureau (LFB) memo released yesterday by Reps. Hintz and Taylor explains that there are two kinds of debt restructuring – one that has the effect of reducing the total amount of interest paid on an outstanding debt, and another type that extends the life of an existing debt and increases the total cost to state taxpayers. The planned delay in the $108 million payment is the second type. Although the LFB memo doesn’t show the full impact of the revised payment schedule, it indicates that the delay will increase debt service costs by $544,900 in 2015-16 and more than $18.7 million in 2016-17.
From Yvette Shields in The Bond Buyer:
The [commercial paper] maneuver is fueling Democratic arguments that the state couldn’t afford to tap a budget surplus last year for a $600 million tax cut package. The state faces a $648 million deficit in its next two-year budget. Walker uses spending cuts to deal with the deficit in his proposed $68.2 billion budget.
In other words, no budget repair bill, as when the Governor took office in 2011, [1] but a measure to increase the ultimate debt burden faced by Wisconsin taxpayers.
Menzie,
I don’t know why you keep worrying about Scott Walker. He will soon be out of Wisconsin and in the White House. Then you guys can go back to expanding the teacher’s and other private sector unions, return to a high priced teacher’s union insurance monopoly, and celebrate stagnation. That is unless the productive citizens are fed up with the crony socialism.
I guess when you’ve got nothing intelligent or constructive it’s time for ad hominem rhetoric.
Let’s talk about debt restructuring.
Beginning in 2008 I was working with a friend to help with a loan modification. It took three years but she finally refinanced and lowered her payment so that she could keep her home. This restructuring of her loan has increased the cost of her loan, but had she not restructured she would have lost her home. People who run businesses understand this concept but people in government always struggle with understanding it. In government if you have to make the payments you simply increase taxes. Most governments run with narrow cash accounting and are not able to use the profit signals of a free market. They do not know if their projects actually fulfill their purpose or are a drag on the economy and most do not even attempt to look at it once they have them more distributed and the votes bought.
I would think the Wisconsin voters would be celebrating a debt restructuring allowing more tax dollars to be returned to private investment and private job creation. Unlike government job creation, private sector job creation is a long term investment rather than a current expense.
Ricardo,
Restructuring debt in times of crisis is logical. According to you though Wisconsin is doing so well now that there is no crisis so why the need to resturcture? The reason responsible people are concerned, is that despite the fact we are not in a recession debt keeps growing at the same time cuts keep happening. Unfortunately the Laffer curve doesn’t seem to be working so well for Wisconsin. Check out the last column of on page 14 table 6 http://legis.wisconsin.gov/lfb/publications/Informational-Papers/Documents/2015/78_State%20Level%20Debt%20Issuance.pdf I’ve looked at those numbers back for 20 years and never once did Wisconsin debt service exceed the targeted ceiling of 4%. In fact the highest was only 3.44% at the onset of the great recession. What Walker did wasn’t refinance to keep his house. He told his parents he needed to borrow some money so that he could stay in college (yes I understand the irony of the analogy). Instead he had a kegger for his friends (tax cuts and road projects) and now his tution is still due.
Kurt,
If you know anything about business any time debt restructuring will allow you to gain a competitive edge you restructure. If you are ever in business I hope you are a little more pro-active than your post implies.
Richard,
Please show me the competitive edge Wisconsin has gained. I showed you how debt service has risen to a level of revenue not seen for a minimum of the the last 20 years. There has to be a return for added risk.
Kurt,
It is allowing the Wisconsin legislature to continue tax cuts and reduce the budget. That is not too hard to see.
“I would think the Wisconsin voters would be celebrating a debt restructuring allowing more tax dollars to be returned to private investment and private job creation.”
walker ends up collecting MORE tax dollars over time to service the debt. he is not RETURNING tax dollars to private investment, etc. so you are for policy which increases the future tax burden? ricardo, walker will be a wonderful presidential candidate to campaign against.
What does he know about private investment? He’s a career politician who has never held a job in the private sector. He has never created a job nor had to make payroll. Strange that this leech is somehow a Randian dreamboat.
random,
I will give you the benefit of the doubt that you just misspoke. Walker worked for IBM in sales and for the Red Cross from 1990-1994 before going into politics. But if not having a job in the private sector is so important we will need to throw out a lot of Democrats.
ricardo,
for what it’s worth, the work experience of scott walker from wikipedia
“During college Walker worked part-time for IBM selling warranties on mainframe computers. His IBM job led to a full-time position in marketing and fundraising at the American Red Cross from 1990 to 1994.”
i am sure this provided superb training for an individual responsible for job creation and payroll. sales part time. marketing and fundraising full time at a non-profit. strong private sector resume i must say.
“Bruce Rauner is Scott Walker on steroids. But is that a bad thing?” by John Kass in the Chicago Trib.
Sorry, This headline was just too choice to pass up.
Who is in the lead now in the race to the bottom? Walker or Brownback?
de Blasio (he is more infamous than Andrew Como)
Ricardo: He’s gotta be — as there is no Andrew Como (there’s a Perry Como, and there’s an Andrew Cuomo, but no Andrew Como…)
Sorry Minnie, just a typo.
I’m curious as to what rationalizations the usual suspects here can come up with for their favorite, ‘monopsony explains low wages for unskilled labor’ argument, now that Wal-Mart is raising its lowest wages to $10/hour.
Patrick, until the demand for labor equals the supply of labor, employers have more bargaining power than employees.
We’re nowhere near a shortage in unskilled labor.
So, employers can exploit unskilled labor.
That’s why labor standards, including a minimum wage, are important.
The ‘demand for labor equals the supply of labor’ at the market price, Peak.
With abundant unskilled labor, the market may determine labor is expendable.
Is that good?
Patrick R. Sullivan: I am still waiting to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
Patrick R. Sullivan: Well, it’s commonly understood that once one departs from atomistic competitive situations, monopoly/monopsony power can vary with the business cycle.
I am still waiting to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
So, about all those claims about monopsony being the answer;
https://econbrowser.com/archives/2014/02/elevating-the-minimum-wage-in-wisconsin-and-the-nation#comment-179689
are inoperative?
Patrick R. Sullivan: No (duh). As the degree of monopsony power varies, then the deviation from of wage from that obtaining under perfect competition will vary.
I am still waiting to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
Some very heavy wage inflation headed our way…
http://www.wsj.com/articles/wal-mart-plans-to-boost-pay-of-u-s-workers-1424353742?mod=WSJ_hps_sections_business
steven, do you think this is good or bad? i think it is good-a sign of growth. but i think the term “wage inflation” is a bad expression for political reasons. not sure if the term “inflation” is appropriate here, particularly if it is a result of supply and demand of labor.
In April Walmart will raise wages to $9 an hour. That’s $18,000 a year for full time work if lucky enough to get it. Don’t worry, though. The Federal Reserve is on the case and is itching to strangle the life out of workers to put a stop to it.
My favorite story about Walmart is how at Christmas it sets up a food drive in the back room to help out their own poverty stricken employees. The way it works is that the lucky $10 per hour employees are supposed to donate to the less fortunate $8 per hour employees. The employees are supposed to take their after tax wages and buy canned goods in the Walmart store and put them in the charity box for the other employees so Walmart can claw back some of those excess wages. It is diabolical in its evilness.
So, how many low skilled people do you employ, Joseph?
Patrick R. Sullivan: I am still waiting to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
even at these new wages, walmart continues to use government subsidies for its workers. because walmart (and others) continue to pay low wages, your tax dollars subsidize walmart’s employee costs, not insignificant since walmart is the nations largest employer. corporate welfare at its best. walmart shareholders continue to collect a nice dividend at the expense of taxpayers!
“walmart shareholders continue to collect a nice dividend at the expense of taxpayers!”
One way to fix that is by increasing the Earned Income Tax Credit. And the way you pay for that increase is by higher taxes on dividends. Then the cost of the subsidy comes directly out of the pockets of those benefiting. If financed this way, the cost of the EITC or a Guaranteed Minimum Income is better targeted than a general minimum wage increase.
Joseph,
Why settle for “better targeted” and tax shareholders of corporations who pay living wages? Increased minumium wage directly addresses the issue with shareholders.
kurt, i have to agree. joseph’s approach penalizes the dividend paying corporation, at the expense of a private company. a simple minimum wage hike is uniform across the board, and if you are a company, small or large, private or public, who uses the low wages and government welfare as a subsidy, then you lose that subsidy, period. do we really want to add another layer of complexity to the tax code?
“do we really want to add another layer of complexity to the tax code?”
Complexity? Complexity is treating various kinds of income differently, requiring different tax forms and different rates for each. What’s complex about treating dividends and capital gains just like ordinary income? That’s simplicity.
As for minimum wage, that’s good too. It complements an EITC.
Joseph,
Why not simplify the tax code by passing a 90% income tax and just let the government pay for all living expenses? I would say 100% but the folks need a little spending money.