The Best Way to Use $4 Billion

The state of Wisconsin has a nice problem. It has a $4 billion surplus and next year the governor and legislature will have to figure out what to do with it.

Republicans want to give most of it back, more or less in proportion to how it was paid in, which means the wealthier you are the more you’d get. Democrats would rather spend the money, mostly on education. In fact, state Superintendent of Public Instruction Jill Underly has an unserious proposal to spend all $4 billion on public schools. But the Dems would also be okay with a limited tax break so long as it was targeted at the poor and the middle class.

But here’s an idea that is as boring as it is responsible: use the cash to supplant debt on public building projects. Instead of borrowing $4 billion to pay for roads and buildings, pay in cash. That’s the responsible thing to do for two reasons. First, it’s using one time money for one time expenses. If you put in place permanent spending or permanent tax cuts you’ve built in a structural problem. You can’t sustain it after the money runs out. But capital expenses are lasting. They’re not really one time exactly, as you need to rebuild the roads eventually and buildings don’t last forever, but they’re still durable investments.

The second reason that this is the most responsible choice is that it saves a lot of money in the long run. If you borrow $4 billion at 4% interest over 20 years, the interest payments add up to about $1.8 billion. So if we pay cash, we’ll save that $1.8 billion.

Now, I suppose it may be possible to anticipate that $1.8 billion in savings over 20 years and incorporate some tax cuts or spending into the next budget. But that averages out to “only” $90 million a year, which is actually not all that much money in the context of the state’s $49 billion annual budget. Better to just leave those savings as a squishy cushion for future budgets.

What are the chances of this happening? Not good. Politicians aren’t likely to get any juice out of this. Interest groups always want more money spent on their causes and everybody likes a tax break. Supplanting debt and saving the interest is pretty much invisible. But if the Democratic governor and the Republican legislature continue to be at loggerheads over this, maybe the responsible solution will present itself as the only thing both sides can agree on.

And with those words of wisdom, we’re going to sign off until Thursday. Have a wonderful Christmas, if you celebrate that. And, whether you do or not, I hope you get some quiet downtime. Read a book. Watch a movie, Take a nap. See some friends. Drink some egg nog. Be of good cheer.