State official: Wisconsin could survive federal default for 'at least three months'

CREATED Jul 26, 2011

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MADISON - If the federal government defaults, Wisconsin now has a back-up plan.

Department of Administration Secretary Mike Huebsch explains that the debt fight is different that previous battles over the budget.

If the federal government hits its limit, or ceiling, it will not be allowed to borrow more money.

"It could have dramatic impact, on states, on local governments, on individuals across the country.  But because this is somewhat unprecedented, we're not exactly sure about the impact," Huebsch said on Newsradio 620 WTMJ's "Wisconsin's Morning News."

According to Huebsch, Wisconsin would rely on borrowing from other state money to cover bills for federally funded programs.

He says that money could last about three months.

"We can, for at least three months, basically lend ourselves that money.  We operate on operating notes.  Knowing tax money is coming in, we know we can pay off that note."

But after that point, "it becomes very questionable as to the impact and when things would start to shut down."

About 29 percent of state funding comes from the federal government.

Huebsch told us contractors and businesses that do work for the federal government would also feel the pain because their bills would not be paid.

Additionally, a lower bond rating due to a federal government default could hurt local governments and businesses as well.

"We borrow money in the markets, and if the federal government defaults, and interest rates go up because of that...that would impact all the other money that's been lent or borrowed, and that could increase interest rates," said Huebsch. 

"It has an accelerating impact throughout the economy."