The mass protests from state workers in Wisconsin and the revolt by Democrats in the state Senate should set off alarm bells for investors in municipal bonds.
One of the strongest arguments against fears of a wave of muni bond defaults is that state governments will be able to reign in their need to accumulate debt before a crisis develops. That would require states to reign in spending—especially health care spending—and pension fund obligations.
Wisconsin is not in imminent danger of defaulting on its bonds. Although tax revenues dropped in the wake of the financial crisis, Wisconsin’s economy is healthier than many other states.
But a victory by the unions in Wisconsin could embolden state workers in states with far worse finances. Politicians worried about similar revolts might consider it better politics to force muni bond holders to accept haircuts. After all, hedge fund and mutual fund managers are not likely to fill the streets of the state capital or win the sympathy of members of the state legislatures.
Much of the bullish case for munis depends on the belief that states and localities will behave rationally and predictably when it comes to their debt payments. In Wisconsin, however, we’re seeing these assumptions fall apart. Political risk is alive and well.
As usual, this political fight pits Wall Street and hedge fund criminals on one side, working and middle class people on the other.
And the hedge fund managers and Wall Street criminal class are WORRIED that the union fight in Wisconsin will spread to other states and other municipalities.
Well, they ought to be worried.
Here in NYC, Mayor Moneybags has decided that even if the state gives more money to the city, he is STILL GOING TO LAY TEACHERS OFF.
Do you understand that logic?
$2.1 billion in extra tax revenue for 2011, NYC economy looking up, the city has over a $3 billion dollar surplus and the state may very well come around with more money for the city, but Bloomberg STILL INSISTS HE HAS TO LAY TEACHERS OFF NO MATTER WHAT.
Just as in Wisconsin, which actually doesn't have that bad a deficit problem (and a previous Democratic governor was able to handle a worse deficit problem without the harsh measures Walker is imposing), Bloomberg here in NYC is USING THE SUPPOSED FISCAL CRISIS TO WRANGLE POLITICAL CHANGES THAT ARE DESIGNED TO DESTROY THE MIDDLE AND WORKING CLASSES AND UNIONS.
That's it - that's what all this is about, whether you're talking Wisconsin, New York City, Tennessee, Florida - wherever.
It's about destroying the unions and subjugating the middle and working classes to an oppressive future where they will have to work longer and harder to make a lot less money, have worse health care and diminished expectations for retirement.
It's CLASS WARFARE.
So this fight in Wisconsin is REALLY, REALLY important.
It scares corporate scum because so far, they have gotten everything they wanted from people - concessions, economic exploitation - without a fight.
But now they're seeing some FIGHT coming from the other side and it worries them.
I have said before, I will say again, until the oligarchs and ruling classes FEAR for their wealth, their possessions, their livelihood, their institutions, their families and their lives, they WILL NOT STOP STEALING 85% OF THE WEALTH OF THIS COUNTRY OR EXPLOITING THE REST OF US.
Make no mistake - the obscenely wealthy oligarchs do not share pieces of the economic pie willingly.
They, like an unwatched dog, will gorge themselves on it and eat it all.
UNLESS WE MAKE THEM STOP.
And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: When property accumulates in too few hands it is taken away. And that companion fact: When a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: Repression works only to strengthen and knit the repressed. -- John Steinbeck, Grapes of Wrath
Let's stop them, Bloomberg, Walker all of the oligarchs -now.