Government Red Ink: A Girl's Best Friend

By Susan Feiner

WeNews commentator

Sunday, August 15, 2010

The federal deficit might not sound like a feminine topic, but economist Susan Feiner says women can't leave it up to the guys running the U.S. Treasury.

Susan Feiner (WOMENSENEWS)--Sex and federal deficits have a lot in common.

For one thing, religion and Wall Street--bastions of virtually unchecked male power--oppose both. Religions like to link sin to women's sexual behavior while Wall Street rails against the evils of federal deficits.

Close your ears.

At the risk of sounding like a heretic, I am here to say: In an economic downturn, federal deficits are a girl's best friend. Without them unemployment will get worse and state budgets will shrink and dismantle numerous social services that are essential to women's well-being.

The federal government's decision to fund--or not fund--state budgets connects sex and deficits.

One example: Public funds ensure access to contraceptive services for millions of women. Today one-quarter of U.S. women and half of poor women obtain contraceptive services at a publically funded family planning center whose existence is likely tied to deficit financing, reports New York's Guttmacher Institute, a leader in reproductive health research.

This is just one reason why women should favor increases in the federal deficit since that's the only way states can balance their budgets.

States deliver the bulk of direct services--education, fire and police, health, child welfare, recreation, food assistance--that keep whole communities functioning. These services are particularly crucial for women because of our inordinate caretaking responsibilities for the young, elderly and sick.

States have been slashing spending and programs for two years now and are under the gun to keep doing so, since the states, unlike the federal government, must by law balance their budgets by cutting spending (or raising taxes) when revenues fall.

"Budget difficulties have led at least 45 states to reduce services to their residents, including some of their most vulnerable families and individuals," according to Washington, D.C.-based Center on Budget and Priorities. The center reports that states closed budget gaps of $215 billion in 2009 and 2010 and that balancing state budgets for 2011 necessitated another $144 billion in spending cuts and-or tax increases. In 2012, state shortfalls are likely to amount to $120 billion.

Cuts Hurt Women Disproportionately

Taking all this money--half a trillion--out of circulation hurts women disproportionately and spreads economic hardship. "When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services and cut benefit payments to individuals," the center says.

This is particularly hard at a time when 55 percent of households have either lost jobs, wages or hours in the 30 months since the onset of this recession.

Deficit-hawks say deficit-financed stimulus spending to curb the pain of this recession is like Ma and Pa borrowing too much against the family farm.

But Timothy Geithner, secretary of the Treasury, the official with the power to decide how much and when the Treasury should borrow, ain't Ma.

And Larry Summers, director of the White House's National Economic Council, who influences President Obama's decision whether to help cover state deficits, ain't Pa.

The U.S. government--unlike Ma and Pa--can't go bankrupt.

The federal government, unlike a household, is "sovereign in its own currency," which means it can create money to meet whatever bills are deemed necessary.

When its spending exceeds income a Treasury clerk just goes "click, click, click" and a check is issued to cover the spending of Vermont or California, the Department of Education or the U.S. Environmental Protection Agency.

It's common to think that the government must issue bonds in capital markets to raise money to cover its shortfalls. And in this line of thinking, federal deficits are creating a huge overhang of Treasury debt that the country, some day, might not be able to pay.

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