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.

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Treasury Bonds Not Required

money pile But floating Treasury bonds aren't actually required. It's just done to keep bankers happy. If the Treasury decided to spend in excess of revenue and not create new federal debt, the deficit would just be carried on the Treasury's books. But bankers like to buy Treasury bonds because they're risk free and the government has always paid its debts. So when banks have cash they don't want to lend to Ma or Pa, they buy Treasury bonds. It's much better than stuffing it into the mattress.

If the Treasury simply created money for the states and carried a negative balance forward, new purchasing power would be pumped into the economy. Then the incomes of households and firms would rise, so individuals and businesses wouldn't need expensive bank loans to keep them afloat.

This is a major bummer for Wall Street. So bankers spin yarns about the evils of deficits.

"Deficits will burden our children's children's children. Inflation will wipe us out."

What hooey.

The United States has run deficits pretty much continuously since the founding of the republic.

In over 200 years the budget has been balanced or in surplus only six times. The sky hasn't fallen. Hell hasn't frozen over. Our first-born were spared.

Each period of budgetary balance lasted only briefly. Then we crashed.

Even if the Treasury borrows to cover states' needs (versus running its account in the red), the U.S. government is not--contrary to some alarmists--peddling "too much debt." If that were true, capital markets for that debt would react with rising interest rates, but today's interest rates are historically low. Even Milton Friedman, the very economist responsible for the theory that deficits cause inflation, said that when unemployment is high this link doesn't hold.

Jobs Deficit a Greater Concern

So the really worrying deficit these days is the jobs deficit.

At least 31 per cent of U.S. workers are "contingent." Such work has all the characteristics of "women's work." It is insecure, poorly paid and carries few benefits.

Work-force experts predict that contingent labor could rise to as much as 30 to 50 percent of the entire U.S. work force, triple the 13 percent it was estimated to be in 2008. If this happens, the feminized poor will be everybody.

Federal deficits can help reverse this trend. Washington politicians have to tell the Treasury to create the funds needed to avert financial disaster for the masses of Americans who depend on paychecks.

That's why I applaud Congress for passing a $26 billion package last week to help states pay teachers and other government workers such as firefighters and police. But they must do more--this bill provides less than 20 percent of what the states need.

Reducing the federal deficit is not the equivalent of getting one's household finances in order. In fact, it is the opposite. Curtailing federal spending when there are unprecedented millions unemployed makes deficits worse. When government spending falls, people lose their jobs, incomes fall and tax revenues plummet.

Stimulating economic activity via deficit spending should not require the blessing of the banks, economists or fiscal conservatives, any more than sex--recreational, procreative, straight, gay, queer or polymorphous--requires the sanction of the church, temple or mosque.

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Susan F. Feiner is professor of women's studies and of economics at the University of Southern Maine. She is co-author of the 2004 book, "Liberating Economics: Feminist Perspectives on Families, Work and Globalization."