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The Myth Of The Clinton Surplus

Mike

Well-known member
The Myth of the Clinton Surplus
October 31st, 2007

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Time and time again, anyone reading the mainstream news or reading articles on the Internet will read the claim that President Clinton not only balanced the budget, but had a surplus. This is then used as an argument to further highlight the fiscal irresponsibility of the federal government under the Bush administration.

The claim is generally made that Clinton had a surplus of $69 billion in FY1998, $123 billion in FY1999 and $230 billion in FY2000 . In that same link, Clinton claimed that the national debt had been reduced by $360 billion in the last three years, presumably FY1998, FY1999, and FY2000--though, interestingly, $360 billion is not the sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).

While not defending the increase of the federal debt under President Bush, it is aggravating seeing Clinton's record promoted as having generated a surplus. It never happened. There was never a surplus and the cold hard facts support that position. In fact, far from a $360 billion reduction in the national debt in FY1998-FY2000, there was an increase of $281 billion.

Verifying this is as simple as accessing the U.S. Treasury website where the national debt is updated daily and a history of the debt since January 1993 can be obtained. Considering the government's fiscal year ends on the last day of September each year, and considering Clinton's budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994), here's the national debt at the end of each year of Clinton Budgets:


Fiscal
Year Year
Ending National Debt Deficit
FY1993 09/30/1993 $4.411488 trillion
FY1994 09/30/1994 $4.692749 trillion $281.26 billion
FY1995 09/29/1995 $4.973982 trillion $281.23 billion
FY1996 09/30/1996 $5.224810 trillion $250.83 billion
FY1997 09/30/1997 $5.413146 trillion $188.34 billion
FY1998 09/30/1998 $5.526193 trillion $113.05 billion
FY1999 09/30/1999 $5.656270 trillion $130.08 billion
FY2000 09/29/2000 $5.674178 trillion $17.91 billion
FY2001 09/28/2001 $5.807463 trillion $133.29 billion



As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a budget surplus that Bush subsequently turned into a deficit. Yes, the budget was almost balanced in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive number. And Clinton's last budget proposal for FY2001, which ended in September 2001, generated a $133.29 billion deficit. The growing deficits started in the year of the last Clinton budget, not in the first year of the Bush administration.

Keep in mind that President Bush took office in January 2001 and his first budget took effect October 1, 2001 for the year ending September 30, 2002 (FY2002). So the $133.29 billion deficit in the year ending September 2001 was Clinton's. Granted, Bush supported a tax refund where taxpayers received checks in 2001. However, the total amount refunded to taxpayers was $38 billion . So even if we assume that $38 billion of the FY2001 deficit was due to Bush's tax refunds which were not part of Clinton's last budget, that still means that Clinton's last budget produced a deficit of 133.29 - 38 = $95.29 billion.

Clinton clearly did not achieve a surplus and he didn't leave President Bush with a surplus.

So why do they said he had a surplus?

As is usually the case in claims such as this, it has to do with Washington doublespeak and political smoke and mirrors.

Understanding what happened requires understanding two concepts of what makes up the national debt. The national debt is made up of public debt and intergovernmental holdings. The public debt is debt held by the public, normally including things such as treasury bills, savings bonds, and other instruments the public can purchase from the government. Intergovernmental holdings, on the other hand, is when the government borrows money from itself--mostly borrowing money from social security.

Looking at the makeup of the national debt and the claimed surpluses for the last 4 Clinton fiscal years, we have the following table:


Fiscal
Year End
Date Claimed
Surplus Public
Debt Inter-gov
Holdings Total National
Debt
FY1997 09/30/1997 $3.789667T $1.623478T $5.413146T
FY1998 09/30/1998 $69.2B $3.733864T $55.8B $1.792328T $168.9B $5.526193T $113B
FY1999 09/30/1999 $122.7B $3.636104T $97.8B $2.020166T $227.8B $5.656270T $130.1B
FY2000 09/29/2000 $230.0B $3.405303T $230.8B $2.268874T $248.7B $5.674178T $17.9B
FY2001 09/28/2001 $3.339310T $66.0B $2.468153T $199.3B $5.807463T $133.3B



Notice that while the public debt went down in each of those four years, the intergovernmental holdings went up each year by a far greater amount--and, in turn, the total national debt (which is public debt + intergovernmental holdings) went up. Therein lies the lie.

When Clinton (and others) said that he had paid down the national debt, that was patently false--as can be seen, the national debt went up every single year. What Clinton did do was pay down the public debt--notice that the claimed surplus is relatively close to the decrease in the public debt for those years. But he paid down the public debt by borrowing far more money in the form of intergovernmental holdings.

Interestingly, this most likely was not even a conscious decision by Clinton. The Social Security Administration is legally required to take all its surpluses and buy U.S. Government securities, and the U.S. Government readily sells those securities--which automatically and immediately becomes intergovernmental holdings. The economy was doing well due to the dot-com bubble and people were earning a lot of money and paying a lot into Social Security. Since Social Security had more money coming in than it had to pay in benefits to retired persons, all that extra money was immediately used to buy U.S. Government securities. The government was still running deficits, but since there was so much money coming from excess Social Security contributions there was no need to borrow more money directly from the public. As such, the public debt went down while intergovernmental holdings continued to skyrocket.

The net effect was that the national debt most definitely did not get paid down because we did not have a surplus. The government just covered its deficit by borrowing money from Social Security rather than the public .


An overall "downsizing" of government and a virtual end to the arms race have contributed to the surplus, but the vast majority is coming from excess Social Security taxes being paid by the workforce in an attempt to keep Social Security benefit checks coming once the "baby-boomers" start to retire.
Of the $142 billion surplus projected by the end of 2000, $137 billion will come from excess Social Security taxes.
When these unified budget numbers are separated into Social Security and non-Social Security components, however, it becomes evident that all of the projected surplus throughout this period is attributable to Social Security. The remainder of the budget will remain in deficit throughout the next decade.


Are intergovernmental holdings really debt?

Absolutely! The intergovernmental debt is every bit as real as the public debt. It's not "a wash" simply because you owe the government owes the money to "itself."

As I explained in a previous article, Social Security is legally required to use all its surpluses to buy U.S. Government securities. From Social Security's standpoint, it has a multi-trillion dollar reserve in the form of U.S. Government securities. When the Social Security system starts to falter due to insufficient contributions to pay for all the benefits of retiring baby-boomers, probably around 2017, it will start cashing those securities and will expect the U.S. Government to pay it back, with interest. The problem is, the government doesn't have the money. The money has already been spent--in part, effectively, to pay down the public debt under Clinton.

The Federal Government cannot just wave a magic wand and somehow "write off" the intergovernmental debt. Essentially, citizens invested money in Social Security and Social Security invested that money in the Federal Government. Now Social Security effectively owes you money (in the form of future retirement benefits) and won't be able to pay you that money if the Federal Government just cancels the intergovernmental debt. The only way the Federal Government can "write off" intergovernmental debt is if it simultaneously eliminates the Social Security system. That might very well be a good idea, but it isn't likely. And Social Security will go bankrupt in about 2017 if the Federal Government doesn't honor those intergovernmental holdings as real debt.

In short, if the government doesn't pay back intergovernmental holdings, other government agencies (like Social Security) will fail. Since allowing Social Security to fail is not a politically viable option, the debt represented by intergovernmental holdings is just as real as the public debt. It can't just be eliminated by some fancy accounting trick or political maneuvering. If it were possible, believe me, politicians would have done it already and taken credit for reducing the national debt by trillions of dollars.

Does a Budget Surplus Automatically Pay Down The Debt?

The concept of a "budget surplus" or a "balanced budget" is of very tenuous importance. A budget is simply a plan on how to spend money which normally also factors in expected income. Anyone can present a "balanced budget" or have a "budget surplus" if they use inflated estimates of income or deflated estimates of expenses. In the end, a budget is nothing more than a plan. Reality is a completely different matter.

As a simple example, if I start 2008 with a job that pays $50,000/year, I can plan a budget that takes into account the $50,000 I expect to make and divides that up amongst all the expenses I expect to make over the course of the year. If my expected expenses are less than my expected earnings, I have a budget surplus. If, however, over the course of the year I lose my job and get a new job that only pays $40,000/year while at the same time it just so happens I have a variable-rate mortgage that adjusts and increases my mortgage payment, by the end of year the reality may very well be that my expenses exceeded my income. I had a budget surplus but reality had different plans and I ended up further in debt.

A balanced budget or a budget surplus is a great thing, but it's only relevant if the budget surplus turns into a real surplus at the end of the fiscal year. In Clinton's case, it never did.

The reality of the national debt

The only debt that matters is the total national debt. And the national debt went up every single year under Clinton. Had Clinton really had a surplus the national debt would have gone down. It didn't go down precisely because Clinton had a deficit every single year. The U.S. Treasury's historical record of the national debt verifies this.
 

aplusmnt

Well-known member
Way to logical of an explanation for Frankie (fff). If she googles Clinton and it says on the Huffington Post he had a surplus then damn them facts!

As I have said before, all he had to do is shift some of that debt over to his last budget so it appeared it was Bush's fault it went up even though Clinton set the budget for Bush's first year.

They did not call him slick Willy for nothing!
 

fff

Well-known member
:roll: You guys can keep patting each other on the back, spinning, and pretending but

Seattle Times:
President Clinton announced Wednesday that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year's record surplus of $122.7 billion

http://community.seattletimes.nwsource.com/archive/?date=20000913&slug=4042141

CBS News:
Running out of time, President Clinton and Republican leaders wrangled yesterday over how to deal with huge budget surpluses, tax cuts and spending priorities as Congress struggles to rush out of town to campaign for the November elections.

http://www.cbsnews.com/stories/2002/08/27/politics/main519956.shtml

Washington Post:
The return of deficit spending this year, the first since 1997 and after a $127 billion surplus in fiscal 2001, is generally attributed to the fragile economy, the shaky stock market and the government's response to the Sept. 11 terrorist attacks. Democrats also blame the 10-year, $1.35 trillion tax cut that President Bush pushed through last year.

http://www.washingtonpost.com/wp-srv/politics/special/budget/stories/budget062999.htm

CNN:
President Clinton announced yesterday that the surging economy will pump an extra $1 trillion into government coffers over the next 15 years, a bonanza that he said should give Washington the money it needs to secure the long-term stability of the nation's two largest social programs and eliminate the federal government's public debt by 2015.

http://archives.cnn.com/2000/ALLPOLITICS/stories/09/27/clinton.surplus/

Republican Congressmen:

Rep. J.C. Watts, R-Oklahoma, chairman of the House Republican Conference, said the GOP wants 90 percent of the surplus used for the debt. In a CNN interview, he said the other 10 percent should be used to "take care of a lot of priorities we have, like prescription drugs, making sure that our education needs are met, making sure some of our national security needs are met, and doing that while at the same time protecting the Social Security surplus and the Medicare surplus."

George Bush used the CLINTON surplus as a basis for his tax cuts!
http://query.nytimes.com/gst/fullpage.html?res=9C00E3D91731F931A1575BC0A9679C8B63

''The federal budget will have the second largest surplus in history,'' Mr. Bush told an audience of several thousand people at Harry S. Truman High School, referring to figures for the current fiscal year to be released on Wednesday by the White House Office of Management and Budget.


Then there’s this guy:
http://hubpages.com/hub/Proof-REPUBLICANS-are-bad-for-the-economy

If they aren't good with money or morals, what are they good with?
I'd like to start off by defining exactly what I mean by Republican. By Republican I don't mean the 90-year old WWII vet down the street, or an avid Ron Paul supporter, I mean specifically, the last three (3) Republican Presidents/Administrations; Reagan, Bush, and Bush. And by bad for the economy I mean that you'll be seeing a lot of Republicans when you be bringin' all those pennies to the CoinStar machine at your local Safeway. How do I know this as fact? Is it the years in College studying politics and economics? Was it hours of MSNBC, and Mad Money? Is it the daily edition of The Wall Street Journal that has given me my divine monetary policy knowledge?
Amazingly it took none of that, all it took was a couple brave observations. First I observed a couple graphs showing the history of the national deficit/surplus (we did have a surplus if you remember, and a curbed debt, ah the 90's) and the history of the national debt. You can see these for yourself down below. The second thing I observed is that at the end of the last two major Republican holds on the White House our country seemed to go into what people back home call a recession (in 92' following 12 years of Republican rule, and 2008 after two amazing terms with George W. Bush). For me, there's not much left to say. As an anarchist I won't blaim government for my personal economic woes, as I am able to relocate my money into another economy if needed. But we can blaim these failed "economic conservatives" for bankrupting our government and hording our vault to pay off their contributors.

His graph didn't copy. If you go to the link, the bright blue line shooting up, up, up (just before the red line dropping down, down, down) is Clinton's budget surplus. And that last red line going down, down, down is Bush's deficit.
 

Mike

Well-known member
Aplus.............Wonder if Frankie found anything in the first article of this thread that was wrong? :lol: :lol: :lol:
 

aplusmnt

Well-known member
Mike said:
Aplus.............Wonder if Frankie found anything in the first article of this thread that was wrong? :lol: :lol: :lol:

Frankie does not read to learn she reads to support her opinion! She will never accept the way Clinton played with the SS numbers or how he waited till the end of his term to get that so called surplus to just turn around and give Bush a budget that corrected for his saving.

She will never accept that Clinton just put off spending on infrastructure so someone else could fix it.

But you have to remember Frankie thinks the Democrats are her guardian Angels and they will make everything good in the world if only given the chance!
 

Texan

Well-known member
fff said:
His graph didn't copy.
Is this it, ff?

360748_f520.jpg
 
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