Craig Steiner: The Myth of the Clinton Surplus

[Switchgear]

link

While not defending the increase of the federal debt under President Bush, it's curious to see Clinton's record promoted as having generated a surplus. It never happened. There was never a surplus and the 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 (see note about this link below) 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 surplus that Bush subsequently turned into a deficit. Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive surplus 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 only $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 say 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 intragovernmental 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. Intragovernmental 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:

<See chart on the link, it doesn't translate to ES well at all>

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

When it is claimed that Clinton paid down the national debt, that is 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 intragovernmental holdings (mostly Social Security).

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 intragovernmental 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 intragovernmental 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.

There's more at the link.

By the way, anyone know the last time there was an actual surplus (meaning federal debt decreased from one year to the next)?

Ninja text below:

1956-1957!

[DeanCollins]

What amazes me by this is the lengths the republicans will go back in time to blame Bushes failings on the prior admin, and at the same time accuse the current admin of "poor leadership" for doing the same thing, even though the country went from an awesome economy and peace time to the worst economy since the 30's and involved in 2 wars.

[aREDSKIN]

What amazes me by this is the lengths the republicans will go back in time to blame Bushes failings on the prior admin, and at the same time accuse the current admin of "poor leadership" for doing the same thing, even though the country went from an awesome economy and peace time to the worst economy since the 30's and involved in 2 wars.

I'm not a Bush defender, especially given his putrid performance on spending & immigration, however, to now claim that Clinton's "economy" was awesome is just plain ignorant, ESPECIALLY given what we now know, is just plain WRONG.

[Bang]

From what I understand, Zachary Taylor was also wrongly credited with a bunch of stuff. (according to his arch rival and noted partisan pamphleteer Horace Van Bumbershoot)

The ****.

~Bang

[Nickclone]

I'm not a Bush defender, especially given his putrid performance on spending & immigration, however, to now claim that Clinton's "economy" was awesome is just plain ignorant, ESPECIALLY given what we now know, is just plain WRONG.

What? Can you explain yourself further?

[DeanCollins]

I'm not a Bush defender, especially given his putrid performance on spending & immigration, however, to now claim that Clinton's "economy" was awesome is just plain ignorant, ESPECIALLY given what we now know, is just plain WRONG.

Ok, "refutiate" some of this. :beatdeadhorse:

The Clinton Presidency:

Historic Economic Growth In 1993, President Clinton and Vice President Gore launched their economic strategy: (1) establishing fiscal discipline, eliminating the budget deficit, keeping interest rates low, and spurring private-sector investment; (2) investing in people through education, training, science, and research; and (3) opening foreign markets so American workers can compete abroad. After eight years, the results of President Clinton’s economic leadership are clear. Record budget deficits have become record surpluses, 22 million new jobs have been created, unemployment and core inflation are at their lowest levels in more than 30 years, and America is in the midst of the longest economic expansion in our history.

President Clinton’s Record on the Economy: In 1992, 10 million Americans were unemployed, the country faced record deficits, and poverty and welfare rolls were growing. Family incomes were losing ground to inflation and jobs were being created at the slowest rate since the Great Depression. Today, America enjoys what may be the strongest economy ever.

• Strong Economic Growth: Since President Clinton and Vice President Gore took office, economic growth has averaged 4.0 percent per year, compared to average growth of 2.8 percent during the Reagan-Bush years. The economy has grown for 116 consecutive months, the most in history.
  
• Most New Jobs Ever Created Under a Single Administration: The economy has created more than 22.5 million jobs in less than eight years—the most jobs ever created under a single administration, and more than were created in the previous 12 years. Of the total new jobs, 20.7 million, or 92 percent, are in the private sector.
  
• Median Family Income Up $6,000 since 1993: Economic gains have been made across the spectrum as family incomes increased for all Americans. Since 1993, real median family income has increased by $6,338, from $42,612 in 1993 to $48,950 in 1999 (in 1999 dollars).
  
• Unemployment at Its Lowest Level in More than 30 Years: Overall unemployment has dropped to the lowest level in more than 30 years, down from 6.9 percent in 1993 to just 4.0 percent in November 2000. The unemployment rate has been below 5 percent for 40 consecutive months. Unemployment for African Americans has fallen from 14.2 percent in 1992 to 7.3 percent in October 2000, the lowest rate on record. Unemployment for Hispanics has fallen from 11.8 percent in October 1992 to 5.0 percent in October 2000, also the lowest rate on record.
  
• Lowest Inflation since the 1960s: Inflation is at the lowest rate since the Kennedy Administration, averaging 2.5 percent, and it is down from 4.7 percent during the previous administration.
  
• Highest Homeownership Rate on Record: The homeownership rate reached 67.7 percent for the third quarter of 2000, the highest rate on record. In contrast, the homeownership rate fell from 65.6 percent in the first quarter of 1981 to 63.7 percent in the first quarter of 1993.
  
• 7 Million Fewer Americans Living in Poverty: The poverty rate has declined from 15.1 percent in 1993 to 11.8 percent last year, the largest six-year drop in poverty in nearly 30 years. There are now 7 million fewer people in poverty than there were in 1993.
  

Establishing Fiscal Discipline and Paying off the National Debt

President Clinton’s Record on Fiscal Discipline: Between 1981 and 1992, the national debt held by the public quadrupled. The annual budget deficit grew to $290 billion in 1992, the largest ever, and was projected to grow to more than $455 billion by Fiscal Year (FY) 2000. As a result of the tough and sometimes unpopular choices made by President Clinton, and major deficit reduction legislation passed in 1993 and 1997, we have seen eight consecutive years of fiscal improvement for the first time in America’s history.

• Largest Surplus Ever: The surplus in FY 2000 is $237 billion—the third consecutive surplus and the largest surplus ever.
  
• Largest Three-Year Debt Pay-Down Ever: Between 1998-2000, the publicly held debt was reduced by $363 billion—the largest three-year pay-down in American history. Under Presidents Reagan and Bush, the debt held by the public quadrupled. Under the Clinton-Gore budget, we are on track to pay off the entire publicly held debt on a net basis by 2009.
  
• Lower Federal Government Spending: After increasing under the previous two administrations, federal government spending as a share of the economy has been cut from 22.2 percent in 1992 to 18 percent in 2000—the lowest level since 1966.
  
• Reduced Interest Payments on the Debt: In 1993, the net interest payments on the debt held by the public were projected to grow to $348 billion in FY 2000. In 2000, interest payments on the debt were $125 billion lower than projected.
  
• Americans Benefit from Reduced Debt: Because of fiscal discipline and deficit and debt reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save roughly $2,000 per year in mortgage payments, like a large tax cut.
  
• Double Digit Growth in Private Investment in Equipment and Software: Lower debt will help maintain strong economic growth and fuel private investments. With government no longer draining resources out of capital markets, private investment in equipment and software averaged 13.3 percent annual growth since 1993, compared to 4.7 percent during 1981 to 1992.
  

To Establish Fiscal Discipline, President Clinton:

• Enacted the 1993 Deficit Reduction Plan without a Single Republican Vote. Prior to 1993, the debate over fiscal policy often revolved around a false choice between public investment and deficit reduction. The 1993 deficit reduction plan showed that deficit and debt reductions could be accomplished in a progressive way by slashing the deficit in half and making important investments in our future, including education, health care, and science and technology research. The plan included more than $500 billion in deficit reduction. It also cut taxes for 15 million of the hardest-pressed Americans by expanding the Earned Income Tax Credit; created the Direct Student Loan Program; created the first nine Empowerment Zones and first 95 Enterprise Communities; and passed tax cuts for small businesses and research and development.
  
• Negotiated the Balanced Budget Agreement of 1997. In his 1997 State of the Union address, President Clinton announced his plan to balance the budget for the first time in 27 years. Later that year, he signed the Balanced Budget Act of 1997, a major bipartisan agreement to eliminate the national budget deficit, create the conditions for economic growth, and invest in the education and health of our people. It provided middle-class tax relief with a $500 per child tax credit and the Hope Scholarship and Lifetime Learning tax credits for college. It also created the Children’s Health Insurance Program to serve up to 5 million children and made landmark investments in education initiatives including educational technology, charter schools, Head Start, and Pell Grants. Finally, it added 20 more Empowerment Zones and 20 more rural Enterprise Communities, included the President’s plan to revitalize the District of Columbia, and continued welfare reform though $3 billion in new resources to move welfare recipients to private-sector jobs.
  
• Dedicated the Surplus to Save Social Security and Reduce the National Debt. In his 1998 and 1999 State of the Union addresses, President Clinton called on the nation to save the surplus until the solvency of Social Security is assured. He also repeatedly vetoed large Republican tax cut bills that would have jeopardized our nation’s fiscal discipline. The President’s actions led to a bipartisan consensus on saving the surplus and paying down the debt.
  
• Extended Medicare Solvency from 1999 to 2025. When President Clinton took office, Medicare was expected to become insolvent in 1999, then only six years away. The 1993 deficit reduction act dedicated some of the taxes paid by Social Security beneficiaries to the Medicare Trust Fund and extended the life of Medicare by three years to 2002. Thanks to additional provisions to combat waste, fraud and abuse and bipartisan cooperation in the 1997 balanced budget agreement, Medicare is now expected to remain solvent until 2025.
  

Clinton-Gore Economic Policy Has Dramatically Improved the Economy

"My colleagues and I have been very appreciative of your [President Clinton’s] support of the Fed over the years, and your commitment to fiscal discipline has been instrumental in achieving what in a few weeks will be the longest economic expansion in the nation’s history."

— Alan Greenspan, Federal Reserve Board Chairman, January 4, 2000, with President Clinton at Chairman Greenspan’s re-nomination announcement

"The deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of credit for that. [He] did something about it, fast. And I think we are seeing some benefits."

— Paul Volcker, Federal Reserve Board Chairman (1979-1987), in Audacity, Fall 1994

One of the reasons Goldman Sachs cites for the "best economy ever" is that "on the policy side, trade, fiscal, and monetary policies have been excellent, working in ways that have facilitated growth without inflation. The Clinton Administration has worked to liberalize trade and has used any revenue windfalls to reduce the federal budget deficit."

— Goldman Sachs, March 1998

"Clinton’s 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity."

— Business Week, May 19, 1997

[Beans]

Ok, "refutiate" some of this. :beatdeadhorse:

The internets "refutiate".

[robotfire]

I honestly don't care about the past, except for what it can teach us in the future. We know for certain that we can't possibly keep spending what we're spending. Pointing fingers is only going to make it harder to get on track. Nobody seems to want to make hard decisions to right the ship, though. I prioritize this country where it belongs (right below God and family), and it's painful for me to see the trouble we're headed toward.

[techboy]

Ok, "refutiate" some of this. :beatdeadhorse:

You should probably "ensourcitate" that. You certainly didn't write it yourself.

[TD Riggo]

What amazes me by this is the lengths the republicans will go back in time to blame Bushes failings on the prior admin, and at the same time accuse the current admin of "poor leadership" for doing the same thing, even though the country went from an awesome economy and peace time to the worst economy since the 30's and involved in 2 wars.

What amazes ME is the lengths at which 0bama supporters will do anything to deflect criticism of their hero. You DO realize that Bammie ONCE AGAIN blamed Bush just a couple of days ago "for taking a surplus and running up deficits." So, once again 0bama lies about a surplus that never existed (and seriously .. I've been using these same facts that the OP posted here for about 5 years to refute Clinton-lovers claims to the contrary) in order to "prop up" his FAILing regime, and his supporters all lap it up. Hilarious.

Yes .. 0bama quadruples Bush's worst deficit in just a little over one year, and his supporters still blame Bush for creating such "huge" deficits!

[TD Riggo]

Ok, "refutiate" some of this. :beatdeadhorse:

The Clinton Presidency:

Historic Economic Growth

BLAH

BLAH

BLAH

SNIP

You for got the while REPUBLICAN CONGRESS PART in your factoids ..

[NoCalMike]

Covering your eyes and saying it isn't true is not a very good job of convincing anyone. A long post was made outlying the economy and surplus under Clinton and you just pretty much no-sell it and ignore that it is there in plain english.

[Thiebear]

I'd put Clinton back in office to get the same deficits...

[polywog999]

link

There's more at the link.

By the way, anyone know the last time there was an actual surplus (meaning federal debt decreased from one year to the next)?

Ninja text below:

1956-1957!

Yes, during the Clinton administration.

[Hubbs]

Yes, during the Clinton administration.

*sigh*

If I have a dollar in my pocket, and I owe you a dollar, and I replace the dollar in my pocket with an I.O.U. so I can pay you....

[mardi gras skin]

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

Yeah, I don't understand how we can have a budget surplus while the debt keeps going up. Government accounting is ridiculous.

Still, Bush and Obama have done everything they can to make Clinton and Gingrich look like economic masterminds. From $5.8 to $13.3 trillion in ten years. Amazing.

[Burgold]

You for got the while REPUBLICAN CONGRESS PART in your factoids ..

Probably, the reason for that is that as soon as Clinton left office we saw how Congress responded. That same majority Republican Congress certainly didn't display any fiscal restraint or responsibility ergo it wasn't them who instilled it in Clinton.

The Republicans for six years had all three federal branches under their control with a wimpy, spineless dem minority to face against. Clearly, they are what they are.

[Thiebear]

The Republicans for six years had all three federal branches under their control with a wimpy, spineless dem minority to face against. Clearly, they are what they are.

This i don't understand:

80% of the same people have been in office for 35years.

During one admin (different) they are wimpy

During the next admin (same) they go crazy

and then we put them back in power.

and then we take them out of power.

And then we put them back in power.

Clearly they are both: What they have ever been since 1952?

Those are slowly leaving though....

[aREDSKIN]

Ok, "refutiate" some of this. :beatdeadhorse:

Barack Obama on Thursday laid much of the blame for America's unfolding credit crisis on the financial deregulation of the 1990s in his hardest hitting attack so far on the economic legacy of Bill Clinton's administration. ....

In his address Mr Obama associated Mr Clinton's abolition of the Depression-era Glass-Steagall Act in 1999 with the financial scandals that rocked the early years of the Bush administration and which led up to the bailout earlier this month of Bear Stearns.......

Mr Obama also ascribed the bankruptcy of Enron and WorldCom in 2001 and the subsequent lack of oversight of the US sub-prime mortgage market to the influence of special interests and lobby groups in Washington DC dating from the Clinton era. And he contrasted his refusal to take campaign donations from lobby groups with Mrs Clinton's acceptance of such funds......

"This was not the invisible hand at work - it was the hand of industry lobbyists," he said. "Instead of establishing a 21st century framework we simply dismantled the old one - aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy."

This is what Clinton's "policies" ACTUALLY got us. Not some point in time artificial benchmark(s) some cheerlead as some great altruistic achievement.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto032720081349315803

[Popeman38]

I have said it before and I will say it again, Bill Clinton was one of the least active Presidents ever. He didn't really do anything, yet he is remembered as one of the greatest. That tells you how bad recent Presidents have been. Doing nothing is viewed in a positive light.

[Switchgear]

Yes, during the Clinton administration.

In which year of the Clinton administration did debt decrease?

I posted this because I saw the "Clinton Surplus" used in the Foodstamps thread, and it always amazes me that people still believe it. Debt increased every year in the 90's, so where was the surplus? Also, the 80's, 70's, 60's and 2000's. We've got a debt problem, and eventually it's going to consume us.

[SnyderShrugged]

Never was a Clinton fan, learned to regret my Bush support, but I would gladly take a 1997 economy at this point. I dont care who was in office or what has happened since. heck, give me 1997 spending levels alone and I'd be tickled!

[Larry]

Yes .. 0bama quadruples Bush's worst deficit in just a little over one year, . . .

If you're gonna call out other people for spouting things that aren't true, in an attempt to demonstrate their partisanship, then you really should try not to do the same thing, yourself, in the very same post.

[Burgold]

This i don't understand:

80% of the same people have been in office for 35years.

During one admin (different) they are wimpy

During the next admin (same) they go crazy

....

actually, I'd argue that the democrats are still spineless wimps. Look at how desperately the contort and compromise to try to get one or two Republicans to join in. Look how they found themselves stymied and unable to push through legislation despite having huge majorities... even when they had a fillibuster proof majority.

They're so afraid of mistakes and desperate to share potential blame that they are endlessly shooting themselves in the foot and making their legislation worse.

I suspect that if we reinstall the Repubs we would find again that they are still the same drunk spending irresponsible bums that they proved to be before.

So, our choice is between spineless corrupt bums and irresponsible cavalier corrupt bums who march in unanimous lockstep. Kind of scary, isn't it?

[Mursilis]

What amazes me by this is the lengths the republicans will go back in time to blame Bushes failings on the prior admin, and at the same time accuse the current admin of "poor leadership" for doing the same thing, even though the country went from an awesome economy and peace time to the worst economy since the 30's and involved in 2 wars.

What "inside-the-box" (non)thinkers like you fail to understand is that criticism of a Democrat does NOT automatically mean the critic supports all Republicans, or ANY Republican! Hey, guess what?!? I think Clinton's economic "success" was mostly just the combination of a speculative tech bubble and some shady gov't accounting, and I ALSO think GWB was a poor president!! Spend a few minutes trying to wrap your head around that idea.