Craig Steiner: The Myth of the Clinton Surplus

[Larry]

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.

It's done by selectively choosing whether or not to treat the Social Security Trust Fund as though it exists or not.

What actually happened during Clinton's last full year, was that the government had a deficit, but it was the smallest one in years, and the deficit was small enough that the Social Security surplus was bigger than the general revenue deficit.

The government as a whole (SS and other monies, combined) took in more money than it sent out. The government actually bought back more t-bills than they sold.

If, however, you treat the transaction in which the government transferred cash from SS to general revenue as "borrowing", . . .

And, personally, I think that's the way it should be done. I think that the government figures ought to include the money "borrowed" from SS as a debt that's owed to that fund. I think that's the honest way to do things.

Where I have a problem is my suspicion that the same people who are claiming "Clinton didn't have a surplus, because he borrowed money from SS, and that there's a debt", when they trot out their "let's kill SS" agenda, will loudly announce that there is no such thing as an SS trust fund, it doesn't exist, it's never existed, it's just worthless pieces of paper, and SS will be bankrupt on the day when it ever asks for any of that money back. (Or, if they really want to try to simulate panic, they'll pull the "well, if the government were forced to come up, right now, with enough money to fund SS

forever

,

using only current revenues

, then the government would have to come up with a gazillion dollars, therefore SS is a gazillion dollars in debt, right now." game.)

[Ax]

The myth was created as a political tool to be used for election purposes.

D's lied about it's existence saying, "Hey, look at all this money we saved. Now, we can spend it on..."

The R's went along with the lie, but said, "Hey, since we have all this extra money laying around, we want to give it back to the taxpayers!"

D's - We're gonna spend your money for you

R's - We're gonna give it back.

Same mythical story, with different morals to them.

[Larry]

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

Hey, that's a no brainer, to me. (Shaddup, you in the back.)

I'll take a Congress that can't/won't do anything, any day.

[Henry]

Here. This should help:

http://www.usgovernmentspending.com/downchart_gs.php?year=1792_2010&view=1&expand=&units=p&fy=fy11&chart=H0-fed&bar=0&stack=1&size=l&title=US%20Federal%20Debt%20As%20Percent%20Of%20GDP&state=US&color=c&local=s

Rather than a chart of straight-up surpluses and deficits, this is a chart of US Federal Debt As Percent Of GDP.

Look at the big spike up starting at 1980. That's Reagan and Bush.

See the dip down? That's Clinton.

See it go back up? That's Bush, and now Obama.

[Burgold]

See it go back up? That's Bush, and now Obama.

To be fair (which is never fair) one should acknowledge that the majority of money Obama spent was money spent to address the economic crisis he inherited. A stimulus that was deemed necessary by a broad majority on both sides and from most economic perspectives.

Still, Obama signed it and it is part of his legacy. I do think the "why" is useful though.

[SnyderShrugged]

To be fair (which is never fair) one should acknowledge that the majority of money Obama spent was money spent to address the economic crisis he inherited. A stimulus that was deemed necessary by a broad majority on both sides and from most economic perspectives.

Still, Obama signed it and it is part of his legacy. I do think the "why" is useful though.

There were LOTS of smart people who knew the stimulus was a waste.

Nobody listened:mad:

[Homercles82]

The problem now is that we spending much higher than we did during the Bush years and that spending is not doing a good job at creating jobs.

The late 90's benefited from the dot com bubble as well in addition to what we now know as the housing bubble with bad mortgages.

[Burgold]

I don't think it was. We're in a better place than we were two years ago. Two years ago, we were hanging off a cliff with a 2 ton boulder strapped to our ankle. Now, at least we managed to cut the boulder free and grab a twig.

The economy seems better using a number of measures like growth. It's just that it's a long, long, long way from fixed. The self inflicted damage was MASSIVE and was never going to be quickly or easily erased.

[Popeman38]

The problem now is that we spending much higher than we did during the Bush years and that spending is not doing a good job at creating jobs.

The late 90's benefited from the dot com bubble as well in addition to what we now know as the housing bubble with bad mortgages.

Thank you. There have been two significant bubbles in the last 2 decades: dot com and housing. Both started in the Clinton years. Now, Clinton does not get 100% of the blame, as policies enacted by Reagan, GHW Bush, and Clinton all contributed. But he definitely should get a portion of the blame.

[Henry]

To be fair (which is never fair) one should acknowledge that the majority of money Obama spent was money spent to address the economic crisis he inherited. A stimulus that was deemed necessary by a broad majority on both sides and from most economic perspectives.

Still, Obama signed it and it is part of his legacy. I do think the "why" is useful though.

Well, and Reagan ramped up spending to break the back of the USSR. And Bush was fighting the War on Terror ... I'm not trying to pass judgement here. I'm just addressing the initial post, which suggests that Clinton's frugality was a 'myth.'

[Popeman38]

I don't think it was. We're in a better place than we were two years ago. Two years ago, we were hanging off a cliff with a 2 ton boulder strapped to our ankle. Now, at least we managed to cut the boulder free and grab a twig.

The economy seems better using a number of measures like growth. It's just that it's a long, long, long way from fixed. The self inflicted damage was MASSIVE and was never going to be quickly or easily erased.

And MANY people feel/felt that since the economy expanded due to an inflated bubble, what happened when it burst is the market correcting itself. Pumping trillions of dollars into it only artificially re-inflates it for longer, slower, more painful deflation.

[Henry]

And MANY people feel/felt that since the economy expanded due to an inflated bubble, what happened when it burst is the market correcting itself. Pumping trillions of dollars into it only artificially re-inflates it for longer, slower, more painful deflation.

Those people got out-voted.

[Burgold]

And MANY people feel/felt that since the economy expanded due to an inflated bubble, what happened when it burst is the market correcting itself. Pumping trillions of dollars into it only artificially re-inflates it for longer, slower, more painful deflation.

Honestly, I'm worried about that too. The downside of the stimuli and the strategy of the last three years is that the cure might have some decent upside... we got the patient off the operating table alive... but that the means used might eventually lead to catastrophic problems.

At some point, we've got to allow ourselves to feel the pain of our actions and deal with these issues that have been looming seemingly forever (debt, SS, Medicare, etc)

[Popeman38]

Those people got out-voted.

I understand that. So now we get the longer, slower, more painful deflation. Hooray! But you can only throw money at a bottomless pit for so long before you either run outta money or the people supplying the money get really pissed off and throw you into the bottomless pit.

[Henry]

But you can only throw money at a bottomless pit for so long before you either run outta money or the people supplying the money get really pissed off and throw you into the bottomless pit.

That's absolutely true, which is why when the economy is strong it's a good idea to decrease the debt relative to the GDP, just as Clinton did. And just as Bush did not do (okay, now I am passing judgement )

That way, when the economy does have an inevitable downturn, or if a rainy day occurs, you have some wiggle room. Obama came into office up against the wall. His solution was to spend anyway, which posterity will have to judge. But he should have never been put in that position in the first place.

[mbws]

The myth was created as a political tool to be used for election purposes.

D's lied about it's existence saying, "Hey, look at all this money we saved. Now, we can spend it on..."

The R's went along with the lie, but said, "Hey, since we have all this extra money laying around, we want to give it back to the rich taxpayers who don't really need it more than we need to fix our infrastructure!"

D's - We're gonna spend your money for you

R's - We're gonna give it to the rich.

Same mythical story, with different morals to them.

Fixed

[December90]

Simple Government Example

Last year we spent $100.00

This year we want to spend $200.00

This year we "only" get to spend $150.00

Our spending was just "cut" 25%

Democrat, Republican does not matter they all play this stupid game...

[Popeman38]

Simple Government Example

Last year we spent $100.00

This year we want to spend $200.00

This year we "only" get to spend $150.00

Our spending was just "cut" 25%

Democrat, Republican does not matter they all play this stupid game...

Don't forget, you have to spend at least 100% of your allotted budget or face budget cuts next fiscal year. Don't find ways to accomplish more for less, find ways to accomplish less with more so that you can justify more more.

[Ax]

Fixed

Your assessment...

"Hey, since we have all this extra money laying around, we want to give it back to the rich taxpayers who don't really need it more than we need to fix our infrastructure!"

I'm nowhere near rich, and I got back my fair share. As did the rich, who pay most of the taxes.

[Switchgear]

The myth was created as a political tool to be used for election purposes.

I don't think you read the whole thing.

Interestingly, this most likely was not even a conscious decision by Clinton.

I don't think it was an attempt to fool anybody, it's just the way the government does its accounting. The CBO just looks at public debt, so their numbers made it look like there was a surplus, but the overall numbers don't bear that out.

I'm nowhere near rich, and I got back my fair share. As did the rich, who pay most of the taxes.

You did not get back your "fair share". Bush returned the "excess" money that people paid, while running a deficit. You were one of many people who got cash at that time in return for long term debt. Fair share, ha.

[Switchgear]

Henry, your debt as compared to GDP chart is pretty informative. I thought about that last night after I posted this, I'm glad you did the legwork for me.

I'm not claiming Clinton doesn't have a better fiscal record than Bush, Reagan or W. The debt didn't increase nearly as fast during the Clinton administration, no one can argue that. But there was no surplus at any time, either.

That's absolutely true, which is why when the economy is strong it's a good idea to decrease the debt relative to the GDP, just as Clinton did. And just as Bush did not do (okay, now I am passing judgement )

I don't think that goes far enough. Our aim shouldn't just be to decrease debt relative to GDP, it should be to decrease debt overall during good economic times.

[Henry]

I don't think that goes far enough. Our aim shouldn't just be to decrease debt relative to GDP, it should be to decrease debt overall during good economic times.

I'd be ok with that.

[Ax]

You did not get back your "fair share". Bush returned the "excess" money that people paid, while running a deficit. You were one of many people who got cash at that time in return for long term debt. Fair share, ha.

"Fair share" being a figure of speech, used to debunk the tired old line that the tax cuts only went to "the rich".

Although, if they're gonna blow money we don't have, I'd rather they give it back to me, every time.

[The 12th Commandment]

Cutting taxes while running up a deficit is what I really had an issue with. That's just pandering to get votes at the expense of all of us. Taxes have to go up that's just a fact of life. No other way to fix the situation. I don't buy into the trickle down mumbo jumbo. Reagan just left his deficit for Bush 1 to fix and lose the re-election because of.

[Wrong Direction]

So many posts I want to respond to. I'll try to be brief.

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!

There's nuance here that is (so far) missing in this thread, though I haven't read it all.

The Clinton economy produced a huge tech bubble and actually claims high home ownership and low interest rates as strengths. Note what happened 8 years later with the banks.

Clinton touted the policies. The Republicans were supportive of the policies. Greenspan played well in the sandbox with Bush, Clinton and Bush. Bush II continued the policies with full support of Democrat party leadership like Dodd, Frank and *gulp* Obama.

In other words, I firmly believe the meldtown of 08, which continues today, was the direct result of the economic policy of Washington, not of Bush, Clinton, or anyone else. It was the policy of conventional wisdom...it created a ton of wealth and then destroyed it TWICE (don't forget the huge stock bubble that blew up while Clinton was still in office).

We need to kick them all out.