The Clinton Surplus Myth [Reader Post]

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I’m here to blow a hole in the myth that Clinton created an amazing budget surplus that Bush squandered and turned into a huge deficit. The above chart shows the deficit/surplus since 1980, pay no attention to Obama’s first year. I’ve talked enough about his budget deficit recently.

The following is a chart of the Nasdaq from 1990 until now:

At the end of Clinton’s term ONE THIRD of ALL revenue came from capital gains taxes. This is pretty astounding. I’m certainly not giving Bush a pass, he raised spending a huge amount and that is the biggest thing that annoyed me about his Presidency. That being said he was not blessed with the same environment Clinton had to work with. There were no capital gains tax revenues, only losses. The tech bubble and subsequent bust was the cause of Clinton’s surplus and Bush’s initial deficit.

Clinton gets far too much credit for something he had no control over, and in the long run was very bad for our economy. Let me know what you think in the comments below.

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Sometimes, it’s better to be lucky than good.

Did you even graduate from _hight school?! Surely not.

Mittens #2
So, who are you calling short? Oh,. . . you meant “high school” as in the author was obviously not indoctrinated adequately by the teachers’ union to honor the mythology of the left. Now I get it.

@Mittens:

Such a clever non sequitur. Nice lead-in to what you plan to say next, I’m sure, and how you will demolish his arguments with your superior reason and wit.

Wait, don’t start until I can make some popcorn. I don’t want to miss a single delicious moment.

OK, go ahead…

The whole Clinton term was characterized by corporate malfeasance. Some say that the lying that was so acceptable in the White House and cabinet that the effect merely “trickled down.” Eight years of partying and “who gives a s***” led to not only the tech bubble, itself a product of not merely unrealistic optimism, but that same culture of deceit and fudging. One might even say the ends sought by the biggest players in the tech bubble was partying, as well. Ferraris and champagne, nevermind the upcoming cliff. But the Clinton years led to the deceit and false “green” hopes that allowed Enron to pull of what was only – mistakenly – known as the worst scam of the period because the MSM would barely even TOUCH the Dem-tainted scandal that was Global Crossing, which made “green” energy insta-giant Enron look like a lemonade stand ripoff.

Sure the Clinton economy looked GREAT! And bubbles are what naturally happens when everyone is lying and money is being made by gambling on the future they’ve based on made-up numbers. Ferarris and champagne.

In GWB’s first few months, the press was, en masse, visibly depressed that the party machine in Washington had nearly ground to a halt. The adults were back in town.

Word has it the Obama White House held more big gala parties last year than there are days in the year.

Clinton’s surplus was phony since it came only from cutting the military by over 40% and we’re paying big time for that today. No one even bothered to find the billions of dollars in military equipment that vanished in thin air. Yet people believe the Arabs are giving him millions for nothing. Giving Slick a few million for billions in equipment would make sense.

What’s a “hight?”
Why do people rush to type something, and ignore the red squiggly lines beneath misspelled words? What do you think they are there for? To highlight brilliance? Is the anger so intense that you won’t take a second to look up a word? Or at least keep throwing vowels and consonants until something right shows up? Beats me.

Meanwhile, as for Bill’s “surplus,” I do recall, loosely, that he used some budget tricks to push expenses to following years, but kept revenues in current years, so that a “surplus” magically surfaced, to help Al get the presidency under the “good management” school of government. To para-quote a president, “Bush inherited his deficit from Clinton.”

I do think, too, it is sort of silly to talk even about a “budget” of the USA when there are 13 or so budgets, or appropriation bills. There are also entitlements whose true costs can’t be known until after the fact (and often long after anyone will go and correct the record.) Also, Social Security and Medicare, and a few lesser things are both part of and separate from the budget. After all, Social Security is supposed to be a dedicated funds program, people pay in, benefits are paid out, and the “surplus” for Soc. Sec. is put in an account somewhere for future payout, but are often replaced with T-bills or some other sort of federal obligation – in effect the “surplus” is a debt, or deficit element, at one and the same time. Plus there are supplemental budgets, off budget items, recapitulations, adjustments and a melange of other devices to do what is necessary to hide the true costs of government. Plus there are accounting methods unique to the Feds that don’t pass muster under GAAP to further confuse and conflate the issue. Added to that, sometimes, taxes are accounted for as revenues, but are not collected, but are expected to be collected. Not to mention, either, the old quip that “a billion or two are mere accounting errors.” Who knows how many billions this is?

I could go on, and I suppose there are wonks with far more analysis of this funny fed math mush than I can do. But to think that Bill had a “surplus” is sort of wrong. As is perhaps Obama’s deficit. It may be higher or lower than stated, who knows? Be that as it may, no matter how you look at it, the Federal Government is spending too much, with no end in sight, nor can it ever gain the revenues needed to cover its expenses or obligations. And there in lies the problem, not if Clinton had a paper surplus.

However, if Bush had just maintained spending levels and increased them with inflation? He would not have had a deficit.

His own budget took us from 2 Trillion, to 2.77 Trillion in the 6 Years he had control of the budget process.

So, Yes, Clinton was helped by Capital Gains taxes, but Bush was hurt by his own spending increases.

It might be worth noting that our nation’s decent into the deepest pit of debt it has ever been in has coincided with the greatest and most rapid upward transfer of wealth in history.

@Romeo13:

“…Bush was hurt by his own spending increases.”

Yes, sadly Bush was no fiscal Conservative. But he was still far more Conservative than the current crop of suicidal Democrats and Obama ever could be. Though there are those who feel Bush was less Conservative, shudder, than Klintonius the Kinky.

I do hope that the next Republican president will, in fact, BE a Republican.

I’ve made this point many times to my lefty friends but it falls on deaf ears. Among many other factors during that time period:

1. Clinton got a windfall from a “bubble economy” that turned out to be built on sand and was in the process of imploding during his final year in office.

2. Clinton got the “peace dividend” paid for by past adminstrations, especially Reagan’s, and by our men and women in uniform. You can see this clearly in the budget numbers by looking at defense spending as a % of GDP.

3. Clinton got lucky to catch the previous trough in oil prices, which ended that decade at $10/bbl. Of course, the underinvestment in new finds during that time period led in the next decade to skyrocketing prices. Count that one as a squandered opportunity to wean ourselves from oil imports.

4. Everyone forgets about the Republican congress that put the kabosh on his expansive plans. I’ll give him props for figuring out which way the wind was blowing and tacking enough to stay in office, something the current adminstration seems not to be doing.

5. People forget the sheer force of demographics. Thanks to action during the Reagan adminstration, Social Security was put on temporarily better footing by extracting more tax money from boomers. As boomers now begin to retire, inevitably the math on such programs is going to work against successive adminstrations. Actually Bush was lucky to get out of Dodge when he did – this bomb is now going off on Obama, and will continue to plague his successors. What would be fair to say is that Obama hasn’t done anything to defuse the bomb, but the fact is he’d have a growing budget problem even if he wasn’t spending money on bailouts and stimulus programs.

Thanks for all the insightful comments guys, save mittens. Clinton was clearly a beneficiary of the bubble as well as clever accounting as some have pointed out. As I said in the article, Bush’s spending really made me really angry, but in his defense we did need to put our military back together after Clinton took it apart and 9/11 hit. Consider though that while Bush took spending from about 2 to 3 Trillion in 8 years. Obama has managed to take it all the way to 3.8 in 2 years. I’m scared to see what it will be in 4 and heaven forbid 8 years.

I am surprised the whole dot com bubble burst isn’t brought up more. Everything tech or internet related was why overhype and Bush had to deal with that coming in, which i think Clinton let get out hand when folks knew there wasmuch to the dot com hype, and then right into 9/11.

I agree Clinton get way too much of a pass and credit for stuff that isn’t true.

I hate graphs that are not to proper scale. It tries to hide statistical manipulation. The NASDAQ is much worse than the graph shows. That graph has almost the same measurement from 1k to 5k as it does from 0k to 1k. Spread the graph out to show equal spacing between each 1k and the graph is much more dramatic.

An incredibly dumb post. First, the NAS is an exceedingly narrow measure of share value. The S & P 500 is more meaningful as a measure of business activity.

Second, the stock market, even broader measure, is neither the measure of the economy nor the measure of tax revenues.

Third, there was a surplus; there is no dispute about that. There is also no dispute that the GOPer ran up trillions of dollars in debt after Clinton retired debt toward the end of his presidency. Thus, there is no”myth” that Clinton handed off a budget surplus. It is a fact that is historic, which no spinning can change.

@BRob:

Third, there was a surplus; there is no dispute about that….Thus, there is no”myth” that Clinton handed off a budget surplus. It is a fact that is historic, which no spinning can change.

Reality bytes. Again:

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’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:




View at EasyCaptures.com

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:




View at EasyCaptures.com

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).

Update 3/31/2009: The following quote from an article at CBS confirms my explanation of the Myth of the Clinton Surplus, and the entire article essentially substantiates what I wrote.

“Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller,” said Andrew Biggs, a resident scholar at the American Enterprise Institute.

Yes, there is a “dispute” about it among those of us who know the truth of the matter.

Yes, the Clinton “surplus” is a well perpetuated myth.

The facts and figures of the matter do not lie.

Feel free to cross reference anything you wish to here.

why are people so thick as t believe that clinton was some economic genius and great president, when he was chasing skirts, being impeached and preparing to leave a broken IT bubble and a bin laden at large right on the new presidents desk. yeah, he was pretty great…. history will tell the story from the proper objective perspective..