indago
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Letxa.com
Commentary, science, and debunking
The Myth of the Clinton Surplus
October 31st, 2007
From Letxa.com 31 October 2007:
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The U.S. Treasury website that tracks the U.S. National Debt proves there was never a surplus because the national debt went up every single year — this article simply explains why/how people claim otherwise for political reasons.
...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 (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 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 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 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............End...............Claimed...............Public........................InterGovernment...................Total
Year..............Date.............Surplus.................Debt..............................Holdings.......................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.
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The Myth of the Clinton Surplus
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