Republicans: Fiscal Sanity

[Toro]

Why not trust what the CBO says?
CBO Admits (Very Quietly) That HR 3200 Will Reduce Costs | Health | Change.org

CBO doubles some health care spending estimates – This Just In - CNN.com Blogs
Douglas Elmendorf, the CBO director, said the latest report "updates and expands" on the previous report. He noted that assessing effects on discretionary spending was speculative because such appropriations require congressional action, and could be larger or smaller than initially anticipated.

CBO: Health Care Bill Will Cost $115 Billion More Than Previously Assessed - Political Punch - ABC News
Greenspan on Heath Care Costs: Severe Consequences if CBO is Wrong - Political Punch - ABC News

You have posted forecasts by the CBO. I have posted ex post data from the CBO. Do you not see the difference? Forecasting is trying to predict the future. Accounting is determining what happened in the past. Forecasting accurately is extraordinarily difficult. People change forecasts constantly because the future is inherently unknowable.

The CBO data is consistent with the GAO data which is consistent with the Treasury data.

I trust the public information found under the Federal Treasury Government Link. I'm not following ideology, but I'm looking to the facts between Federal Government DEBT and DEFICIT Source: Debt to the Penny (Daily History Search Application) (this TreasuryDirect Government site allows you to go into a History search to show you the Outstanding Federal Debt). Why does the public debt continue to go up during the Clinton administration?

Here is a listing of the Public Debt for prior fiscal years under President Bill Clinton:
09/29/1995 .... $4,973,982,900,709.39
09/30/1996 .... $5,224,810,939,135.73
09/30/1997 .... $5,413,146,011,397.34
09/30/1998 .... $5,526,194,008,897.62
09/30/1999 .... $5,656,270,901,615.43

Source: History of the U.S. public debt - Wikipedia, the free encyclopedia



Can you explain the reason behind the INCREASE in the Federal debt ceiling during Clinton's term?
April 6, 1993 .. $4,370,000,000,000
Aug 10, 1993 .. $4,900,000,000,000
Mar 29, 1996 .. $5,500,000,000,000
Aug 5, 1997 .... $5,950,000,000,000
June 11, 2002 . $6,400,000,000,000 (under President George W Bush, the same gradual increase in the debt ceiling is shown to have be made)

Source: United States public debt - Wikipedia, the free encyclopedia

I'm not arguing that the national debt didn't go down. I'm explaining how the government can run a surplus while the national debt rises, which I do here.

It is factually incorrect to deduce changes in the national debt as indicative of the government's budgetary balance. The national debt is partly a function of inter-governmental accounting, which does not give an accurate assessment of the financial health of the US government because it only looks at one side of the balance sheet.

The national debt is gross debt, not net debt. This is from the link you cite below. As you can see, gross debt rose.

The way the government accounts for its books, if there was economic growth and the government spent exactly zero dollars more than the year before, the national debt - which is gross debt - would still rise, all else being equal, because taxes flowing into the trusts automatically trigger buying of government securities. But the net debt would not rise because there would be a concurrent rise in asset value of the trusts, which are government agencies.

Yes the deficit went down, but at the cost of the Federal Debt. See Deficit vs Federal Debt Graphs - usgovernment link: United States Debt Deficit History - Charts Following this government link you will see TWO groups of graphs; one that focuses on Government Debt since 1900, followed by a set graphs that shows the Government Deficit. The graphs will show the Deficit did go down, but at the cost of the Federal Debt which continued to go up.

The deficit was eliminated. It wasn't just reduced. There was a surplus. Here is the graph from the link you provided.

See?

This is not about whether or not the gross national debt rose. This is about whether or not there were surpluses in the 1990s. And there were.

What matters in this discussion is not that gross debt rose in the 1990s. What matters is that net debt fell. If the government was running surpluses, you would expect to see a decline in the national net debt, all else being equal.

And it did.

United States Total Government Net Debt (% of GDP) data, Total Government Net Debt (% of GDP) United States

This is net debt to GDP. Net debt to GDP can fall if GDP is rising faster than the growth of debt. But you can see that net debt to GDP fell from 54% in 1995 to 35% in 2000. That is due both to a rise in nominal GDP and a decline in total net debt.

And, as you can see, total net federal government debt declined in the last years of the 1990s.

 

[ShaklesOfBigGov]

I trust the public information found under the Federal Treasury Government Link. I'm not following ideology, but I'm looking to the facts between Federal Government DEBT and DEFICIT Source: Debt to the Penny (Daily History Search Application) (this TreasuryDirect Government site allows you to go into a History search to show you the Outstanding Federal Debt). Why does the public debt continue to go up during the Clinton administration?

Here is a listing of the Public Debt for prior fiscal years under President Bill Clinton:
09/29/1995 .... $4,973,982,900,709.39
09/30/1996 .... $5,224,810,939,135.73
09/30/1997 .... $5,413,146,011,397.34
09/30/1998 .... $5,526,194,008,897.62
09/30/1999 .... $5,656,270,901,615.43

Source: History of the U.S. public debt - Wikipedia, the free encyclopedia



Can you explain the reason behind the INCREASE in the Federal debt ceiling during Clinton's term?
April 6, 1993 .. $4,370,000,000,000
Aug 10, 1993 .. $4,900,000,000,000
Mar 29, 1996 .. $5,500,000,000,000
Aug 5, 1997 .... $5,950,000,000,000
June 11, 2002 . $6,400,000,000,000 (under President George W Bush, the same gradual increase in the debt ceiling is shown to have be made)

Source: United States public debt - Wikipedia, the free encyclopedia

I'm not arguing that the national debt didn't go down. I'm explaining how the government can run a surplus while the national debt rises, which I do here.

It is factually incorrect to deduce changes in the national debt as indicative of the government's budgetary balance. The national debt is partly a function of inter-governmental accounting, which does not give an accurate assessment of the financial health of the US government because it only looks at one side of the balance sheet.

The national debt is gross debt, not net debt.

I am glad after all these posts that you FINALLY see that the overall National Debt DID go up. President Clinton had actually run up, USED, the National Debt to make the Federal Deficit appear lower. I've only been trying to show you this as I don't doubt the "claims" of the Deficit going down. However, I've been trying to show you HOW the Deficit was reduced by adding to the National Debt as a result:

source:Clintons View of the Economy Clinton Memorial Library
What President Clinton failed to say was his deficit-reduction package would run up almost 1$ trillion in federal debt. This is because the reported deficit does not include monies "borrowed" from trust funds. This despicable gimmick used by the White House and Congress to cover up the huge federal budget deficit was the looting of the Social Security Trust Fund, Medicaid, Civil Service and military retirements funds[1]. This money may very well not be available to many of us when we grow old.
While his numbers may show a net deficit reduction of $514 billion it adds $936.5 billion to the gross national debt and the debt continues to grow to this day. While Bill Clinton was president, the gross federal debt went up from $4.1 trillion to more than $5 trillion.


[1] I had served in the military from March 1994 to March 1998. During that time I discovered that military retirement for those on active duty had been reduced. Nearing the end of my enlistment while looking into the Air National Guard, I discovered the National Guard no longer had ANY retirement benefits (recently eliminated by the Federal Government).

 

[Toro]

I am glad after all these posts that you FINALLY see that the overall National Debt DID go up. President Clinton had actually run up, USED, the National Debt to make the Federal Deficit appear lower. I've only been trying to show you this as I don't doubt the "claims" of the Deficit going down. However, I've been trying to show you HOW the Deficit was reduced by adding to the National Debt as a result:

source:Clintons View of the Economy Clinton Memorial Library
What President Clinton failed to say was his deficit-reduction package would run up almost 1$ trillion in federal debt. This is because the reported deficit does not include monies "borrowed" from trust funds. This despicable gimmick used by the White House and Congress to cover up the huge federal budget deficit was the looting of the Social Security Trust Fund, Medicaid, Civil Service and military retirements funds[1]. This money may very well not be available to many of us when we grow old.
While his numbers may show a net deficit reduction of $514 billion it adds $936.5 billion to the gross national debt and the debt continues to grow to this day. While Bill Clinton was president, the gross federal debt went up from $4.1 trillion to more than $5 trillion.


[1] I had served in the military from March 1994 to March 1998. During that time I discovered that military retirement for those on active duty had been reduced. Nearing the end of my enlistment while looking into the Air National Guard, I discovered the National Guard no longer had ANY retirement benefits (recently eliminated by the Federal Government).

I don't mean to be disrespectful - and thank you for your service - but I don't think you understand the accounting and cash flows for the US government. The link to which you post - which is a partisan blog, the type you decried earlier in this thread - does not understand how the accounting works either.

This is an important concept to understand - If the budget were in balance, the economy was growing and SS receipts were greater than disbursements, the national debt will always rise. That is true of no matter who or what party is in power.

Changes to intergovernmental debt are, for the most part, merely an accounting function. Intergovernmental debt nets out to zero. There was no "raid" on the SS trusts. The government does not "use" the national debt to alter the appearance of the budgetary balance. Its not a despicable gimmick because its not a gimmick at all. It is how all cash flows into and out the SS trusts have been accounted for since the early 1980s when the government revamped the operations of the SS trusts.

I am going to repost what I wrote over in the other thread to show you how cash flows into and out of the government and how national debt rises when there is a surge in taxes.

But again, remember that even though total national debt rises, because intergovernmental debt nets out to zero, for the most part, total national assets also rise, and net debt either stays the same or falls.

The cash flows of SS look like this

• ----------> Payroll taxes come into the Treasury
• <---------- SS payments are paid out by the Treasury
• The government spends the excess.

If SS were a real pension fund that invested its funds entirely in government bonds, it would look something like this.

• ----------> Payroll taxes come into the pension fund
• The pension fund invests money from payroll taxes in government Treasury bonds
• The government spends the money from the issuance of Treasury bonds
• Treasury bonds earn interest
• <---------- SS payments are paid out by the pension from funds earned through interest and selling government Treasury bonds.

How SS really operates

• ----------> Payroll taxes come into the Treasury
• The government issues nonmarketable bonds to the SS trusts in the amount of the cash coming into the Treasury
• The government spends the money from payroll taxes
• The government credits interest payments to the SS trusts
• <---------- SS payments are paid out and the SS trusts are debited that amount.

Essentially, how SS operates and how it would operate if it were a real pension fund invested 100% in government bonds is exactly the same.

• Money comes into the government.
• The government buys government debt - Treasury bonds for a real pension fund, nonmarketable bonds for SS.
• The government spends the money.
• The trusts earn interest - Interest payments for Treasury bonds in a real pension plan, credits for the SS trusts.
• Payments are made - from interest earned and bonds sales in a real pension fund, debits for the payment amounts of the SS trusts accounts.

The economics are exactly the same.

In truth, the SS system is a bad one. I do not know of any other pension fund that is 100% invested in government bonds. The problems of SS underfunding could be completely wiped out if SS were run like a real pension fund, with the fund investing in stocks, corporate bonds, mortgages, private equity, real estate, etc., like all other pension plans, including the equivalents of SS in Norway and Canada.

Some are confused about what occurred in the late 90s regarding the budgetary surplus and the national debt. Some have argued that there was no surplus because national debt rose in the final years of the Clinton Presidency. As has been demonstrated, this characterization is incorrect. The budget balance is the difference between government revenues and spending, nothing more. It does not include changes in the national debt.

Thus, the question is why did the national debt rise even though there was a surplus? And the next question is it a bad thing? The answers may surprise some people.

Why did the national debt rise when there was a surplus?

Counter-intuitively, the reason why the national debt rose was because the economy was doing well. When the economy is doing better than expected, payroll taxes flowing into the SS trust funds are greater than expected. The SS trust funds can only "buy" special issuance nonmarketable government bonds. Thus, when payroll tax revenues are greater than expected, issuance of these special issuance government bonds rises and the national debt rises. Likewise, when the economy is doing poorly, payroll tax inflows are less than expected. The amount of funds in the SS trusts is lower, the SS trusts buy fewer special-issue government bonds and the national debt is less than expected.

Understand, though, that this is merely an accounting function. It affects assets and liabilities of the government and trust fund recipients. It does not affect cash flows, and thus does not affect the budgetary balance.


So was rise in the national debt a bad thing?

It is true that in the last half of the 1990s, total government debt rose. But did it negatively affect the balance sheet of the United States government? In other words, was the rise in the national debt during the last 1990s a bad thing?

To help us understand this question, it is best to use an example.

Let us say that in the first year, the government has total debt of $1,000, including $100 of debt in the social security trust. This is the breakdown of the government&#8217;s debt.

Total government debt, year 1
Social security debt -$100
All other government debt -$900
Total government debt -$1,000​

Now, let&#8217;s say that in the second year, the government runs a $20 surplus and payroll taxes are $30 all of which go into the SS trusts. Payroll taxes are used to buy government debt in the SS trusts and the surplus is used to pay down other government debt. There is no change in any other debt. The breakdown of the government&#8217;s total debt is as follows.

Total government debt, year 2
Social security debt -$130
All other government debt -$880
Total government debt -$1,010​

The debt has gone up even though the government has run a surplus.

This is bad, right?

In this case, no.

Why?

Because we are only looking at one side of the balance sheet.

What the critics fail to recognize is that they are looking only at gross debt.

What matters is not gross debt but net debt, which is total debt less total assets.

Critics who decry the government&#8217;s total national debt rising in the last years under Clinton are only looking at total debt, not net debt. This is intellectually flawed. An analogy would be to look only at mortgage debt when assessing an individual's financial health without looking at the value of the house. According to the critics, if you take out a $200,000 mortgage, that&#8217;s bad. But it is not bad if the value of your house is $300,000.

It works the same way for the social security trusts. This is what the critics omit.

If you earn $100 and you buy a government bond for $100, your assets now include a government bonds worth $100. The SS trusts do the same thing. Money comes in and they buy bonds from the government.

Let&#8217;s look at our example again. Let&#8217;s say that in the first year, the government has assets worth $400. The SS trusts are government agencies, and government debt in the SS trust funds is an asset of the SS trust fund. Since the government has $100 in debt outstanding issued to the SS trusts, the SS trusts now have assets worth $100. Thus, the balance sheet of the government looks like this.

Government debt issued to the SS trusts is an asset of the SS trusts. The SS trusts are essentially buying government bonds. If you buy a government bond for $100, you now own a government bond. The SS trusts effectively do the same thing

Total government debt, year 1
Social security debt -$100
All other government debt -$900
Total government debt -$1,000

Total government assets, year 1
Debt issued by the government to the SS trusts $100
All other government assets $300
Total government assets $400

Net government debt, year 1 -$600​

Net debt is total debt less total assets. In this case $1,000 in government debt less $400 in government assets means the government&#8217;s net debt is -$600.

It is no different than you owning your house. If you own your house, your balance sheet looks like this.

House $300,000
Less: Mortgage -$200,000
Net equity $100,000​

We do the same thing for the government. What matters is not gross debt but net debt.

Now, let&#8217;s look at the example above in year 2, where the government runs a $20 surplus with $30 in payroll taxes, which go directly into buying government debt in the SS trusts. The balance sheet of the government would look like this.

Total government debt, year 2
Social security debt -$130
All other government debt -$880
Total government debt -$1,010

Total government assets, year 2
Debt issued by the government to the SS trusts $130
All other government assets $300
Total government assets $430

Net government debt, year 2 -$580​

As you can see, even though total debt rises, because there is a budgetary surplus, net debt declines when there is a surplus because the value of assets rises.

When one is assessing the fiscal health of the government, one must look at net debt, not total debt. This is what the conservative critics fail to understand.

 

[ShaklesOfBigGov]

Changes to intergovernmental debt are, for the most part, merely an accounting function. Intergovernmental debt nets out to zero. There was no "raid" on the SS trusts. The government does not "use" the national debt to alter the appearance of the budgetary balance.

Are you so sure about that?



Based upon today&#8217;s new economic and budget projections for the coming 10 years from the Office of Management and Budget (OMB):

The United States can be debt-free this decade. By dedicating the entire budget surplus to debt reduction, The United States can eliminate its publicly held debt by FY 2009.
Source:The United States on Track to Pay Off the Debt by End of the Decade



reported deficit does not include monies "borrowed" from social security trust fund:
Mr. Clinton's plan is based on the idea that by using the Social Security surplus to pay down the national debt, the Government's interest bill will decline substantially.

By the White House's estimate, the Government's interest expense will be $107 billion lower in 2011 than it would be if the Social Security surplus were not used, starting this year, to reduce the debt. Mr. Clinton's proposal would take the money saved because of the lower amount of debt, starting in 2011, and earmark it to shore up Social Security.
Source: CLINTON ABANDONS IDEA OF INVESTING RETIREMENT FUNDS - NYTimes.com



December 2, 1999
Web posted at: 6:30 p.m. EST (2330 GMT)

WASHINGTON (CNN) -- The non-partisan Congressional Budget Office Thursday said the federal budget for the current fiscal year not only breaks spending caps but also spends $17 billion from the Social Security trust fund.

The CBO now estimates the budget deal spent all of the $14 billion estimated on-budget surplus as well as $17 billion from the Social Security surplus. Most of the federal surplus comes from the Social Security Trust Fund which has been running a surplus for years.

Clinton had proposed dedicating the entire Social Security surplus to debt reduction, a proposal Congress declined to consider. Republicans, concerned about protecting themselves politically on the issue, then pledged to not use any of the Social Security money for regular government spending. But the CBO began warning they were dipping into the Social Security after the first appropriations bills were approved in the fall.
Source:CBO says budget breaks spending caps; dips into Social Security Trust Fund - December 2, 1999




An increase in the Federal Debt Ceiling, while we saw a Federal Deficit reduction under Clinton:
Payroll taxes may have found and increase in the Social Security trust fund due to a good economy, but there is also the increase of Federal Income and Corporate tax revenue. This is because the Democrats always desired greater taxes on the rich to COVER for the expenses of the Federal Government, and there were no tax reductions for the rich reported during the Clinton administration. A stronger economy would then also mean an increase in Federal Income tax revenue. With the reduction of the military budget, thanks to the help of TERA, the Clinton administration still saw a need to increase in the Federal Debt Ceiling. Why was this increase necessary, if Clinton was working to cut Federal spending of the military and its programs like "Star Wars"?

April 6, 1993 .. $4,370,000,000,000
Aug 10, 1993 .. $4,900,000,000,000
Mar 29, 1996 .. $5,500,000,000,000
Aug 5, 1997 .... $5,950,000,000,000
Source: http://en.wikipedia.org/wiki/United_States_public_debt






President Clinton reducing the deficit by reducing the military budget, drastically cutting military spending through downsizing Active and National Guard military personnel and benefits:

Temporary Early Retirement Authority (TERA), 1992-2001 (FY1993-FY2001)​

The FY1993 National Defense Authorization Act (Sec. 4403, P.L. 102-484) granted temporary authority (which expired on September 30, 2001) for the services to offer early retirements to personnel with more than 15 but less than 20 years of service. TERA was usedasamanpowertooltoenticevoluntaryretirementsduringthedrawdown.TERA retired pay was calculated in the usual ways except that there is an additional reduction of one percent for every year of service below 20.
Source:http://www.fas.org/sgp/crs/natsec/IB85159.pdf


The program also will include $112 million to help members of the National Guard and reserves who are being dropped from the rolls and to provide severance pay and health benefits for civilian Defense Department employees who may be laid off.

And the Pentagon announced Thursday that it would offer early retirement and lifelong benefits to more than 17,000 active-duty troops with between 15 and 20 years of service
Source:Clinton Offers $19.5-Billion Package to Help Defense Industry After Cuts : Pentagon: Expansion of high-technology jobs is the primary goal. Little immediate relief is proposed for displaced workers or affected firms. - Page 3 - Los Angeles Times

 

[Toro]

I hope you read this and don't skim over this. I will try to answer any question you may have to better help you understand how this system works, because it is confusing and the public press doesn't help much. I have spent over a decade working within a pension fund, so I hopefully can be able to clear up misconceptions.

Based upon today&#8217;s new economic and budget projections for the coming 10 years from the Office of Management and Budget (OMB):

The United States can be debt-free this decade. By dedicating the entire budget surplus to debt reduction, The United States can eliminate its publicly held debt by FY 2009.
Source:The United States on Track to Pay Off the Debt by End of the Decade

This is in reference to the publicly held debt. I blew it up for you. Remember, SS does not hold publicly held debt.

Mr. Clinton's plan is based on the idea that by using the Social Security surplus to pay down the national debt, the Government's interest bill will decline substantially.

By the White House's estimate, the Government's interest expense will be $107 billion lower in 2011 than it would be if the Social Security surplus were not used, starting this year, to reduce the debt. Mr. Clinton's proposal would take the money saved because of the lower amount of debt, starting in 2011, and earmark it to shore up Social Security.
Source: CLINTON ABANDONS IDEA OF INVESTING RETIREMENT FUNDS - NYTimes.com

Remember when you said that

This despicable gimmick used by the White House and Congress to cover up the huge federal budget deficit was the looting of the Social Security Trust Fund, Medicaid, Civil Service and military retirements funds[1]. This money may very well not be available to many of us when we grow old.

And I said

Its not a despicable gimmick because its not a gimmick at all. It is how all cash flows into and out the SS trusts have been accounted for since the early 1980s when the government revamped the operations of the SS trusts.

From your link.

Both parties routinely agreed for decades to spend excess Social Security payroll tax revenues on general Government operations.

This is how its been done for decades, since at least when SS was revamped in the early 1980s.

Now, to get to your point, which I think you've mis-understood, and I don't blame you, because it is very unclear in the article to which you've reference.

First, on the very next line of the article

But this year the two parties have both pledged to balance the budget without using any of the Social Security money, and they have been trading bitter accusations about the inability of the other to show how to do it.

What happens every year, as has happened for many years, is that money comes into the fund then money goes out and is spent, as I explained above

How SS really operates

* ----------> Payroll taxes come into the Treasury
* The government issues nonmarketable bonds to the SS trusts in the amount of the cash coming into the Treasury
* The government spends the money from payroll taxes
* The government credits interest payments to the SS trusts
* <---------- SS payments are paid out and the SS trusts are debited that amount.

What they are talking about is the excess money coming into SS. So, for example, as I explained

Total social security cash receipts in the fiscal year was $620 billion. Total social security cash outlays was $442 billion.

the total excess is $178 billion. This is what they were arguing about.

But as mentioned in the NY Times article you linked, the government had been doing this for decades. This isn't the Clinton administration resorting to despicable accounting gimmicks. This is business as usual in Washington.

Now, I agree that it would have been better to have not spent that money. It would have been better if they invested the $178 billion. It would have improved the balance sheet of the United States. But it isn't a raid. In FY 2000, the SS trusts would have bought a net of $178 billion in nonmarketable special-issue securities. That doesn't change. What would have changed had the money not been spent would have been the balance sheet of the US Treasury, which would have made the US government better off. But it wouldn't have affected the SS trusts, other than if the funds had been held as collateral off balance sheet of the trusts.


Here is what the incremental SS trusts balance sheet would have looked like in 2000

Debit: $620 billion in nonmarketable special-issue government bonds issued to the SS trusts
Credit: -$442 billion in disbursements and outlays
Net change in the net asset value of the SS trusts: +$178 billion.

And here is what the US Treasury's balance sheet would have looked like

Credit: -$620 billion in nonmarketable special-issue government bonds issued to the SS trusts
Net change in the net asset value of the US Treasury: -$620 billion.


Now here is what the incremental SS trusts balance sheet would have looked like in 2000 had the $178 billion not been spent

Debit: $620 billion in nonmarketable special-issue government bonds issued to the SS trusts
Credit: -$442 billion in disbursements and outlays
Net change in the net asset value of the SS trusts: +$178 billion.

And here is what the US Treasury's balance sheet would have looked like had the $178 billion not been spent

Debit: +$178 billion not spent by the government and instead invested
Credit: -$620 billion in nonmarketable special-issue government bonds issued to the SS trusts
Net change in the net asset value of the US Treasury: -$442 billion.

The US government would have been $178 billion better off had it not spent the surplus. But the SS trusts would not have been better off, at least not from an accounting stand-point.

The real-world caveat to this is that the SS trusts would have been better off because the government would have pledged the $178 billion as collateral to back up the SS trusts. And that's a good thing. Investing rather than spending almost always makes a balance sheet stronger, no matter if you're the government, a person, a company, etc.

But again, understand this - there can be no "raid" on social security because there is no cash in the fund. The only securities held in the funds are nonmarketable, special-issue government bonds that can only be credited and debited by the government. It's not like there is $1 trillion of cash sitting there. There are no marketable government bonds in the fund that can be sold. Nothing in the fund can be sold. Thus, nothing can be raided and taken out.

When the government talks about the "surplus," what they are talking about is that excess. That is what the CBO is talking about in your next link.

But to go back to your NY Times link where it says

Mr. Clinton's plan is based on the idea that by using the Social Security surplus to pay down the national debt, the Government's interest bill will decline substantially.

By the White House's estimate, the Government's interest expense will be $107 billion lower in 2011 than it would be if the Social Security surplus were not used, starting this year, to reduce the debt. Mr. Clinton's proposal would take the money saved because of the lower amount of debt, starting in 2011, and earmark it to shore up Social Security.

This again is confusing, and I can see how it gives the impression that there is this pile of money that the government can raid. But there is not.

What the article is referring to is on the first page, where it says

President Clinton dropped one of the most contentious elements of his plan for bolstering Social Security's finances today, and called on Congress to break the partisan deadlock over how to prepare the retirement system for the aging of the baby boom generation.

In his weekly radio address, Mr. Clinton said he would send Congress legislation next week based on a proposal he first floated earlier this year to shore up Social Security with projected Federal budget surpluses. But the new version will not include Mr. Clinton's longstanding call for the Government to invest some Social Security taxes in the stock market. ...

In a signal of his desire for bipartisan cooperation, White House officials said Mr. Clinton was withdrawing for now his plan to seek higher returns for the system by having the Government invest as much as 15 percent of Social Security's reserves in the stock market.

First, understand what a pension fund does. It makes investments to earn a return to pay benefits in the future. The higher the return of the plan assets, either 1.) the more money that can be paid out in the end, and/or 2.) the less amount that must be contributed to meet the same amount of benefits in the future.

So, what Clinton proposed was that the SS trusts invest in the stock market and earn a higher return (over time) in the future. A higher return means that the fund will be worth more in the future. To meet the same future benefit claims, the government could lower the taxes paid into the SS trust, but what Clinton was arguing was to use the excess, i.e. the surplus, the $178 billion, to pay down the national debt. In other words, as returns in the trust rose over time, instead of lowering contributions, i.e. payroll taxes, he was going to keep payroll taxes the same and use that money to pay off debt.

Here's an example.

Let's say you want to retire in 10 years, and you decide to put away $10,000 a year for the next 10 years. You have two options, you can invest in government bonds that earn 3% a year or stocks that earn 10% a year. In the first option earning 3%, at the end of 10 years, you will have $128,000 in the bank. At the end of 10 years using the second option of earning 10%, you will have $185,000 in the bank.

But let's say you only need $128,000 at the end of 10 years. If you decide to go with option 2 and earn 10% a year, you don't need to put $10,000 away. In fact, you only have to put $6500 away each year to earn $128,000 at 10% in 10 years. Now let's say you also have a debt of $20,000. You can pay that off in 10 years by investing $6500 at 10% and applying the $3500 to pay off the debt. Now, you could save $6500 a year and spend the extra $3500, but you'd still have a debt of $20,000 (plus interest) at the end of the decade.

That is what Clinton was proposing. What Clinton was proposing was to use taxes intended for SS to pay down the marketable debt while investing in assets that earn a higher return so the government could afford to take SS taxes and pay off the national debt. He was proposing to take that $10,000 and invest it in stocks so it could a higher return and have some left over to pay down debt. That's not underhanded. That's smart.

It's confusing, I know, but there wasn't anything untoward going on in the 1990s. But people don't understand how this works and make false conclusions.

 

[ShaklesOfBigGov]

I hope you read this and don't skim over this. I will try to answer any question you may have to better help you understand how this system works, because it is confusing and the public press doesn't help much. I have spent over a decade working within a pension fund, so I hopefully can be able to clear up misconceptions.

Based upon today&#8217;s new economic and budget projections for the coming 10 years from the Office of Management and Budget (OMB):

The United States can be debt-free this decade. By dedicating the entire budget surplus to debt reduction, The United States can eliminate its publicly held debt by FY 2009.
Source:The United States on Track to Pay Off the Debt by End of the Decade

This is in reference to the publicly held debt. I blew it up for you. Remember, SS does not hold publicly held debt.

Mr. Clinton's plan is based on the idea that by using the Social Security surplus to pay down the national debt, the Government's interest bill will decline substantially.

By the White House's estimate, the Government's interest expense will be $107 billion lower in 2011 than it would be if the Social Security surplus were not used, starting this year, to reduce the debt. Mr. Clinton's proposal would take the money saved because of the lower amount of debt, starting in 2011, and earmark it to shore up Social Security.
Source: CLINTON ABANDONS IDEA OF INVESTING RETIREMENT FUNDS - NYTimes.com

This is how its been done for decades, since at least when SS was revamped in the early 1980s.

Now, to get to your point, which I think you've mis-understood, and I don't blame you, because it is very unclear in the article to which you've reference.

I know the social security surplus was "used to pay down the deficit", and that government has been using social security for decades.

The CBO now estimates the budget deal spent all of the $14 billion estimated on-budget surplus as well as $17 billion from the Social Security surplus. Most of the federal surplus comes from the Social Security Trust Fund which has been running a surplus for years.

Clinton had proposed dedicating the entire Social Security surplus to debt reduction

Source:http://quiz.cnn.com/1999/ALLPOLITICS/stories/12/02/cbo.estimates/index.html]CBO says budget breaks spending caps; dips into Social Security Trust Fund - December 2, 1999


However, 1) you keep ignoring the fact that Clinton also reduced drastically the military, to include programs like "Star Wars".

Military reduction under President Clinton
With the newly-sworn-in President Bill Clinton&#8217;s first budget, submitted on March 27, 1993. He asked for $263.4 billion&#8212;$10 billion less than the final budget under the first President Bush. The budget scrapped most funds for President Ronald Reagan&#8217;s Strategic Defense Initiative, called &#8220;Star Wars&#8221; by the media.

In 1994, troops were sent to Haiti, Saudi Arabia and Kuwait. Clinton asked for a Defense increase of just $2.8 billion but Congress approved a decrease of $17.1 billion. The shrinking budget caused sharp reduction

At this point, we are well into the Clinton presidency and the eleventh straight year of declining military budgets. The president and the Congress have slashed the defense budget to the point where, after adjusting for inflation, it is some 40% less than in 1985 during the second Reagan term.

The year 1996 saw cruise missile strikes against Iraq and 18,000 U.S. troops stationed in the Balkans as part of a NATO force. Clinton sent the U.S. aircraft carrier Independence and three other ships to the Taiwan Strait because of tensions between Taiwan and China. For 1997, Clinton sought another $10 billion reduction, though the bill he eventually signed set aside $244 billion for defense&#8212;finally halting the long string of declining budgets, but just barely.

It was a bit calmer overseas in 1997, though 8,500 Americans were still keeping the peace in Bosnia. The Defense budget rose to $268 billion but Clinton proposed more base closures. The Senate rejected the recommendation.

Defense Secretary William Cohen had become concerned about his budget, and so he called for more base closings&#8212;and more money. The Joint Chiefs said that unless funding levels could be increased, some weapons systems or overseas deployments would have to be eliminated.
Source:http://www.discoverthenetworks.org/Articles/Bill Clinton and the Decline of the Military.html



add to that:

Temporary Early Retirement Authority (TERA), 1992-2001 (FY1993-FY2001)​

The FY1993 National Defense Authorization Act (Sec. 4403, P.L. 102-484) granted temporary authority (which expired on September 30, 2001) for the services to offer early retirements to personnel with more than 15 but less than 20 years of service. TERA was used as a manpower tool to entice voluntary retirements during the drawdown.TERA retired pay was calculated in the usual ways except that there is an additional reduction of one percent for every year of service below 20.
Source:http://www.fas.org/sgp/crs/natsec/IB85159.pdf


The program also will include $112 million to help members of the National Guard and reserves who are being dropped from the rolls and to provide severance pay and health benefits for civilian Defense Department employees who may be laid off.

And the Pentagon announced Thursday that it would offer early retirement and lifelong benefits to more than 17,000 active-duty troops with between 15 and 20 years of service
Source: http://articles.latimes.com/1993-03-12/news/mn-10210_1_defense-industry-firms/3]Clinton Offers $19.5-Billion Package to Help Defense Industry After Cuts : Pentagon: Expansion of high-technology jobs is the primary goal. Little immediate relief is proposed for displaced workers or affected firms. - Page 3 - Los Angeles Times




An increase in the Federal Debt Ceiling, while we saw a Federal Deficit reduction under Clinton:
2)Payroll taxes may have found and increase in the Social Security trust fund due to a good economy, but there is also the increase of Federal Income and Corporate tax revenue. This is because the Democrats always desired greater taxes on the rich to COVER for the expenses of the Federal Government, and there were no tax reductions for the rich reported during the Clinton administration. A stronger economy would then also mean an increase in Federal Income tax revenue. With the reduction of the military budget, thanks to the help of TERA, the Clinton administration still saw a need to increase in the Federal Debt Ceiling.

April 6, 1993 .. $4,370,000,000,000
Aug 10, 1993 .. $4,900,000,000,000
Mar 29, 1996 .. $5,500,000,000,000
Aug 5, 1997 .... $5,950,000,000,000
Source: United States public debt - Wikipedia, the free encyclopedia



3) Questions: Why was it necessary to RAISE the debt ceiling, if Clinton was working to cut Federal spending of the military and its programs like "Star Wars"?
Why the need to raise the Debt ceiling under a GOOD strong economy? I can understand Obama needing to raise the debt ceiling to increase Federal Spending and try to stimulate our nation's economy out of a recession, but why did Clinton?

Why, when you have Federal Tax revenue from a strong economy, did the National Debt "CEILING" go UP while the deficit was going down?



I appreciate your answers on Social Security, .... HOWEVER when a good economy also means an increase in Federal and Corporate income tax revenue! There was no Tax reduction of the rich under the Clinton Administration, and Democrats always make their claim of taxing the rich to cover for government spending!! I would appreciate an answer to these issues I have addressed. You need to look at the overall scope of Federal Government spending and income (corporate) tax received under the Clinton administration, if you want to talk about reduction of the Federal Deficit !!

Please answer my questions. Please don't just give me another answer that's only about Social Security, the Federal Government Budget is made up of much more than that.



I believe that the Clinton administration DRASTICALLY reduced the military spending budget, to include downsizing of military forces, while Federal Income and Corporate tax revenue continued to come in. President Clinton then used that reduced spending, the added revenue from the Federal Income taxes, WITH the social security surplus, to reduce the deficit. Going as far as to even include an increase in the debt ceiling during his administration, anything he could do to make the country "believe" we have this rosey looking surplus budget. Answer my questions above and Prove me wrong! It's hard for me to see otherwise when you put all these facts I've listed together, and please use include internet links to prove your facts so I can follow. Thank you for your efforts Toro.