Why Is It So Hard For Republicans To Realize?

[Cammmpbell]

The Clinton administration generated surpluses during the second term. The FY 2001 surplus of $256 billion followed surpluses of $237 billion in FY 2000, $124 billion in FY 1999, and $69 billion in FY 1998. The last time before that The United States had four surpluses in a row was during 1927-30.

Clinton left federal spending as a share of the economy the lowest since 1966. Spending cuts under Clinton's last term brought federal spending down from 22 percent of GDP in 1992 to 18 percent of GDP in 2001, the lowest since 1966.

George Bush cut taxes twice, 2001 and 2003, started two wars....one totally unnecessary and doubled the national debt from $5.7 trillion to nearly $12 trillion. It's a matter of record.:

Total U S Debt


09/30/2009 $11,909,829,003,511.75(80% Of All Debt Across 232 Years Borrowed By Reagan And Bushes)

09/30/2008 $10,024,724,896,912.49(Times Square Debt Clock Modified To Accomodate Tens of Trillions)

09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32

09/30/2003 $6,783,231,062,743.62(Second Bush Tax Cuts Enacted Using Reconciliation)


09/30/2002 $6,228,235,965,597.16

09/30/2001 $5,807,463,412,200.06(First Bush Tax Cuts Enacted Using Reconciliation)


09/30/2000 $5,674,178,209,886.86(Administration And Congress Arguing About How To Use Surplus)

09/30/1999 $5,656,270,901,615.43(First Surplus Generated...On Track To Pay Off Debt By 2012)

09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32

09/30/1993 $4,411,488,883,139.38(Debt Quadrupled By Reagan/Bush41)

09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
09/29/1989 $2,857,430,960,187.32
09/30/1988 $2,602,337,712,041.16
09/30/1987 $2,350,276,890,953.00
09/30/1986 $2,125,302,616,658.42
09/30/1985 $1,823,103,000,000.00
09/30/1984 $1,572,266,000,000.00
09/30/1983 $1,377,210,000,000.00

09/30/1982 $1,142,034,000,000.00(Total Debt Passes $1 Trillion)

09/30/1981 $997,855,000,000.00

 

[Soggy in NOLA]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

 

[Claudette]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

He can't help being a dope.

He's an Obama supporter.

 

[Mr. H.]

 

[PredFan]

The Clinton administration generated surpluses during the second term. The FY 2001 surplus of $256 billion followed surpluses of $237 billion in FY 2000, $124 billion in FY 1999, and $69 billion in FY 1998. The last time before that The United States had four surpluses in a row was during 1927-30.

Clinton left federal spending as a share of the economy the lowest since 1966. Spending cuts under Clinton's last term brought federal spending down from 22 percent of GDP in 1992 to 18 percent of GDP in 2001, the lowest since 1966.

George Bush cut taxes twice, 2001 and 2003, started two wars....one totally unnecessary and doubled the national debt from $5.7 trillion to nearly $12 trillion. It's a matter of record.:

Total U S Debt


09/30/2009 $11,909,829,003,511.75(80% Of All Debt Across 232 Years Borrowed By Reagan And Bushes)

09/30/2008 $10,024,724,896,912.49(Times Square Debt Clock Modified To Accomodate Tens of Trillions)

09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32

09/30/2003 $6,783,231,062,743.62(Second Bush Tax Cuts Enacted Using Reconciliation)


09/30/2002 $6,228,235,965,597.16

09/30/2001 $5,807,463,412,200.06(First Bush Tax Cuts Enacted Using Reconciliation)


09/30/2000 $5,674,178,209,886.86(Administration And Congress Arguing About How To Use Surplus)

09/30/1999 $5,656,270,901,615.43(First Surplus Generated...On Track To Pay Off Debt By 2012)

09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32

09/30/1993 $4,411,488,883,139.38(Debt Quadrupled By Reagan/Bush41)

09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
09/29/1989 $2,857,430,960,187.32
09/30/1988 $2,602,337,712,041.16
09/30/1987 $2,350,276,890,953.00
09/30/1986 $2,125,302,616,658.42
09/30/1985 $1,823,103,000,000.00
09/30/1984 $1,572,266,000,000.00
09/30/1983 $1,377,210,000,000.00

09/30/1982 $1,142,034,000,000.00(Total Debt Passes $1 Trillion)

09/30/1981 $997,855,000,000.00

We realize that that is what happened. However, we on the right are smart enough to know what the actual cause of that was and it wasn't because of Clinton. You'd be more accurate to give the credit to the Republican Congress. though not entirely accurate either.

 

[Truthmatters]

note they have no facts to offer

 

[Truthmatters]

The CBO gave the lions share of credit for the budget surpluses in the 90s to the 1993 budget act.

that was signed by NOT ONE republican

 

[PredFan]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

Well, it didn't hurt either that the tech boom was in full epic mode at the time. People were making huge bank in just about any tech sector.

 

[Wry Catcher]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

Please provide evidence.

 

[Mr Natural]

If there was no surplus, then where did those $300 George Bush checks come from?

 

[Wry Catcher]

Wednesday, February 18, 2009
the 1993 budget act

A little bit of economic history:

On August 10, 1993, President Clinton signed into law the Omnibus Budget Reconciliation Act of 1993 (the 1993 Budget Act). Four days earlier, it had passed the Senate by a vote of 51 to 50 – with Vice President Gore breaking a tie and casting the deciding 51st vote for passage. (Note: You didn’t have to get 60 votes to pass anything in the Senate in those days. The filibuster was reserved for extraordinary occasions, like denying civil rights to black people.) The day before that it had passed the House by a vote of 218 to 216. In both Houses of Congress, the vote literally could not have been closer. And in both cases, not a single Republican voted in support of the Act.

The 1993 Budget Act was President Clinton’s response to mounting federal deficits and debt. Under President Carter, the federal deficit had been modest – averaging $55 billion a year. But under Reagan, it exploded to an average of $186 billion a year. Federal spending as a percentage of GDP went from less than 21% under Carter to an average of around 23% under Reagan. During the eight years Reagan was president the national debt nearly tripled, from roughly $900 billion to $2.6 trillion. It rose from 34% of GDP to 55% of GDP. By the last full year of George H.W. Bush’s presidency, the federal budget deficit had reached a record $290 billion (after having also set a record the previous year). Reaganomics had resulted in a bloodbath of red ink. (As an aside, contrary to popular myth, economic growth averaged slightly higher under Carter than it did under Reagan.)

quoted from this link:

daggatt blog: the 1993 budget act

See also:

Omnibus Budget Reconciliation Act of 1993 - Wikipedia, the free encyclopedia

and this:

1993 Omnibus Budget Reconciliation Act - Timeline - Slaying the Dragon of Debt - Regional Oral History Office - University of California, Berkeley

What say you NOLA?

 

[LordBrownTrout]

Weird how the OP starts the clock on Bush' debt when he wasn't even in office and gives O a year in office before his debt clock starts. The reality is: O has created 6 trillion in debt in four years while it took Bush 8 years to create 5 trillion. Just another hack post by cammmpbell.

 

[whitehall]

Republicans forced Clinton to balance the budget. Remember also that the US was sitting on a dot-com bubble that was ready to burst when the sleaze bag was president. ENRON flourshed under Clinton and the Bubba pardoned the most notorious corporate pirate in history while he was on the FBI's top ten for a couple of bucks donated by Marc Rich's wife to the sleaze bag motel aka the Clinton library.

 

[Mad Scientist]

Clinton was President, Republicans held Congress. Wanna' go back to that?

 

[Katzndogz]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

Well, it didn't hurt either that the tech boom was in full epic mode at the time. People were making huge bank in just about any tech sector.

Clinton also cut capital gains taxes to zip.

 

[Cammmpbell]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

You couldn't find your ass in a room full of bass drums. Here's about 15%-20% of the congressional hearing when they decided to use the surplus to buy back debt. If you would like to read the rest of it....it's out there:



66-896 WASHINGTON : 2000


COMMITTEE ON WAYS AND MEANS

BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

A.L. Singleton, Chief of Staff

Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.


C O N T E N T S

__________

Page

Advisory of September 22, 1999, announcing the hearing........... 2

WITNESSES

U.S. Department of the Treasury, Hon. Lee Sachs, Assistant
Secretary, Financial Markets................................... 6
U.S. General Accounting Office, Paul L. Posner, Director, Budget
Issues, Accounting and Information Management Division,
accompanied by Tom McCool, Director, Financial Institutions and
Market Issues, and Carolyn Litsinger, Head of Work on Federal
Debt........................................................... 24

______

American Enterprise Institute, John H. Makin, Ph.D............... 38
Bond Market Association, and Salomon Smith Barney, Charles M.
Parkhurst...................................................... 42


U.S. DEPARTMENT OF THE TREASURY'S DEBT BUYBACK PROPOSAL

----------


WEDNESDAY, SEPTEMBER 29, 1999

House of Representatives,
Committee on Ways and Means,
Washington, D.C.
The committee met, pursuant to call, at 10 a.m., in room
1100, Longworth House Office Building, Hon. Bill Archer
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS



CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
September 22, 1999
No. FC-13

Archer Announces Hearing on

Treasury's Debt Buyback Proposal

Congressman Bill Archer (R-TX), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
U.S. Department of the Treasury's debt buyback proposal. The hearing
will take place on Wednesday, September 29, 1999, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 10:00
a.m.

Oral testimony at this hearing will be from invited witnesses only.
Witnesses will include representatives of the U.S. Department of the
Treasury, the U.S. General Accounting Office, and other experts in debt
management. However, any individual or organization not scheduled for
an oral appearance may submit a written statement for consideration by
the Committee and for inclusion in the printed record of the hearing.


BACKGROUND:


Article I, Section 8 of the Constitution gives Congress the power
``to borrow money on the credit of the United States.'' Congress has,
therefore, historically been concerned about the level of public debt
and the cost to the taxpayer. Originally, Congress approved each
Government debt issue. In more recent times, through the statutory
limit on the public debt (31 U.S.C. 3101) specified levels of overall
debt were authorized, and adjusted when necessary. Congressional
oversight of Treasury's debt management policies is essential to ensure
the lowest cost of borrowing to the taxpayer given the large scope of
public borrowings.

The Congressional Budget Office and the Office of Management and
Budget have both forecast sizeable budget surpluses over the next 15
years. Fiscal year 1998 surpluses already have reduced the Government's
borrowing needs, causing Treasury to adjust its debt management
policies. Last year, Treasury suspended auctions of 3-year notes and
reduced the frequency of 5-year note sales.

As large surpluses continue to reduce the Government's borrowing
needs, Treasury must consider how its policies will affect taxpayer
costs and capital market efficiency. Consequently, Treasury is
exploring new debt management polices. On August 4, 1999, Treasury
announced regulations (31 CFR Part 375) to allow Treasury to buy back
outstanding debt before it matures. In essence, Treasury would buy back
old debt and re-issue new debt in its place. Such a policy would not
reduce the level of debt, but it may help Treasury achieve other goals,
such as improving liquidity and achieving targeted cash balances. A
debt buyback program would increase short-term costs, but should
generate long-term budgetary savings.

In announcing the hearing, Chairman Archer stated: ``With large and
growing budget surpluses projected over the next 15 years, we have an
historic opportunity to reduce our national debt. As the Administration
explores adjustments to its debt management policies, including a new
proposal to buy back outstanding debt, the Congress needs to remain
engaged in decisions regarding the level of debt and its costs to the
taxpayer, as well as the growing debate concerning the efficiency of
global and domestic capital markets. Our goal should be to reduce
significantly the national debt at the least cost to the taxpayer.''


FOCUS OF THE HEARING:


The hearing explores the potential costs and benefits of Treasury's
debt buyback proposal and the effect such a proposal would have on the
budget. In addition, the hearing will examine Treasury's debt
management goals and the policy issues posed by growing surpluses.
Finally, the hearing will review the economic and budgetary effects of
Treasury's debt management policies.


DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:


Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect 5.1 format, with their name, address, and
hearing date noted on a label, by the close of business, Wednesday,
October 13, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways
and Means, U.S. House of Representatives, Room 1102 Longworth House
Office Building, Washington, D.C. 20515. If those filing written
statements wish to have their statements distributed to the press and
interested public at the hearing, they may deliver 200 additional
copies for this purpose to the Committee office, Room 1102 Longworth
House Office Building, by close of business the day before the hearing.


FORMATTING REQUIREMENTS:


Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.

1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1
format, typed in single space and may not exceed a total of 10 pages
including attachments. Witnesses are advised that the Committee will
rely on electronic submissions for printing the official hearing
record.

2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.

3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.

4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.

The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press
and the public during the course of a public hearing may be submitted
in other forms.


Note: All Committee advisories and news releases are available on
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.


The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.

<F-dash>

Chairman Archer. The Committee will come to order.
For the first time in over 40 years, the Federal budget
will record back-to-back surpluses. These surpluses have
allowed us to pay down the debt by $51 billion last year, and
it is now projected that we will pay down the debt by over $100
billion this year. This is truly a historic achievement that
many of us, even as recently as 2 or 3 or 4 years ago, would
not have believed to be possible.
The prospect of large and growing budget surpluses in the
future has created a new challenge for the Treasury Department
in how the national debt is managed. In August Treasury
proposed a new direction for debt management practices. This
option would allow Treasury to buy back debt from the public
before it matures. That also would have been unthinkable even a
few years ago.
As I understand the proposal, Treasury would, in essence,
buy back old debt and re-issue new debt in its place. Such a
policy would not reduce the level of debt, but it may help
Treasury achieve other goals, such as improving liquidity and
achieving targeted cash balances. Clearly any change in
Treasury's debt management policy could have far-reaching
implications for consumers, financial markets, and the economy,
and that is why we are conducting this hearing today.
How much will this plan cost in the short and the long
term? What will be the impact on the taxpayer? How will the
budget surplus be affected? What impact will this have on the
markets? And what lessons have other countries learned when
faced with a similar challenge? I hope to hear from our
witnesses on these and other questions.
In closing, let me say I am proud that we find ourselves in
this situation. The Treasury proposal to change debt policy is
further proof that there is indeed a budget surplus in
Washington, and that we have already paid down billions of
dollars in debt. That is, in itself, a tremendous
accomplishment that few people ever thought possible only a few
years ago.
I now will recognize Mr. Rangel for any comments he would
like to make on behalf of the minority, and without objection,
each member will be able to insert their written statements in
the record at this point.
Mr. Rangel.
Mr. Rangel. Thank you, Mr. Chairman. I want to join with
you in welcoming the new Treasury Assistant Secretary Lee
Sachs. We congratulate you collectively for your confirmation.
It is good news, as the chairman said, that we come to
discuss a new challenge in debt management that arises out of
fundamental good news, the fact that the Federal Government has
started to run unified budget surpluses, and as a result, we
can begin to start to retire Federal debt held by the public.
As recently as 1992, the unified deficit was $290 billion. This
year the unified budget is likely to have a surplus of about
$115 billion. This has been great for the economy, and it also
means that we are starting to put resources into the bank for
future generations rather than running up balances on the
national credit card. It means that we have a historic
opportunity to fix the Social Security and fix Medicare and to
do it while the sun is shining.
A great deal of this progress has been due to the
leadership of President Clinton and Vice President Gore and the
very tough votes provided in 1993 by Democrats alone, without
the assistance of anyone from the other side. We voted for this
historic deficit reduction package and today we are seeing the
benefit of such courage.
The Treasury now proposes to buy back outstanding debt.
This may be a new technique because I understand that the
Treasury needs this tool to carry out the kind of debt
management that Treasury has done in the past. When there were
deficits, Treasury could manage this mix between long- and
short-term Treasury securities by choosing the kind of
securities to sell. However, now that there are surpluses, the
debt makes this change by the arbitrary nature by which
outstanding securities happen to mature; by buying back the
actual activity, Treasury can manage their debt mix again.
This is an opportunity for Members of Congress to hear from
witnesses who I hope will keep us focused on the fundamentals
and steer us away from the misunderstandings that might arise
from the complex technicalities of budget accounting and debt
management. We hope that Congress will continue to protect
these newly found surpluses so that you will be able to use the
new techniques in managing debt.
Thank you for being here.
And thank you, Mr. Chairman.
Chairman Archer. Thank you, Mr. Rangel.
[The opening statement of Mr. Ramstad follows:]

Statement of Hon. Jim Ramstad, a Representative in Congress from the
State of Minnesota

Mr. Chairman, thank you for convening this important
hearing to examine the Department of the Treasury's proposal to
redeem outstanding, unmatured Treasury securities.
Let me begin by noting what a pleasure it is to be
discussing this issue. It wasn't that long ago when growing
deficits and exploding debt were the norm. Due to a concerted
effort at fiscal responsibility, we are moving in a new
direction in which growing surpluses are now expected.
Just last year the budget surplus was $69 billion. This
week, the President estimated the surplus will be $115 billion
in fiscal year 1999. Over the next 10 years, the news gets even
better. In fact, the Congressional Budget Office projects that
over the next decade, there will be a decline in publicly-held
debt to $865 billion, from the current $3.3 trillion.
I'm under no illusion that this will be easily
accomplished. It will take a strong effort to maintain this
fiscal course. But I think we all agree that the era of
deficits is over.
This new path does present some difficult economic issues
and today we will explore one of them: redeeming federal debt.
In response to the growing surpluses, the Treasury has already
stopped issuing three-year notes and the monthly auctions of
five-year notes have been reduced to quarterly auctions.
In August, Treasury issued a proposed regulation to begin
redeeming unmatured Treasury securities. In theory, this
proposal will improve the flexibility and liquidity of the
federal government and promises to keep borrowing costs down.
But these benefits will come at a direct cost to the Treasury.
In other words, this proposal presents a short-term cost to
the bottom line of the federal government with the promise of a
long-term benefit.
I am anxious to hear from the witnesses today just how much
this will cost in the short term and if there are any
quantifiable long-term benefits.
Again, Mr. Chairman, thank you for providing us this forum
to explore the Administration's proposals in detail.

<F-dash>


Secretary Sachs, we are pleased to have you here on what is
in effect your maiden voyage before this Committee. We welcome
you, and we will be pleased to hear your testimony. We hope
that you can keep your verbal testimony to 5 minutes, and your
entire printed statement would then, without objection, be
printed in the record.
Welcome and you may proceed

STATEMENT OF LEE SACHS, ASSISTANT SECRETARY FOR FINANCIAL
MARKETS, U.S. DEPARTMENT OF THE TREASURY

Mr. Sachs. Thank you, Mr. Chairman, Mr. Rangel,
distinguished Members of the Committee. It is an honor to be
here today to discuss Treasury debt management and our proposal
to create a mechanism to repurchase outstanding Treasury
securities prior to maturity.
Mr. Chairman, I would like to thank you personally and
other Members of this Committee for the leadership you have
shown on debt management issues. Your role in this area has
been extremely helpful to the Department in exercising its debt
management responsibilities in a fiscally prudent and
nonpartisan manner.
The fiscal discipline of recent years has helped to foster
a strong U.S. economy and has led to our first back-to-back
budget surpluses since 1956 and 1957. We expect this quarter to
pay down $16 billion in privately-held marketable debt,
bringing the total reduction to an estimated $100 billion by
the end of this fiscal year, and $210 billion for the past 2
years.
Reducing the supply of Treasury debt held by the public has
enormous benefits for our economy. It means that less of the
savings of Americans will flow into government bonds and more
will flow into investment in American businesses. It means less
reliance on borrowings from abroad to finance American
investment. It means less pressure on interest rates and, thus,
lower relative borrowing costs for businesses and American
families.
While reducing the debt held by the public greatly benefits
the economy, it brings with it significant challenges. As a
result of the reductions in publicly-held debt, the ongoing
task of debt management for the Federal Government will be very
different in the years ahead than it has been in the past when
debt was rapidly increasing.
Treasury debt management has three main goals: First, to
provide sound cash management in order to ensure that adequate
cash balances are available at all times; second, to achieve
the lowest cost financing to the American taxpayer; and third,
to promote efficient capital markets.
In our efforts to achieve these goals, we seek to maintain,
No. 1, the risk-free status of Treasury securities; No. 2,
consistency and predictability in our financing programs; No.
3, deep and liquid markets; and No. 4, a balanced maturity
structure.
The financing tools that Treasury has had at its disposal
in the past to achieve the goals and promote the principles I
just described have included primarily the ability to determine
the issue sizes, offering schedules, and types of securities
offered.
Using these tools, Treasury has paid down debt by refunding
our regularly maturing debt with smaller amounts of new debt.
Repurchase of outstanding debt prior to maturity would
represent another tool that would provide us with greater
flexibility in meeting our debt management goals and would be
consistent with the principles we have followed in meeting
those goals. While we have made no decisions as to whether we
will, in fact, conduct debt buybacks, publication of the
proposed rule for public comment is the first step to making
debt buybacks an actual debt management tool for the Treasury.
These buybacks would have a number of potential benefits.
First, buybacks can enhance market liquidity by allowing us to
maintain regular issuance of new benchmark securities across
the maturity spectrum. This enhanced liquidity should reduce
the Government's interest expense and promote efficient capital
markets. Second, by paying off debt that has substantial
remaining maturity, we would be able to prevent what could
otherwise be a potentially costly and unjustified increase in
the average maturity of our debt. Third, buybacks could be used
as a cash management tool absorbing excess cash in periods such
as late April when tax revenues greatly exceed immediate
spending needs.
Among the issues which must be given careful consideration
in the coming months is the budgetary treatment of proposed
buybacks. As most older Treasury securities were issued in
higher interest rate environments, repurchasing such debt in
the near term would most likely require payment of a premium.
Current budget practice would require that any premium paid by
the Treasury to buy back debt would be treated as interest
expense at the time of the buyback while future savings would
be accounted for in future fiscal years. The future savings, in
reality, would offset the up front expense paid in the form of
the premium. In other words, the up front budget impact would
merely reflect a difference in the timing of immediate outlays
and future savings.
Although we cannot ignore this issue, we must do our utmost
to ensure that budgetary treatment issues do not affect the
efficient management of our Nation's debt. It is important to
maintain both the integrity of our budget practices and our
debt management. We must ensure that everyone understands that
both our budget treatment and debt management principles will
be upheld and their integrity maintained.
Having a mechanism in place through which Treasury can
conduct debt buybacks is simply good policy. Debt buybacks can
help fulfill our core debt management goals by improving our
cash management capabilities, offering potential taxpayer
savings, and promoting efficiency in capital markets through
enhanced liquidity.
Mr. Chairman, as you stated in your announcement of these
hearings, our goal should be to reduce significantly the
national debt at the least cost to the taxpayer. This proposal
is an effort to ensure that this Treasury Department and future
Treasury Departments have another important tool in place with
which to achieve that objective.
We look forward to continuing to work with this Committee
and others to continue to advance these goals.
That concludes my opening remarks. I would be happy to take
any questions.
[The prepared statement follows:]

Statement of Hon. Lee Sachs, Assistant Secretary for Financial Markets,
U.S. Department of the Treasury

Mr. Chairman, Ranking Member Rangel, and distinguished
members of the committee, it is an honor to be here today to
discuss Treasury debt management and our proposal to create a
mechanism to repurchase outstanding Treasury securities prior
to maturity.
Mr. Chairman, I want to thank you personally and other
members for the leadership this committee has shown on debt
management issues. Your role in this area has been extremely
helpful to the Department in exercising its debt management
responsibilities in a fiscally prudent and non-partisan manner.
The fiscal discipline of recent years has helped to foster
a strong U.S. economy and has led to our first back-to-back
budget surpluses since 1956 and 1957. We expect this quarter to
pay down $16 billion in privately-held marketable debt,
bringing the total reduction to an estimated $100 billion by
the end of FY 1999.
In 1993, federal debt held by the public was projected to
rise to $5.4 trillion by 1999 if additional fiscal discipline
was not imposed. In fact, the stock of publicly-held debt
outstanding now stands at $3.6 trillion, more than $1.7
trillion lower than it otherwise would have been. As a result,
Treasury debt is taking up an ever smaller share of the capital
markets. In 1992, Treasury marketable securities represented 32
percent, or just under a third, of the U.S. debt markets. They
now represent only 23 percent of the U.S. debt markets.
Moreover, Treasury's share of the gross new issuance of long-
term debt has been reduced by more than half. While we still
have to issue debt to refund maturing securities, last year
that Treasury debt issuance represented only 18 percent of new
long-term debt issued in the United States, down from 40
percent in 1990.
Reducing the supply of Treasury debt held by the public has
enormous benefits for our economy.
<bullet> It means that less of the savings of Americans
will flow into government bonds and more will flow into
investment in American businesses.
<bullet> It means less reliance on borrowings from abroad
to finance American investment.
<bullet> It means less pressure on interest rates and thus
lower relative borrowing costs for businesses and American
families.
While reducing the debt held by the public greatly benefits
the economy, it brings with it significant challenges. As a
result of the reductions in publicly-held debt, the ongoing
task of debt management for the Federal government will be very
different in the years ahead than it has been in the past when
debt was rapidly increasing.

Debt Management Goals and Principles

Before discussing our debt buy-back proposal in detail, I'd
like to briefly review the goals and principles of Treasury's
debt management program, which provide the background and
context for the debt buy-back proposal. These goals and
principles were outlined in greater detail for this panel last
year when my predecessor, now Under Secretary Gensler spoke to
you about debt management more broadly.
Treasury debt management has three main goals: (1) to
provide sound cash management in order to ensure that adequate
cash balances are available at all times; (2) to achieve the
lowest cost financing for the taxpayers, and (3) to promote
efficient capital markets.
In achieving these goals, we are guided by five
interrelated principles:
First, maintenance of the ``risk-free'' status of Treasury
securities to assure ready-market access and lowest cost
financing.
Second, consistency and predictability in our financing
program. Keeping to a regular schedule of issuance with set
auction procedures reduces uncertainty in the market and helps
minimize our overall cost of borrowing.
Third, maintenance of market liquidity, both to promote
efficient capital markets and lower Treasury borrowing costs.
Fourth, financing across the yield curve. A balanced
maturity structure enables us to appeal to the broadest range
of investors and mitigates refunding risks. Providing a pricing
mechanism for interest rates across the yield curve also
further promotes efficient capital markets.
Fifth, unitary financing. We aggregate the financing needs
for all programs of the Federal Government and borrow as one
nation. This ensures that all programs of the Federal
government benefit from Treasury's low borrowing rate.
The financing tools that Treasury has had at its disposal
in the past to achieve the goals and promote the principles
described have included primarily the ability to determine the
issue sizes, offering schedules and types of securities
offered. Using these tools, Treasury has paid down debt by
refunding our regularly maturing debt with smaller amounts of
new debt. To do this, we have reduced the size of our regular
Treasury bill auctions, reduced the frequency of issuance of 5-
year notes, and discontinued issuance of 3-year notes. At our
last quarterly refunding announcement, we announced a reduction
in the frequency of issuance of our thirty-year bonds. Aside
from allowing us to maintain the size of our benchmark issues,
this reduction also will help to keep the average maturity of
our debt from lengthening further.

Proposed Debt Buy-Back Rules

Repurchase of outstanding debt prior to maturity would
represent another tool that could provide us with greater
flexibility in meeting our debt management goals and would be
consistent with the principles we have followed in meeting
those goals. While we have made no decisions as to whether we
will, in fact, conduct debt buy-backs, publication of the
proposed rule for public comment is the first step to making
debt buy-backs an actual debt management tool for Treasury. We
hope to have final regulations in place during the first
quarter of 2000.
The process proposed for the debt buy-back program is
fairly straightforward. Treasury would issue a press release,
which would include the eligible securities and the total
amount of the buy-back. Treasury would have the right to buy
back less than the amount announced. Offers would be submitted
through primary dealers. This limitation will enable us to make
use of the Federal Reserve Bank of New York's open market
facility. Other holders of eligible securities could
participate through offers submitted to a primary dealer. The
proposed rules call for a ``reverse auction''--a multiple price
process in which successful offerors receive the price at which
they offered securities. Following the completion of the
auction, Treasury would issue a press release providing for
each security the amounts offered and accepted, the highest
price accepted, and the remaining privately-held amounts
outstanding. FRB New York will transmit results messages to
primary dealers informing them of the acceptance of the offers
they submitted.

Benefits of Buybacks

We believe that buybacks would have a number of potential
benefits as a debt management tool:
<bullet> First, buy-backs could enhance market liquidity by
allowing us to maintain regular issuance of new ``benchmark''
securities across the maturity spectrum, in greater volume than
would otherwise be possible. This enhanced liquidity should
reduce the government's interest expense and promote more
efficient capital markets.
<bullet> Second, by paying off debt that has substantial
remaining maturity, we would be able to prevent what could
otherwise be a potentially costly and unjustified increase in
the average maturity of our debt: from just over five years to
more than seven years on the current trajectory.
<bullet> Third, buy-backs could be used as a cash
management tool, absorbing excess cash in periods such as late
April when tax revenues greatly exceed immediate spending
needs.
In addition, although it is not a primary reason for
conducting buy-backs, we may occasionally be able to reduce the
government's interest expense by purchasing older, ``off-the-
run'' debt and replacing it with lower-yield ``on-the-run''
debt. A Treasury security is referred to as being ``on-the-
run'' when it is the newest security issue of its maturity. An
on-the-run security normally is the most liquid issue for that
maturity and therefore generally trades at lower yields than
off-the-run debt. Because an off-the-run security generally
does not have the same liquidity as an on-the-run issue, it may
trade at higher yields, and thus lower prices, than on-the-run
securities. Treasury may be able to capture part of the yield
differential and thus reduce the government's interest costs by
purchasing and retiring older debt and replacing it with lower
yielding on-the-run debt.
Before I came to the Treasury Department, I spent thirteen
years at a major investment bank. I frequently advised major
corporations on their debt management policies. Debt buybacks
and exchanges are common debt management tools used by some of
the most sophisticated corporations in the private sector.
Similarly, other countries experiencing budget surpluses have
explored and/or implemented buyback programs to attempt to
maximize the budgetary benefits of such surpluses. Even in the
United States, the repurchase of outstanding securities that
have not matured is not without precedent. Treasury conducted
several debt exchanges or advance refundings between 1960 and
1966, and again in 1972 under which new issues were exchanged
for outstanding, unmatured debt. In addition, the Treasury's
Borrowing Advisory Committee has unanimously recommended the
use of debt buy-backs as a debt management tool in the future.

Budgetary Impact

Let me now turn to the budgetary treatment of proposed
buybacks. As most older Treasury securities were issued in a
higher interest rate environment, repurchasing such debt in the
near term would most likely require payment of a premium, which
means that we would have to pay more than the face value of the
bonds. Current budget treatment would require that any premium
paid by the Treasury to buy back debt would be treated as
interest expense at the time of the buyback. It would account
for a future savings in interest expense in future fiscal
years. The future savings, in reality, would offset the up-
front expense paid in the form of the premium. In other words,
the up-front budget impact would merely reflect a difference in
the timing of immediate outlays and future savings. We also
must recognize that not all securities trade at a premium.
There are also securities, albeit a minority in today's.........

(cont)

 

[emptystep]

Clinton never ran a surplus.... all he did was ratchet up borrowings from SS and other intra-governmental funds rather than public borrowings... stop being such a dope.

Well, it didn't hurt either that the tech boom was in full epic mode at the time. People were making huge bank in just about any tech sector.

I believe truthmatters is accurate in the 1993 Budget Act helped bring in the tech boom. I also believe the some of Clinton's policies helped bring in the 'huge' bank which ended up crashing the system. Bush then proceed to do almost exactly the same thing. I think the Obama administration has managed to learn from history and that this growth is fundamentally stronger that both those 'strong' economies.

 

[LogikAndReazon]

Got that folks......... higher taxes mean surpluses.........lol

 

[Redfish]

If you want to credit someone for the clinton era "surplus" then credit Newt for having the ballls to shut down the govt until Bubba agreed to balance the budget.

 

[Skull Pilot]

A budget surplus means nothing when the debt exists.

That's like someone who owes 1 million dollars getting all excited because he actually has a few bucks left over after he paid his bills one month.