Clinton's Surpluses

It's common knowledge that in the last few years of the Clinton administration, the budget was not just balanced, we actually had surpluses. Bill Clinton has claimed that he reduced the national debt by $360 billion in his last three years. But is it true?

Figures from the U.S. Treasury on total debt for fiscal years 1998-2001 are as follows (bear in mind that Clinton's last budget ended on 9/30/2001):

 Fiscal Yr. Year ending  National debt        Deficit

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 one can see, the debt went up each year, and there were deficits each year. Each year of the Clinton administration saw deficits and rising debt. And Clinton clearly did not turn surpluses over to Bush, which he then squandered, as the conventional wisdom says. So how did this myth arise?

According to an article I recently read, the answer lies in the distinction between public debt and intragovernmental debt. Public debt is (you guessed it) debt held by the public. T-bills, bonds, what have you. Intragovernmental debt occurs when the government borrows money from itself, mostly from Social Security. Add the two together and you get total national debt.

What Clinton did over the last few years of his administration was pay down public debt. But he did this by borrowing more in the form of intragovernmental debt, again, mostly from Social Security.

From U.S. Treasury data:

Fiscal Year	End Date	Claimed Surplus	Public Debt	Intra-gov Holdings	Total 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

As one can see, over the years in question, public debt went down, but intragovernmental holdings and total national debt went up.

To be fair to Clinton, it's unlikely that this was his plan. By law, the Social Security Administration is required to take its surpluses and buy U.S Government securities, which are then sold and which then immediately become part of the national debt. During the dot-com boom of the late 1990's, payments to social security unexpectedly went way up. This may explain why the Clinton administration predicted in 1996 large deficits as far as the eye could see, and suddenly a couple of years later we have supposed "surpluses". The administration must have been shocked to see all this extra dough available, and, to his credit, he did pay down public debt. But the only way this can be characterized as surpluses is if one ignores the other element of the total national debt.

Thanks to political spin, a compliant media, and lack of awareness by the public of the arcane accounting methods of Washington, the myth of the Clinton surpluses was born and survives today.

None of this is meant to defend George Bush. But I think it's important to realize that when people say we should return to the tax rates of the Clinton years because, after all, we had surpluses then, that assertion is simply false. I also find it very interesting when I discover that what we have been told, ad nauseum, for several years, just ain't so.

It would appear that high unemployment is not just painful for the unemployed. With fewer FICA taxes coming into the government, it has less money to hide what it's been doing over the past few decades. If corporate CEO's pulled this kind of stuff, they'd go to jail.