Debts, Deficits, and the Myth of the Clinton Surplus

Originally posted April 3, 2009

We have all heard this before. When Bush took office in 2001 he inherited a surplus from Clinton and turned it into an $11 trillion debt. So, considering Clinton left office with the US $5.7 trillion in debt, I think it might be a good exercise to go back and look at the difference between debts and deficits and to examine what it actually was that Clinton left and Bush wasted.

Deficits, in most conversation, refer to the annual budget deficits where our government projects to spend more than it brings in. These deficits tend to be strictly on paper. For example, while he was $5.7 trillion in debt, Clinton projected a $236 billion surplus for 2000. Bush’s deficits never got to be much more than $400 billion a year, yet he increased the debt by $5 trillion. Do the math. Obama’s projected deficits come in about $100 billion below the Congressional Budget Office’s estimates until he leaves office, when his projected deficit comes in at about half of what the Congressional Budget Office estimates (about $700 billion in 2019 according to Obama, about $1.2 trillion according to the CBO). I guess when he leaves office he can blame the actual deficits on his predecessors.

Debt is what we actually owe to both our citizens through government bonds and debt and to other countries like China. It is also when we borrow from our “lock-boxes” like Social Security funds and other designated funds. This of course comes from spending more than we bring in, and from spending on items that don’t even make the budget.

When Clinton took office, the national debt was at $4.1 trillion. By the time Newt Gingrich and the Republicans took control of Congress after the 1994 election and began enacting the Contract With America, the national debt was about $4.8 trillion. When Clinton finally signed the Balanced Budget Act of 1997 the national debt was at about $5.4 trillion.

At the end of 2000 the national debt stood at $5.7 trillion. A year later, with Democrats in control of the Senate, and then 9/11 happening, the national debt stood at $5.9 trillion. 5 years later, at the end of 2006 and 5 years of Republican rule in both Congress and the White House, two wars, a tax cut inspired economic recovery, the national debt stood at $8.7 trillion. Two years later, under a Democratic congress and Republican president the national debt stood at $10.7 trillion. Today, three months later, it is $11.1 trillion. Feeling sick yet?

So what was Clinton’s surplus? Well, it wasn’t ever anything more than on paper. Every year of Clinton’s presidency the debt increased. In fact, his budget for the fiscal year ending September 29, 2001 resulted in a $133 billion deficit.

So why did Clinton say surplus? Well, first of all, as mentioned above there are two different kinds of debt. There is public debt (government bonds, etc.) and there is inter-government debt. Inter-government debt is when the government raids obligations like Social Security with the promise of paying it back. Right now the government owes $6.8 trillion to citizens and foreign countries, and owes $4.2 trillion to Social Security and other government funds and obligations.

When President Clinton said that he had a surplus, it was because his budget between 1998 and 2001 paid down about $450 billion in public debt. He did this by borrowing more than $800 billion from government lock-boxes. And the national debt increased even despite the Balanced Budget Act of 2007.

So the next time you find the words on the tip of your tongue that President Clinton had a surplus and Bush wasted it, just remember that in 2006 some projected the 2009 budget to have as much as a $38 billion surplus before Democrats took over congress the following



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