The Fictional Surplus - A Twisting of Facts
January 2nd, 2007
Every time I read a mention that there was a surplus under Clinton, such as the December 22nd entry in Slate’s ramblings from The Has Been, it really gets my knickers in a twist.
In 2000, Bush ran for president as a different kind of Republican, stealing a page from Clinton’s ‘92 New Democrat playbook. No father in history has left behind a bigger inheritance than Clinton: a $5 trillion surplus with no strings attached.
Well, let’s look at the facts, provided by the Bureau of the Public Debt. Their Historical Debt Outstanding - Annual page shows the national debt at the end of each fiscal year from 1950 to 2005. As of September 30th on each of those years, the numbers get progressively larger.
| Fiscal Year Ending | National Debt | Deficit |
| 9/30/2001 | $5,807,463,412,200.06 | $133,285,202,313.20 |
| 9/30/2000 | $5,674,178,209,886.86 | $17,907,308,271.43 |
| 9/30/1999 | $5,656,270,901,615.43 | $130,077,892,717.81 |
| 9/30/1998 | $5,526,193,008,897.62 | $113,046,997,500.28 |
| 9/30/1997 | $5,413,146,011,397.34 | $188,335,072,261.61 |
| 9/30/1996 | $5,224,810,939,135.73 | $250,828,038,426.34 |
| 9/29/1995 | $4,973,982,900,709.39 | $281,232,990,696.07 |
| 9/30/1994 | $4,692,749,910,013.32 | $281,261,026,873.94 |
| 9/30/1993 | $4,411,488,883,139.38 | $346,868,227,617.72 |
| 9/30/1992 | $4,064,620,655,521.66 |
As you can clearly see, during Clinton’s term (Jan ‘93-Jan ‘01), there were no years when the national debt went down.
What’s the foundation of this myth? Are people that stupid?
Let’s take a closer look. Obviously, ‘99-’01 are the place to look for this mysterious surplus.
The Debt Outstanding by Type of Debt tells us where these “wonks” get their numbers.
| Prior Fiscal Years | Debt Held by the Public | Intragovernmental Holdings | Total |
| 9/28/2001 | $3,339,310,176,094.74 | $2,468,153,236,105.32 | $5,807,463,412,200.06 |
| 9/28/2000 | $3,405,303,490,221.20 | $2,268,874,719,665.66 | $5,674,178,209,886.86 |
| 9/30/1999 | $3,636,104,594,501.81 | $2,020,166,307,131.62 | $5,656,270,901,633.43 |
OK, what’s that mean?
Debt held by the public went down by $230.8 billion. Hmm… we were paying off debt? Sure sounds like a surplus.
Oh, but wait, what’s that other column? Intragovernmental holdings went up by $248.7 billion? What’s that mean?
The Bureau of the Public Debt is nice enough to define these terms…
Debt Held by the Public — Is all Federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside of the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series.
Intragovernmental Holdings — Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.
Now, I’ve done balance transfers on my credit cards. It helps save on interest payments on balances I carry. It doesn’t, however, reduce my debt. Nor does paying off one card, and putting a larger amount on another. Whatever the mechanics, calling any of it a surplus is, at the very least, disingenuous. Using Social Security money to pay for bridges, roads, or schools may or may not be a good idea. Being honest and transparent about it certainly is a good idea.
Why am I making a big deal out of this?
In order to have an informed discussion of any type, it helps to know the facts. The fact is that the national deficit fell sharply during the Clinton years. He and the Republican Congress may have done some really good things. But they did not give us a surplus, and to state otherwise is at best misinformed, and at worst… disinformation. You know… lying?
I encourage you to feel like you’ve been duped if you believed the propaganda. I hope you feel a bit of a sting, and take that as motivation to do your own investigation into such things.
I hope that I’ve educated you in some small way.
I’m open to constructive comments. I’m in no way anyone’s lackey on this point, so baseless political attacks in comments will be deleted.
Edited 1/16/07: Came across this post in the same vein.
Entry Filed under: Government Sucks
6 Comments Add your own
1. Caydel | January 2nd, 2007 at 2:03 pm
I appreciate the point you are trying to make. It is frustrating trying to argue with someone whose head is filled with the media’s interpretation of politics with no independent fact-checking of their own. People are gullible beyond belief when they see something on TV or read it in an article.
In light of the theme of the above article, have anything to say about Michael Moore?
2. Nerf | January 2nd, 2007 at 2:08 pm
Perhaps they mean a budget surplus?
3. John in IL | January 2nd, 2007 at 10:22 pm
Nerf is right. We had a budget (cash) surplus for a few years. The government took in more money than it spent for those years. The federal government uses a cash (as opposed to an accrual)accounting system.
This is more a matter of defitnitions. Both parties play this game and hope that the general public isn’t smart enough to actually understand what they are talking about.
4. NevDull | January 2nd, 2007 at 11:33 pm
So I looked into it a bit. I’m still confused as to how taking in more than you spent can possibly lead to an increase in debt.
Is this like being EBITDA positive? On an operating basis, we did well, but still couldn’t pony up the interest payments, so the total debt still increased?
5. John in IL | January 3rd, 2007 at 1:50 pm
As you pointed out in your post, by spending the trust fund surpluses (either on government expenses or paying down the public debt), intragovernmental debt increases. It also increases because of interest paid on intragovernmental holdings (paid for by the government issuing more bonds to itself).
The government can’t “save” trust fund surpluses beyond investing in its own government securities (increasing intragovernmental debt).
6. ibanix | January 16th, 2007 at 9:11 pm
Nerf and John are both correct. This was a year-to-year budget surplus; for those years our federal income was greater than the federal debt (for the YEAR).
It is like saying you balanced the checkbook and had positive cash flow, instead of putting more on the credit card. Meanwhile, you may still be accruing interest on your credit.
What did we do with the extra cash? We paid back debt taken out by the public, in the form of Federal Bonds, Savings Bonds, TIPS, etc.
This means if you bought one of those, it may have been ‘called’ early, for less than face value.
The Intragovermental Debt is misleading. The gov’t is /required by law/ to invest certain funds (like Social Security) into… Federal Securities! It’s just a closed circle saying we have outstanding obligations which have not yet been met.
The number increases because more people need social security; but we also get more people to tax as the population rises.
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