Thursday, April 23, 2009

Surplus myths

A lot of people like to hearken back to the halcyon days of the late 1990s when a Republican Congress and Democratic President combined nicely to run budget surpluses. There are, however, at least two problems with this storyline. The first is that the size of the national debt grew each year during the Clinton Administration.

Exact figures are available here.

In addition, one must also consider how the surplus was calculated. As Sen. Tom Coburn says in his book Breach of Trust:
At the end of September, the best fiscal news to come out of Washington in years, was paradoxically, the worst news as well. As expected, President Clinton announced that the federal government would end the year with a surplus of about $70 billion. "Tonight at midnight, America puts an end to three decades of deficits and launches a new era of balanced budgets and surpluses," Clinton said. Now that Washington was celebrating a mythical surplus, there would be even less incentive to restrain spending.

The GOP had long since decided to join Clinton's spin game with the surplus rather than expose the deception in his argument. The $70 billion surplus both parties were falling over each other to claim credit for was entirely from excess Social Security payments, which would need to be paid once baby boomers retired. Calling this money surplus was like a business borrowing from their employee's retirement fund so they could call a loss a profit.
It's the kind of spin and dishonest accounting that continues to this day.

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