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Thinking about the National Debt July 27, 2010

Posted by Ken in Politics, Taxation.
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After my post yesterday based on a chart provided by a friend last year, I’ve been thinking about the numbers, and they simply don’t add up. My initial question has to do with the oft-cited surplus President Clinton left behind at the end of his second term, $236 Billion. First off, let me say I will stipulate that this amount of money was “left over” after all revenues were collected and all expenses met that year, FY2000. Looking a bit deeper we see that the national debt stayed at $5.6 Trillion from FY1999 through FY2000 – but that’s my problem, why didn’t National Debt get reduced by $236 Billion, to $5.364 Trillion? Let me explain…

President Clinton walked out of the Oval office in January, 2001 leaving $236 Billion in un-spent revenue on the table, yet he had $5.6 Trillion worth of bills sitting in a drawer inside the Resolute Desk. When Bill Clinton took office the national debt was $4.0 Trillion, so over his eight years in office, he increased the national debt by 40%. Fine, I get it, that’s what President’s do – I’m just setting the table with what I consider are facts that are not in dispute.

But that surplus number just doesn’t ring true… (I understand it exists, I’m just having a hard time understanding how this all works.)

If I applied the same logic at home, I could run up my credit cards, and if I leave a fraction of my total debt in my checking account at the end of the year, can I really be said to have left a surplus? For that statement to be true, you have to define surplus as nothing more than bank account balance, ignoring all other debentures. It doesn’t work at home, why does this work in Washington?

Now, about this “projected” business, to me this is an early version of President Obama’s “Jobs Created or Saved” – a metric that is impossible to define. Now, President Clinton left office with a series of policies in place that, if never deviated from, would have led to a surplus that would have equaled the entire national debt at the time he left office, around $5.6 Trillion, after ten years – assuming nothing changed in the economy. Is that a reasonable point to make? Has any incoming President ever left his predecessors policies and spending untouched, let alone has their successor also carried on the same polices and spending for the first two years of their term? It is a delusional fantasy to imagine that would ever have happened, even if both subsequent administrations were fully supportive of the first administrations goal. So it’s a lie, but it’s a lie that can’t easily be argued against, so it stands. Fine – if we’d only stuck to Bill Clinton’s plan, we’d be debt free, that’s the thinking on the left, correct?

Well, there are a few things working against that Utopian dream – the Dot.com bubble and the events of 9/11, to name but two.

One of the things the democrats espousing the vision of the Clinton Administration for a debt-free nation in ten years forgets (or chooses not to admit), is that the country was riding the Dot.com Bubble right up through March of 2000, and the super-heated dot.com economy created untold wealth in this country, resulting in federal revenues increasing from $1.1 Trillion when Clinton took office in 1992 to $2.0 Trillion when he walked out of office January, 2001. Simply put, he had so much revenues pouring in, he simply couldn’t spend it fast enough. Lucky him, but could that continue for the next ten years? Or Eight? Could President Bush count on ever-increasing revenues during his two terms, anything even approaching the near 90% increase his predecessor came to regard as normal? No. At the end of FY2010, the Federal Government had revenues of $2.1 Trillion, or simply put about 5% more than President Clinton had collected in his last year in office. Sure, revenues increased most years under President Bush, peaking at $2.6 Trillion in 2007, but it then started to decline for various reasons, including the oft cited “Bush Tax Cuts for the Rich” and the housing bubble bursting. Oh, and let’s not forget the attacks on 9/11/2001Operation Enduring Freedom and Operation Iraqi Freedom – they had an impact on the economy as well. Were any of those events part of the Clinton Projections? Of course not.

Now, since President Clinton rode the Dot.com bubble almost to the end of his two terms, raking in record revenues, can any projection based on such a reality be effectively argued for? Not in my opinion.

So where does that leave us? President Clinton did leave a surplus in the annual budget the year he left office, but he also left an increased national debt of $5.6 Trillion, 40% larger than the $4.0 Trillion he inherited from President Bush’41. So we, as a nation, had some money in our pockets, but we also had the largest deficit in our history to then.

(Many of my numbers came from the same source, a USA Today interactive graphic that shows revenues, expenses, and national debt, along with any surplus or debts per year from 1977 through 2010. The chart can be found here: http://www.usatoday.com/news/washington/2009-02-26-deficit_N.htm?csp=34.)

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