Skip to comments.Nope, Saving the Clinton era 'surpluses' wouldn't have averted the entitlement crisis
Posted on 05/05/2011 2:01:27 PM PDT by SeekAndFind
As liberals grapple with the reality that the nation's welfare state is financially unsustainable, they've renewed the myth that all would be swell if President Bush hadn't squandered the surpluses that were projected a decade ago. This argument received a boost over the weekend with an article by the Washington Post's Lori Montgomery, who wrote: "The nation's unnerving descent into debt began a decade ago with a choice, not a crisis."
The reality is a bit more complicated.
To start with, it's important to emphasize that the projected surpluses were just that -- projections. As the Congressional Budget Office cautioned in its January 2001 report on which Montgomery based her piece, "considerable uncertainty" surrounded them.
The CBO wrote that "the U.S. economy and the federal budget are highly complex and are affected by many economic and technical factors that are difficult to predict. As a result, actual budgetary outcomes will almost certainly differ from CBO's baseline projections."
And as it turned out, in 2001, one of the most unpredictable events in American history happened -- the Sept. 11 attacks. Not only did the attacks further weaken an economy that had already been shaken by the bursting of the tech bubble, but they led to an increase in defense spending after a decade of historically low military spending resulting from the post-Cold War "peace dividend." This was to some degree inevitable no matter who was president.
By January 2002, before the Iraq War and before the second round of Bush tax cuts, the CBO had already slashed the projected 10-year surplus from $5.6 trillion to $1.6 trillion. While it's true that 30 percent of that reduction was attributed to the June 2001 Bush tax cuts, 40 percent was linked to the economic downturn, and the rest was due to increased spending and debt service costs.
This isn't to defend Bush's profligacy. No doubt, when the world suddenly changed, he should have dropped the Medicare prescription drug plan and trimmed other parts of the budget to accommodate new war-related spending. Especially if he wanted to keep tax rates low.
Had spending stayed at projected levels from 2001 through 2010 -- even with the tax cuts and two economic shocks -- the budget would have remained roughly in balance over the period, with cumulative deficits of just $144 billion. In reality, deficits were $4.7 trillion.
At the start of the Bush presidency, the CBO projected that spending would be under $2.6 trillion in 2011, but the government is now expected to spend over $3.6 trillion this year.
The Post's Montgomery wrote that, "In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely."
But that's not quite accurate. While CBO projected surpluses to continue in the near term, it noted that even if those surpluses (which turned out to be unrealistic) were "saved," it would have only allowed us to delay, rather than avert, the entitlement crisis.
The CBO explored the issue at length in an October 2000 report, noting that "under most of the assumptions CBO used, a fiscal imbalance eventually develops whether or not surpluses are realized. If the nation's leaders do not change current policies to eliminate that imbalance, federal deficits are likely to reappear and eventually drive federal debt to unsustainable levels."
In other words, even if the Bush tax cuts never passed, if Sept. 11 had never happened, if Bush had never invaded Iraq or Afghanistan, if two recessions had not occurred, it wouldn't have spared liberals from having to confront the fiscal nightmare caused by an overly generous welfare state.
-- Philip Klein is senior editorial writer for The Examiner.
Sorry, most of the Clinton “surplus” was just accounting tricks. Ditto for the supposed “welfare reform” that occurred while the scum bucket was in office.
William Jefferson Clinton often claims to have left a budget surplus that George W. Bush and the Republicans recklessly squandered. The claim is parroted by the media and Democratic politicians in an attempt to show Republicans were irresponsible.
The truth is that the Clinton surplus was nothing more than a numbers game.
The following excerpts are from Craig Steiner’s Site AND there are links to the GUBMINT sites where the data that support the article may be found :
Time and time again, anyone reading the mainstream news or reading articles on the Internet will read the claim that President Clinton not only balanced the budget, but had a surplus. This is then used as an argument to further highlight the fiscal irresponsibility of the federal government under the Bush administration.
The claim is generally made that Clinton had a surplus of $69 billion in FY1998, $123 billion in FY1999 and $230 billion in FY2000 . In that same link, Clinton claimed that the national debt had been reduced by $360 billion in the last three years, presumably FY1998, FY1999, and FY2000though, interestingly, $360 billion is not the sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).
The national debt went up every year under Clinton. Without the “surplus” from SS, Clinton’s budget was in deficit.
If they only spent based on what they brought in the previous year, they wouldn’t have a deficit. Why can’t they do this and stop “projecting”?
The whole economy has been driven by debt. The GDP growth and National debt go hand in hand.
By 2030, one in every five residents of this country will be 65 or older or about twice what it is now. Ergo, the entitlement costs will increase. In the meantime, the number of workers to support the system will decline. In 1950 there were 16 workers for every retiree; today there are 3.3; and by 2030 there will be two.
The deficit will increase and so will the national debt unless we get the entitlement programs under control. Eventually, the costs will consume the entire budget.
Sorry, I was fantisizing for a moment there ...
Another of my favorite lies about the Slick one, “Clinton basically ended welfare.” I’ve heard more liberal talking heads spew that nonsense. This is a real eye opener;
Just one more lie about the liar that, “did not have sex with that woman.....”
I thought Monica wiped Clinton’s surplus on her blue dress?
Thanks for the post SAF.
“To start with, it’s important to emphasize that the projected surpluses were just that — projections.”
So? The current projected deficits are just projections. Talking about projections is being used as a diversion from what is happening today. The fact is that we ran a surplus. It can be done. It is reasonable for a government to spend no more than it takes in.
“Not only did the attacks further weaken an economy that had already been shaken by the bursting of the tech bubble, but they led to an increase in defense spending after a decade of historically low military spending resulting from the post-Cold War “peace dividend.”
Bull. While increased defense spending has increased the deficit, it pales in comparison to the increased spending on Medicare and the effect of the tax cuts. We decided to fight two wars, increase entitlement spending, cut taxes and save the banks. It is no wonder we ran a deficit.
“No doubt, when the world suddenly changed, he should have dropped the Medicare prescription drug plan and trimmed other parts of the budget to accommodate new war-related spending. Especially if he wanted to keep tax rates low.”
Clear eyed truth.
“While CBO projected surpluses to continue in the near term, it noted that even if those surpluses (which turned out to be unrealistic) were “saved,” it would have only allowed us to delay, rather than avert, the entitlement crisis.”
Delay? A deficit delayed is a deficit denied. Politicians are responsible for what happens during their elected term. Saying “I cut the deficit twenty-five years from now” is pure unadulterated bull. Saying “I balanced the budget THIS year” is being responsible.
“it wouldn’t have spared liberals from having to confront the fiscal nightmare caused by an overly generous welfare state.”
So? We can’t tie the voters hands in 2014 just like they couldn’t do to us in 2006.
I all write this because I really, really don’t like the Ryan budget plan. To promise to balance the budget in 2035 (he can’t make that promise) while failing to cut spending today today (which he can) is a betrayal of this country.
Government took in more than it spent. That’s a surplus. It is an accounting gimmick to claim positive cash flow is not a surplus.
Eventually it rose to an all time high. While we waited for that, the debt increased. The budget should have been cut until the revenue came in to support it.
In this case the gov hadn’t even taken anything in yet.
The government was running a surplus when the Republicans took over in 2001. The Republicans made a series of choices to run a deficit. I know that is an unsettling fact but it is a fact none the less.
No, not really. A deficit is a deficit of revenue relative to spending. If revenues go down (they did) and spending goes up (it did) then we have a deficit.
Those figures include the SS surplus, which was put into the General Fund. Without these funds, Clinton ran a deficit every year and our national debt grew about 30% under Clinton, who had the benefit of the Peace Dividend (he reduced our military by over a third) and the dot.com bubble. The Rep Congress also forced him to sign welfare reform on the third try.
Libs can't seem to understand that when "the rich" are allowed to keep more of their money, they are less likely to use tax dodges and more likely to create and expand businesses - which creates jobs and increases tax revenues. But if the Congress and President spend money like - well, I'd say drunken sailors, but drunken sailors are honest and only spend their OWN money - no amount of revenue enhancement can hope to keep up.
Agree with the exception that I think most now realize that the SS trust fund is an accounting gimmick. We were paying off privately held treasury bonds at the end of his administration and through 2001.
I think the bulk of the credit goes to the Republican congress. However that credit has a time limit because they started sticking it to us when Bush came into office.
It was both a revenue and a spending crisis. I agree that tax revenues recovered by 2006 but they did not cut spending when they passed the tax cuts. That meant a deficit. Moreover, they kept spending even more after the revenues came in.
I’m all for tax cuts but when we cut taxes, I think we need to cut spending while we wait for the economy to expand. Not before that.
Our Republicans decided to run (what we thought then) was a massive deficit. I think they made a mistake.
Not before that = Not after that.
Yes, using SS "surplus" funding. The national debt has two parts, publicly held and Intragovernmental Holdings. Paying off some of the publicly-held debt using SS surplus is an accounting gimmick. When Clinton took office, the national debt was $4,188,092,107,183.60 and when he left it was $5,727,776,738,304.64.
The Reps had slim majorities in Congess and with the Jeffords defection, it was almost non-existent. And then the Dems took over Congress completely in January 2007.