August 25, 2013 at 4:27 pm #17962andrew.esselbachParticipant
I heard that clinton refinanced short term loans and raided social security to achieve his budget surplus that he is praised for. Is this true?
-AndrewAugust 26, 2013 at 2:13 pm #17963jmherbenerModerator
For a chart of the federal government’s receipts, outlays, and budget surplus or deficit, click on the link for “Table 1.1” at the following website:
The chart shows that the federal government’s “Total Budget” was in surplus for the years 1998, 1999, 2000, 2001 and that its “On-Budget” was in surplus for only the years 1999 and 2000. The difference between the two is the “Off-Budget,” which is mainly social security receipts, outlays, and surplus or deficit. All administrations use the social security surplus to partially offset the “On-Budget” deficit. So Clinton did not “raid” social security, at least not in any manner different than previous presidents.
(As an aside, the chart shows why Reagan called on Alan Greenspan to save social security in 1983. It had been in deficit since 1976 and Greenspan’s tax increase quickly brought it back into surplus by 1985.)
For a chart of the government’s net interest outlays, click on the link for “Table 3.1” at the following website:
The chart shows that net interest outlays fell from $241 billion in 1998 to $206 billion in 2001. And the “On-Budget” net interest outlays (which is the amount the Treasury paid to government bondholders) fell from $288 billion in 1997 to $275 billion in 2001. This reduction is much to small to account for the corresponding budget surpluses. Although, Clinton did have a policy of changing the time structure of federal government debt to take advantage of lower rates, but the policy did not generate the budget surpluses which were $69 billion in 1998, $126 billion in 1999, $236 billion in 2000, and $128 billion in 2001.August 27, 2013 at 12:11 am #17964andrew.esselbachParticipant
That off budget surplus data is interesting, as I wasn’t aware that such a category existed. I knew about the social security tax increase under Reagan, but I didn’t realize that Social Security had been in deficit. I find it interesting that the off budged surplus increased until it peaked at $186 billion in 2006, but has been decreasing every since and is estimated to go back into a deficit around 2016. Is there any particular reason why it peaked in 2006? I have heard of the controversy of whether or not Social Security is in the red, will be in the red, or as some claim, is perfectly fine. Does Table 1.1 prove that it is indeed in trouble?
How much of the off budget surplus did Clinton use to offset the on budget deficit?
Looking at the Table 1.1 Total Receipts and Outlays, I couldn’t help but wonder if inflation, credit expansion, and the tech bubble contributed to Clinton’s surplus in addition to higher higher tax rates. It seems somewhat plausible to me that as the economy was being artificially pushed higher and higher by inflation coupled with higher tax rates, the total receipts would increase, but when the bubble finally pops, receipts would decrease due to less taxes from lower incomes, corporate revenue, asset values, capital gains, ect. But because government spending continually increased the budget surplus vanished. If this explanation was the case, wouldn’t partial credit go to the federal reserve for the surplus instead of Clinton being a thrifty, fiscally conservative president?
But i’m probably aggregating too much, and making an over simplification of a highly complex event without fully understanding everything else that happened in that time period.
-AndrewAugust 28, 2013 at 10:51 am #17965jmherbenerModerator
The reason the surplus decreased is that outlays increased faster than receipts after 2006. During the downturn the number of people on disability has risen. Social security is projected to be in deficit starting in 2016. There was still a $62 billion surplus in 2012. So the data in Table 1.1 do not prove that SS is in financial trouble. But, the trend is not favorable.
Clinton, like presidents before him, used the entire SS surplus. Each year the Treasury spends all the receipts from SS. It “pays” for the surplus by giving SS non-negotiable bonds. The holding of these bonds by the SS administration constitutes the SS trust fund.
In the 8 years of Clinton administration budgets (FY 1994 through 2001), total outlays of the federal government rose from $1,462 billion to $1,863 billion or 27 percent. In the 8 years of the Bush administration budgets (FY 2002 through 2009), total outlays rose from $2,010 billion to $3,518 billion or 75 percent.
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