The stars must be aligned to foist the constellation anaticula into the Zeitgeist: for the Duck, otherwise known as “the canard” casts its ghoulish light over our sublunary world. Four times in the past week someone has written to inform me that (I pick one formulation of the falsum anaticula) “when Bill Clinton left office there was a government surplus, it was the Bush administration that turned that into a deficit . . .”
This is a canard one hears almost as frequently as this election- year staple: that Newt Gingrich, heinous fellow, asked a former wife for a divorce while she languished in hospital, dying of cancer. What a terrible man, eh? Except that the story isn’t true, as even the most cursory research (e.g., The Gingrich Divorce Myth) would show.
But research, even the cursory sort, isn’t as much fun as simple repetition, especially when there’s a reputation to ruin, smugness to be enjoyed, or a political point to score.
So it is with “Clinton delivered a surplus to George Bush in 2000” canard. You can discover this by going to the monthly statements published by the U.S. Treasury. “But wait,” you say, “that chart linked shows a surplus of more than $200 billion! It’s right there in black-and-white: $236 billion and the word ‘surplus.’ So there.”
Not quite “there,” actually. That $236 billion is only one part of a larger puzzle, the bottom line of which is the total national debt, which grew every year under Clinton. Talk of a “surplus” is possible only because of accounting legerdemain. The economist Craig Steiner has put the case more clearly than anyone I know in a series of articles: “The Myth of the Clinton Surplus,” “The Myth of the Clinton Surplus, Part II,” and “The True Federal Deficit.” In the second article, Mr. Steiner casts his beady eye upon that $236 billion and explains how the national debt is calculated:
If there’s a $236 billion surplus then most people would think the national debt would go down by $236 billion. Instead it went up by $18 billion [in the year 2000]. This is the difference that must be explained.
Public Debt is calculated by taking the previous year’s public debt and adding the total unified budget deficit (or subtracting the surplus), and then adding any “other means of financing.”
Intragovernmental Debt is calculated by taking any trust fund surpluses and adding it to the previous year’s intragovernmental debt.
Total National Debt is calculated by adding the public debt to the intragovernmental debt. As a result, the national debt can increase even when the public debt decreases if the intragovernmental debt increases by a larger amount.
Why? When a trust fund (such as social security) takes in more money than it pays out in benefits, it takes the extra money and “invests” it in government bonds. Essentially social security says “We received $100 billion in social security contributions but only paid out $80 billion in benefits, so we take the extra $20 billion and buy U.S. government bonds.” Social security doesn’t keep the extra cash but rather loans it to the U.S. government and, in return, it gets a U.S. government bond. That means the U.S. government can immediately spend that $20 billion on normal government operations but owes that $20 billion to Social Security. [My emphasis.]Hence one part of the government (the U.S. Federal Government general fund) owes $20 billion to another part of the government (Social Security). That is intragovernmental debt.
Mr. Steiner has a homely but clarifying analogy that explains this:
If in a given year you earn $30,000 and a friend loans you $5,000, and you spend $32,000, is that a surplus? While you can claim “I received $35,000 and only spent $32,000, thus I have a surplus,” that’s a pretty weak argument when you know that $2,000 of the money you spent was actually borrowed and has to be paid back later. That’s pretty much what happened in 2000.
The bottom line: a real surplus would cause the total national debt to decrease. The total national debt did not decrease under Clinton: on the contrary it rose ever year. Ergo, etc.
This is not a partisan issue, by the way. The Clinton administration is not the only one to have engaged in such deceptive accounting reporting. As Mr. Steiner notes, “all modern presidents have.” He lays it all out in “The True Federal Deficit,” where he trace the national debt from 1978 to 2008. “Every year,” he notes “the ‘official’ claimed deficit is smaller than the amount by which the national debt went up. This is true under both Republican and Democrat presidents. Sometimes the differences between the two are smaller and sometimes they are larger, but the real deficit (calculated by the amount the national debt increased) is always larger than the deficit the government claimed.” Here it is, President by President:
* The sum of all Carter’s claimed deficits was $252.709 billion but the national debt went up by $299.015 billion.
* The sum of all Reagan’s claimed deficits was $1.412228 trillion but the national debt went up by $1.859576 trillion.
* The sum of Bush Sr.’s claimed deficits was $1.035646 trillion but the national debt went up by $1.554057 trillion.
* The sum of Clinton’s claimed deficits and surpluses actually resulted in a net surplus of $62.904 billion but the national debt went up by $1.395974 trillion–only 30% less than the increase during the Reagan administration.
* The sum of George W. Bush’s claimed deficits (through fiscal year 2008) was $2.131405 trillion but the national debt went up $4.217262 trillion.
Mr. Steiner concludes: “The sum of all the reported deficits of these five presidents is $4.769084 trillion but the national debt has gone up $9.325885 trillion!”
Note the exclamation point. And remember, Mr. Steiner was writing in 2008. What’s happening now? This April will see the 100th anniversary of the sinking of the “unsinkable” ocean liner Titanic. If you have money to throw away, you can even take a Titanic commemorative cruise, retracing the route of the doomed liner. Or you can just stay at home and watch as the U.S. Economy reenacts the death throes of that mighty ship.
Are you sitting down? Please sit down before reading Mr. Steiner’s article “America’s Titanic Moment.”
There’s a classic sequence near the end of the 1997 movie Titanic that depicts the ship’s sinking.
As the bow of the ship takes on water and slides beneath the ocean, the stern of the ship rises out of the water and ends up vertical. There’s a pause as the stern just bobs there in the middle of the ocean leaving the remaining passengers afraid and confused. Then, after a brief pause, the ship quickly sinks.
As I watch economic and political news unfold, I get the distinct impression that in 2008 the liberal ship Titanic hit an economic iceberg (known as reality) and our economy is now on the stern of that ship, just bobbing around in a dark ocean waiting for what comes next… and many are in denial of what comes next.
It’s difficult to imagine an economic situation more dangerous than the one in which we find ourselves.
All the debt problems that caused the crisis in 2008 haven’t gone away, they’ve just been transferred to the Federal Reserve or continue to lurk on the balance sheets of banks. Sovereign debt bailouts in Greece, Ireland, and Portugal are exploding.
In addition to out of control federal spending, we have states such as California and Illinois that may go bankrupt or seek a bailout–and both of those states are far larger than Greece. In addition to our huge national debt, we have overwhelming unfunded liabilities of anywhere from $61.6 trillion to $100+ trillion. We continue to bailout other countries via the IMF. And even as our country is collapsing under the weight of debt, we are told that the solution is to increase the amount of debt by raising the debt ceilings.
There won’t be tax increases because taxes can’t be raised enough to solve the problem, they’d damage the already weak economy, and Republicans aren’t suicidal (probably).
Printing money hasn’t worked, and we can’t continue down the dangerous path of printing money without destroying the dollar.
Economic recovery–were it to materialize–would only succeed at postponing the day of reckoning. But a strong economy is no longer sufficient to overcome the structural spending problems we have.
Bottom line? “We can either cut spending now or we can cut spending after the economy collapses.”
President Obama has at least a year an a week or two left in office. Do you reckon he is committed to cutting spending? To ask is to know the answer. George W. Bush spent money like a drunken Democrat, but he was a mere punter compared to Obama and his gang.
But that’s not the really depressing part. The really depressing part is that none of the viable candidates for President—not Mitt Romney, not Rick Santorum, not Newt Gingrich—would do anything substantive to change this. The won’t because the interest groups to which they owe their political lifeblood wouldn’t countenance any serious adjustments to governmental spending. The crisis is not yet severe enough. Sure, our bow is submerged and the stern of the ship is bobbing precariously in the water, but the view from here is just dandy. And who’s to say that it won’t bob here perpendicularly forever? Let the band, what’s left of it, play on.
Writing in July 2011, Craig Steiner issued an appeal for honest, principled political candidates. “What we need today,” he wrote, “is a new generation of candidates that win elections by staying true to their principles and ethics, not by sacrificing them.” What do you suppose the chances of that are? Personally, I am happy that, just yesterday, I revived my proposal for a new philanthropic organization: ThrowTheBumsOut.Org. Those bozos got us into this mess. Now it’s time to get rid of them and start anew.