Quaap home

Quaap home
Adventures in rationality, homeschooling, atheism, and like, whatever.


Factcheck.org and the Clinton Surplus

I am a huge supporter of Factcheck.org. They provide a great service which roughly corresponds to the efforts of Snopes.com, but instead of random urban legends, they look into the words and writings of the political world.

I have noticed a somewhat Democratic/Progressive leaning in their work: it's hard to pinpoint, but it's there. Part of it may be that the "conservatives" out there are mass producing spin and sometimes outright nonsense, if not more than the "liberals", at least with greater amplification and distribution due to things like Foxnews and the Drudge Report. "Liberals" just don't have quite the same unity of message or the distributions channels to really publicize their bullshit in the same way. But I digress.

Factcheck's surplus

UPDATE: With great horror I've noticed that many republicans are linking to this article to defend their idiotic points. Please understand that this is not a republican support page. While Clinton did not have a surplus, under his watch the growth of the debt slowed quite a bit. His successors, Bush II and Obama, have both like drunken prostitutes on payday. Please see also the debt article.

As I said, I mostly love what Factcheck does. However, there is one article in particular that bugs me:

Surplus.

Basically it purports to confirm the common belief that during the Clinton Administration, the US federal government had a budget surplus. This is a fairly widespread belief, being believed by most Democrats, and many Republicans (especially those who want to take partial credit for it).

The problem is, it is ridiculously easy to debunk it. If there was a real surplus (more revenue in than spent), the debt would be reduced. However, the US Treasury Department maintains much data, and it clearly shows that at no point did the US Federal debt go down:

Fiscal Year End Total Debt
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43
09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32

So why does Factcheck "confirm" that there was a surplus for several years during the Clinton administration? Because they are using different definitions and therefore a different set of numbers.

Differential accounting

There are two kinds of Federal debt: public debt, and intra-governmental debt. Public debt is money owed to the public, ie people who bought US Treasury bonds: regular people, companies, foreign governments, etc. Intra-governmental debt is money owed to the government. This seems to make no sense, but it actually does.

The US government takes in money through normal means like income taxes, and this money goes into the general fund, but they also take in money through secondary means, such as Social Security taxes. These other taxes do not go into the general fund, but instead go into trust funds and are entirely separate. For social security, if more money comes in through the Social Security tax than goes out through Social Security payments, they are required by law to purchase US Treasury bonds with the excess money. So now the Treasury Department owes money to the Social Security Trust Fund (This in itself is not necessarily a bad thing: there is no sense in letting money sit around losing value to inflation). This debt is called intra-governmental debt.

When Factcheck states that there was a surplus, they are looking at only the public debt and are not including the intra-governmental debt. Looked at this way, yes, there was a surplus. So much money was coming in through Social Security taxes (and used to buy Treasury bonds) that the general fund exceeded the budget by several hundred billion.

Is this a valid way to view the matter? After all, the money the government owes itself shouldn't count, right? Well, yes, it should. The social security money was already earmarked for future social security payments, and the Social Security Trust Fund will want to get its money back when it comes time to make more payments. So yes, this is real debt and I can't think of any reason to exclude it.

It should be noted that even without the Social Security money the deficit did go down most years and came within $18 billion of being a completely balanced budget (down from $430 billion under Bush Sr). The expenditures most years increased only modestly as compared with Bush Sr and especially George W Bush. So for this Clinton and Congress during that time period should be commended. However, I see no way to call a $18 billion deficit a "surplus".

Letter to the Editor

So anyway, I decided to write Factcheck.org and point out the problem of saying there was a surplus when the debt did not go down.

I wrote:

The page: http://www.factcheck.org/askfactcheck/during_the_clinton_administration_was_the_federal.html says there was a budget surplus in the late 90s; however, the US national debt never once went down from year to year: http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm It is misleading at best to claim a surplus when the debt did not go down.

I honestly wasn't ever expecting a response, I really just wanted to point out the discrepancy, so I wrote it as tersely as possibly. But a few hours later I received this:

Editor wrote:

You are looking at a figure that includes money they government owes to itself. The debt owed to the public went down in fiscal 1998, 1999, 2000 and 2001. Here's Table 7.1 from the federal budget, giving the historical figures: http://www.whitehouse.gov/omb/budget/fy2011/assets/hist07z1.xls Alan Greenspan even gave a speech about what would happen if the national debt was paid down entirely. http://www.federalreserve.gov/boarddocs/speeches/2001/20010427/default.htm Brooks Jackson Director, FactCheck.org 320 National Press Building Washington DC 20045 (202) 879-6708 (202) 494-0690 (cell)

Cool, the director! Not sure why the Greenspan speech is relevant, but it's something!

I wrote:

Quick response! Thanks! I understand the difference between "public" and "intergovernmental" (or gross) debt. However, the money the government "owes itself" is still debt. When the Social Security administration comes looking for its money, that money will need to be there. It is still real debt and to exclude it doesn't make sense. The total debt is still the only way to see if there was a surplus. Shouldn't the article at least note that?

Editor wrote:

Nevertheless, the governmentd took in more money than it spent for four straight years. That's a surplus. The gross debt is another matter. You are correct that IOUs are piling up in the Social Security Trust Fund to fund future spending, and those chickens are coming home to roost in the not very distant future. If you recall, the Clinton folks wanted to set the surpluses aside in a "lockbox" to somehow cover that. But that didn't happen. Brooks Jackson Director, FactCheck.org 320 National Press Building Washington DC 20045 (202) 879-6708 (202) 494-0690 (cell)

Wait, an "IOU" is not "debt"? I think an "I Owe You" is the very definition of debt.

I wrote:

That's a very specious distinction, and doesn't fit with the common usage of the word "surplus" or "debt". Social Security used its revenue to purchase treasury bonds as it is required to do, but just because it is the government that did the purchasing does not mean it is not real debt. The SS money was already "spoken for" in that it is owed to the entitlees in the general public. You have a lender (Social Security Trust Fund), a borrower (the Treasury), interest due, and consequences on default. That certainly sounds a lot like debt. To claim it "doesn't count" seems to be just an accounting trick. Anyway, I think my point still stands: if the sum-total amount of money owed did not go down, there could not have been a surplus. By the way, although it should not matter given your non-partisan charter: I am an independent, not some neocon-blog-droid hellbent on tarnishing Clinton. I've promoted factcheck.org to my friends and family who are overly steeped in political kool-aid of various flavors. Also, thank you for spending your time to communicate with me: I very much expected to get a form letter or no response at all.

That was a few days weeks ago. I don't expect much will come of it. Given the in-depth nature of most of their investigations, I can't imagine they did not know about the total debt or haven't received many emails about it from said neocon-blog-droids. Without some solid reasoning why intra-governmental debt should not be counted, I can only conclude they are using the overly specific "public debt only" due to a political leaning.

Disclaimer

As usual, I feel the need to explain my political leanings lest I am mistaken for something I am not: I am a complete independent. I am not a Democrat. I am not a Republican. I am not a Naderite. etc.

2010-02-04