Obama will ruin the economy (Stimulus at $900 billion) (Clinton: buying, income)

[elflord1973]

Originally Posted by Jerseyt719

None is made here anymore....
I say tax the crap out of imported goods and give tax breaks to companies that make their own right here.

That sounds like a fantastic idea until you consider the consequences of this policy.

We would be able to afford it as they would need to hire more people to do so and that would definitely pump more money into the economy.

They can only hire people if they are profitable. If they aren't profitable any more, they will fold.

Economic growth drives employment. Protectionist trade policy reduces efficiency which ultimately is detrimental to economic growth.

Sounds simplistic, I know, but sounds good all the same.

It is. I discuss some of the problems with this line of argument in another post in this thread, please take a look at it.

[elflord1973]

Originally Posted by CarolinaOnMyMind

Let's remember that the root cause of this economic mess we are in is the housing debacle which we can thank liberals such as Barney Franks and Chris Dodd for since they allowed Freddie Mac and Fannie Mae to run amuck and to extend mortgages to anyone with bad credit, no credit, no income or job verification.

Completely wrong. The NINJA loans were subprime, that's where the crisis began. The major subprime originators were private corporations like countrywide financial, and they securitised and sold these loans to whoever would take the loan of their books, usually investment banks. Fannie and Freddie were NOT major subprime players.

So again, the subprime debacle started careless mortgage originators who had no incentive to do due diligence, then repackaged them to investment bankers who failed to do their own due diligence, and instead just tried to ride the bubble upward, multiplying it to astronomical levels through large amounts of leverage.

It's part of the liberal philosophy that everyone should own a home even if they cant afford it.

This wrong-headed idea of subsidising home ownership has bipartisan support, unfortunately. Reagan and Bush wouldn't touch the mortgage interest deduction, and senate Republicans tacked on a subsidy for home owners in this recent bill. It's ironic that one of the effects of these subsidies was make housing unaffordable.

It wasnt Bush that ruined the economy as some other idiots here claimed ,

He inherited surpluses, and he turned them into deficits over night. I doubt that you'll see him up on the big screen at future Republican conventions.

[Amazonas]

Originally Posted by FlyersFan

You wouldn't be so silly as to attempt to suggest that the financial state of the country was better under Bush than Clinton.....would you ?

Honestly, I believe that you're silly by saying or implying that this nation's economic state is in great part Bush's fault. I'm flabbergasted to watch how people go back and forth blaming either party and the different administrations under both political factions. It is obvious that there's a continuity of policies that follow a blue print regardless of who or which party is in "power". The idea that I tried to convey was that it is a fact that Alan Greenspan was the master mind behind the genious deception scheme that made Clinton's administration have a surplus. This rethoric is costing the nation the opportunity for a third party to arise, and I think is about time that an opportunity is given to real patriots to kick these corporate pricks out of the White House.

[elflord1973]

Originally Posted by Amazonas

Honestly, I believe that you're silly by saying or implying that this nation's economic state is in great part Bush's fault. I'm flabbergasted to watch how people go back and forth blaming either party and the different administrations under both political factions. It is obvious that there's a continuity of policies that follow a blue print regardless of who or which party is in "power". The idea that I tried to convey was that it is a fact that Alan Greenspan was the master mind behind the genious deception scheme that made Clinton's administration have a surplus. This rethoric is costing the nation the opportunity for a third party to arise, and I think is about time that an opportunity is given to real patriots to kick these corporate pricks out of the White House.

According to factcheck, Clinton did run surpluses, excluding the social security surplus:
FactCheck.org: During the Clinton administration was the federal budget balanced? Was the federal deficit erased?
The Republicans in the house and senate at the time perhaps could claim some of the credit for this.

Bush immediately turned these into deficits via yet another experiment with supply side (or what his dad called "voodoo") economics.

[FlyersFan]

Originally Posted by elflord1973

According to factcheck, Clinton did run surpluses, excluding the social security surplus:
FactCheck.org: During the Clinton administration was the federal budget balanced? Was the federal deficit erased?
The Republicans in the house and senate at the time perhaps could claim some of the credit for this.

Bush immediately turned these into deficits via yet another experiment with supply side (or what his dad called "voodoo") economics.

Thank you VERY much for your support. I hope "Amazonas" reads this and takes a little time to remove their foot and most of their leg from their mouth before speaking on Bush economic policies again !!!

[Amazonas]

I found this article on the paradigm created over this "surplus". I need to make it clear I'm not a supporter of Bush nor I'm a supporter of Clinton. Again, I'm merely stating that we are following a continuation on policies that seems to never end. FlyersFan is taking this a bit too personal. I recomend you to take a chill pill....not worth the ulcera. Also, I trust the readings from the Treasury Department more than any other public office.


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 FY2000--though, interestingly, $360 billion is not the sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).

While not defending the increase of the federal debt under President Bush, it's curious to see Clinton's record promoted as having generated a surplus. It never happened. There was never a surplus and the facts support that position. In fact, far from a $360 billion reduction in the national debt in FY1998-FY2000, there was an increase of $281 billion.

Verifying this is as simple as accessing the U.S. Treasury (see note about this link below) website where the national debt is updated daily and a history of the debt since January 1993 can be obtained. Considering the government's fiscal year ends on the last day of September each year, and considering Clinton's budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994), here's the national debt at the end of each year of Clinton Budgets:


Fiscal
YearYear
EndingNational DebtDeficitFY1993 09/30/1993 $4.411488 trillion FY1994 09/30/1994 $4.692749 trillion $281.26 billionFY1995 09/29/1995 $4.973982 trillion $281.23 billionFY1996 09/30/1996 $5.224810 trillion $250.83 billionFY1997 09/30/1997 $5.413146 trillion $188.34 billionFY1998 09/30/1998 $5.526193 trillion $113.05 billionFY1999 09/30/1999 $5.656270 trillion $130.08 billionFY2000 09/29/2000 $5.674178 trillion $17.91 billionFY2001 09/28/2001 $5.807463 trillion $133.29 billion

As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit. Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive surplus number. And Clinton's last budget proposal for FY2001, which ended in September 2001, generated a $133.29 billion deficit. The growing deficits started in the year of the last Clinton budget, not in the first year of the Bush administration.

Keep in mind that President Bush took office in January 2001 and his first budget took effect October 1, 2001 for the year ending September 30, 2002 (FY2002). So the $133.29 billion deficit in the year ending September 2001 was Clinton's. Granted, Bush supported a tax refund where taxpayers received checks in 2001. However, the total amount refunded to taxpayers was only $38 billion . So even if we assume that $38 billion of the FY2001 deficit was due to Bush's tax refunds which were not part of Clinton's last budget, that still means that Clinton's last budget produced a deficit of 133.29 - 38 = $95.29 billion.

Clinton clearly did not achieve a surplus and he didn't leave President Bush with a surplus.

So why do they say he had a surplus?

As is usually the case in claims such as this, it has to do with Washington doublespeak and political smoke and mirrors.

Understanding what happened requires understanding two concepts of what makes up the national debt. The national debt is made up of public debt and intergovernmental holdings. The public debt is debt held by the public, normally including things such as treasury bills, savings bonds, and other instruments the public can purchase from the government. Intergovernmental holdings, on the other hand, is when the government borrows money from itself--mostly borrowing money from social security.

Looking at the makeup of the national debt and the claimed surpluses for the last 4 Clinton fiscal years, we have the following table:


Fiscal
YearEnd
DateClaimed
SurplusPublic
DebtInter-gov
HoldingsTotal National
DebtFY199709/30/1997 $3.789667T$1.623478T$5.413146TFY199809/30/1998$69.2B$3.733864T $55.8B$1.792328T $168.9B$5.526193T $113BFY199909/30/1999$122.7B$3.636104T $97.8B$2.020166T $227.8B$5.656270T $130.1BFY200009/29/2000$230.0B$3.405303T $230.8B$2.268874T $248.7B$5.674178T $17.9BFY200109/28/2001 $3.339310T $66.0B$2.468153T $199.3B$5.807463T $133.3B

Notice that while the public debt went down in each of those four years, the intergovernmental holdings went up each year by a far greater amount--and, in turn, the total national debt (which is public debt + intergovernmental holdings) went up. Therein lies the discrepancy.

When it is claimed that Clinton paid down the national debt, that is patently false--as can be seen, the national debt went up every single year. What Clinton did do was pay down the public debt--notice that the claimed surplus is relatively close to the decrease in the public debt for those years. But he paid down the public debt by borrowing far more money in the form of intergovernmental holdings.

Interestingly, this most likely was not even a conscious decision by Clinton. The Social Security Administration is legally required to take all its surpluses and buy U.S. Government securities, and the U.S. Government readily sells those securities--which automatically and immediately becomes intergovernmental holdings. The economy was doing well due to the dot-com bubble and people were earning a lot of money and paying a lot into Social Security. Since Social Security had more money coming in than it had to pay in benefits to retired persons, all that extra money was immediately used to buy U.S. Government securities. The government was still running deficits, but since there was so much money coming from excess Social Security contributions there was no need to borrow more money directly from the public. As such, the public debt went down while intergovernmental holdings continued to skyrocket.

The net effect was that the national debt most definitely did not get paid down because we did not have a surplus. The government just covered its deficit by borrowing money from Social Security rather than the public.

Consider the following quotes (and accompanying links) that demonstrate how people have known this for years:

So the table itself, according to the figures issued yesterday, showed the Federal Government ran a surplus. Absolutely false. This reporter ought to do his work. This crowd never has asked for or kept up with or checked the facts. Eric Planin--all he has to do is not spread rumors or get into the political message. Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000. - Democratic Senator Ernest Hollings, October 28, 1999

An overall "downsizing" of government and a virtual end to the arms race have contributed to the surplus, but the vast majority is coming from excess Social Security taxes being paid by the workforce in an attempt to keep Social Security benefit checks coming once the "baby-boomers" start to retire.

Of the $142 billion surplus projected by the end of 2000, $137 billion will come from excess Social Security taxes.

When these unified budget numbers are separated into Social Security and non-Social Security components, however, it becomes evident that all of the projected surplus throughout this period is attributable to Social Security. The remainder of the budget will remain in deficit throughout the next decade.

Despite a revenue shortfall, full benefits are expected to be paid out between 2017 and 2041. The system will draw on its trust fund, a collection of special-issue bonds from the government, which borrowed prodigiously from the program's surplus over the years. But since the country is already running a deficit, the government will have to borrow more money to pay back its debt to Social Security. That's a little like giving with one hand and taking away with the other.

The surplus deception is clearly discernible in the statistics of national debt. While the spenders are boasting about surpluses, the national debt is rising year after year. In 1998, the first year of the legerdemain surplus, it rose from $5.413 trillion to $5.526 trillion, due to a deficit of $112.9 billion... The federal government spends Social Security money and other trust funds which constitute obligations to present and future recipients. It consumes them and thereby incurs obligations as binding as those to the owners of savings bonds. Yet, the Treasury treats them as revenue and hails them for generating surpluses. If a private banker were to treat trust fund deposits as income and profit, he would face criminal charges.

Are intergovernmental holdings really debt?

Yes, intergovernmental debt is every bit as real as the public debt. It's not "a wash" simply because you owe the government owes the money to "itself."

As I explained in a previous article, Social Security is legally required to use all its surpluses to buy U.S. Government securities. From Social Security's standpoint, it has a multi-trillion dollar reserve in the form of U.S. Government securities. When the Social Security system starts to falter due to insufficient contributions to pay for all the benefits of retiring baby-boomers, probably around 2017, it will start cashing those securities and will expect the U.S. Government to pay it back, with interest. The problem is, the government doesn't have the money. The money has already been spent--in part, effectively, to pay down the public debt under Clinton.

The Federal Government cannot just wave a magic wand and somehow "write off" the intergovernmental debt. Essentially, citizens invested money in Social Security and Social Security invested that money in the Federal Government. Now Social Security effectively owes you money (in the form of future retirement benefits) and won't be able to pay you that money if the Federal Government just cancels the intergovernmental debt. The only way the Federal Government can "write off" intergovernmental debt is if it simultaneously eliminates the Social Security system. That might very well be a good idea, but it isn't likely. And Social Security will start running out of money in about 2017 if the Federal Government doesn't honor those intergovernmental holdings as real debt.

In short, if the government doesn't pay back intergovernmental holdings, other government agencies (like Social Security) will fail. Since allowing Social Security to fail is not a politically viable option, the debt represented by intergovernmental holdings is just as real as the public debt. It can't just be eliminated by some fancy accounting trick or political maneuvering. If it were possible, believe me, politicians would have done it already and taken credit for reducing the national debt by trillions of dollars.

Trust Funds = Intragovernmental Debt

Social Security isn't the only trust fund in the federal budget. There are a number of others including the civil service retirement fund, federal supplementary medical insurance trust fund, unemployment trust fund, military retirement trust fund, etc. All of these trust funds, like Social Security, invest their surpluses in U.S. government bonds and increase intragovernmental debt. And like Social Security, their surpluses really shouldn't count toward a "surplus" because the excess money they contribute to federal coffers actually has to be borrowed by the government from the trust funds.

When the government declared a $236 billion surplus in fiscal year 2000, it literally borrowed $248 billion from trust funds and considered that borrowed money "income" which it counted towards a "surplus."

For a more detailed explanation of how the government borrowed from trust funds and used the borrowed money to count towards an alleged surplus, please read this follow-up article which goes into more detail on the subject of government accounting.

The reality of the national debt

The only debt that matters is the total national debt. You can have a surplus and a debt at the same time, but you can'tt have a surplus if the amount of debt is going up each year. And the national debt went up every single year under Clinton. Had Clinton really had a surplus the national debt would have gone down. It didn't go down precisely because Clinton had a deficit every single year. The U.S. Treasury's historical record of the national debt verifies this.

A balanced budget or a budget surplus is a great thing, but it's only relevant if the budget surplus turns into a real surplus at the end of the fiscal year. In Clinton's case, it never did.

[elflord1973]

When it is claimed that Clinton paid down the national debt, that is patently false--as can be seen, the national debt went up every single year. What Clinton did do was pay down the public debt--notice that the claimed surplus is relatively close to the decrease in the public debt for those years. But he paid down the public debt by borrowing far more money in the form of intergovernmental holdings.

These are not net government debt. One hand is borrowing from the other.
Suppose social security has $100. It can't hold "real cash". The closest thing to cash is government issued securities. So social security gets a bond, issued by the government. Therefore, social security acquires an asset worth the $100 and the government requires a liability worth $100. This is NOT a net deficit. When it comes time to pay a coupon, the left hand (general fund) has to pay the right hand (social security) the $2.50 coupon. This is not a net government liability, it's a liability for the general fund and an asset for social security.

There is a convoluted argument in your quote, to the effect that social security surplus "isn't real", because the surplus will eventually have to be paid to its beneficiaries. It is true that it will have to be paid later, but it is expensed when it is paid, but not before then.

As far as the deficit is concerned, the fact is that the sum of the differences in social security revenue/expense and general fund revenue/expense results in a net surplus.

[FlyersFan]

Dear Amazonas.......I'm not sure what you do that you have the time to gather and list all that information but I can tell you that most on here have neither the inclination, time or desire to sift through all of it.....the bottom line here is that what your attempting to describe is very small potatos compared to whats going on today as we try to dig ourselves out from under the Bush legacy......whether you wish to list it as debt or deficit......the fact is that Bush has created more debt than all the past presidents.......COMBINED !!! Clarifing the miniscule debt or deficit that Clinton left behind as compared to that what Bush has left behind is just plain meaningless ?

[sholden]

Originally Posted by elflord1973

These are not net government debt. One hand is borrowing from the other.
Suppose social security has $100. It can't hold "real cash". The closest thing to cash is government issued securities. So social security gets a bond, issued by the government. Therefore, social security acquires an asset worth the $100 and the government requires a liability worth $100. This is NOT a net deficit. When it comes time to pay a coupon, the left hand (general fund) has to pay the right hand (social security) the $2.50 coupon. This is not a net government liability, it's a liability for the general fund and an asset for social security.

There is a convoluted argument in your quote, to the effect that social security surplus "isn't real", because the surplus will eventually have to be paid to its beneficiaries. It is true that it will have to be paid later, but it is expensed when it is paid, but not before then.

As far as the deficit is concerned, the fact is that the sum of the differences in social security revenue/expense and general fund revenue/expense results in a net surplus.

So what your saying is that:

Bob pays $100 into social security
Social Security buys a treasury bond with it
The General Government spends the $100 is got for the bond on say painting a line of a federal highway


means there is no "net deficit". I think you might need to think things through a little.

[Jerseyt719]

Originally Posted by elflord1973

That sounds like a fantastic idea until you consider the consequences of this policy.



They can only hire people if they are profitable. If they aren't profitable any more, they will fold.

Economic growth drives employment. Protectionist trade policy reduces efficiency which ultimately is detrimental to economic growth.



It is. I discuss some of the problems with this line of argument in another post in this thread, please take a look at it.

I do believe that simply taking a look at what we import vs. what we export. The jobs (skilled) that are required for these imports. If they are kept within and we are a little more self sufficient, we would see a huge turnaround.
I think we need to change our policies to look out for Americans first. Not completely ignore others and foreign policies, but make those take a back seat to the welfare of the USA.
I mean, this sounds really bad, but it's how I feel. I don't care if we promised a third world nation 3,000 bushels of corn and we don't have the surplus to give them. In these cases, we are BUYING the bushels to make up for what we didn't produce to then give them. And then guess what, WE pay for it.
We step in WAY too much. The governments of some of these countries are more than capable of taking care of their citizens. They choose not to. So then it becomes up to Big Brother USA to take up the slack?? We have far too many here that need help and need the slack picked up.
Another example, natural disasters. If there is a disaster in, let's say, Kenya (or other country, makes no difference), our $$$ is there tomorrow. We have one here and it takes a month or more before we even declare that it in fact WAS a natural disaster and guess what, there is no money ever seen by those affected. This is just wrong.