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Clinton 'Surplus" Confusion

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Capital Pumper Posted: Tue, Nov 10 2009 6:57 PM

I've come across a few leftist in the past who praised the Clinton "Surplus" as if it were the final nail in in the coffin of fiscal conservatism, and implicitly as a jab against the free market. This makes little sense to me since a surplus is just expropriated wealth that hasn't be thrown into the gutter of government spending. The state doesn't legitimately own anything, it only destroy wealth on a net scale through malinvestment into its grossly inefficient enterprises (a.k.a broken window fallacy).

All that aside I only know as far that  intragovernment spending rose because the government bought treasury bonds from its own trust fund, mostly from the SSA surplus, public debt was being paid off (I only know that this includes treasury bills/bonds) while the national debt rose. One strawman of a rebuttal I received was, "deficits are not debt" as if they're mutually exclusive Hmm; another time someone linked me a relatively indefinite congressional graph that shows a budget surplus of 236 billion dollars; subsequently special pleading that it cancels out the official treasury report I provided, which proves my findings regarding public debt, intragovernment spending, and national debt. Is there anything I'm missing? Did the Federal Reserve play some sort of sole in this surplus craziness?

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The answer is that the idea that the Republicans have been fiscally more responsible than the Democrats is incorrect.  For example, Murray Rothbard wrote a very important critique against Reagan.  There was a budgetary surplus between 1998 and 2001, as total receipts exceeded total outlays.  These were the first years of surplus since 1969 (and that year stands alone, as it was not since 1960 before that that there had been a surplus, and the late 1940s before that.  But, there is doublespeak admist.  While public debt did decrease, intragovernment debt increased.  As in, Clinton's administration was borrowing from other government programs to pay for the priority programs (borrowing from, for example, social security).  This explains why the national debt actually increased during the entirety of Clinton's tenure.  But, the fact that the "Conservatives"  do not really follow "conservative economics" also holds true.

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As is usual with economic data, any political partisan can find "reason" to claim a position.  In real terms the first surplus was in 1998.  The Republican "Contract for America" Congress won the 1994 elections (and Newt Gingrich has publicly taken credit for the surpluses).  Clinton took office 1/20/1993 (and Clintonistas everywhere give him credit).  The deficits peaked in 1992 (there's probably someone crediting GHW Bush).

A Misesian might point out that the 2001 recession shows that the bubble GDP for the late 1990's, which led to higher tax revenues, was a false measure of productivity.  So in fact what we had was a massive bubble with the taxpayers holding the bag at pop time.  From this point of view it isn't credit, but blame that should be attributed.

And with both the bubble-engendered surplus, and the recession, following as expected the low Federal Reserve target rates in 1992-1994, the real culprit is 'None of the Above'.  It was little more than yet another central bank bipolar psychosis.

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sthomper replied on Sun, Nov 15 2009 12:42 AM

this issue is unclear to me.

this link  says

"Q: What should be done with the existing budget surplus? A: Surplus? What surplus? The federal budget process allows politicians to utilize the funds from the so-called “Trust” of Social Security and to move projects “off-budget” so that they can achieve their political goal. The surplus doesn’t exist."

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It depends on how you want to account, but the government figures for even the gross public debt, which includes intragovernment lending, showed surpluses.  If you compare it to the unfunded liabilities, it was insignificant, and if you apply the Austrian analysis I mentioned, it wasn't even real--actually was a bad thing.  But there was a blip of sorts in the official budget numbers for a few years starting in 1998 reflecting relatively more dollars in than out, even if you don't believe there was an actual surplus.

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