TCS Daily

Tea Party Clarity on the Deficit

By Jon N. Hall - October 22, 2010 12:54 PM

Despite the hegemonic control they've enjoyed since January 2009, including a filibuster-proof majority from July of that year until the election of Scott Brown, Democrats continue to blame George W. Bush for everything, especially the budget deficit. And because the deficit has become such a huge issue, especially for the Tea Party, Democrats trot out the "Clinton surpluses" from 1998 through 2001.

But were there any surpluses? A glance at Treasury Department web pages shows a rise in the total debt for each of the four years in question. How can the debt go up if there's a surplus?

For total debt not to rise in a fiscal year, two conditions must be met. First, every penny of off-budget surplus, if any, must be used to retire public debt. Second, there can't be an on-budget deficit, even if the off-budget surplus can cover it. (See note below.)

Assuming both conditions obtain, the amount that total debt goes down would be equal to the amount of on-budget surplus used to retire public debt. At least that's how it should work. But there are certain discrepancies in federal records.

According to the Office of Management and Budget, there have only been two years in the last 50 in which the feds ran an on-budget surplus: 1999 and 2000. Those two fiscal years registered on-budget surpluses of $1.9B and $86.4B, respectively.

Detail of OMB's Table 1.1 (PDF version) for 1998-2001:

The OMB chart above is for the four years of supposed budget surpluses. If the feds had used all the surpluses to retire public debt, total debt would have gone down by $26B and public debt would have gone down by $559B. But Treasury says otherwise.

Daily History Search Application: last business day of the fiscal year (source):

According to Treasury, public debt went down by only $450B, a discrepancy of $109B. And the trust funds are larger than they should be, having a discrepancy of $311B. But the sum of these two discrepancies is $420B -- the exact amount the total debt is "off." Discrepancies aside, the public debt did in fact go down, and significantly.

Appearing on Meet the Press on September 19, former President Clinton said: "the debt was quadrupled in the 12 years before I became president and then we paid down the debt for four years, paid down $600 billion on the national debt, and then my budget was abandoned and they doubled the debt again."

The use of the passive voice in "was quadrupled" and in "was abandoned" is telling. ("Was quadrupled"? By whom?) Also troubling is the last clause: Who is this "they"?

What really rankles is "my budget." These two words are just insulting, for in America it is Congress that is responsible for the federal budget, not the President. As economist Thomas Sowell explains: "No president of the United States can create either a budget deficit or a budget surplus. All spending bills originate in the House of Representatives and all taxes are voted into law by Congress."

So Clinton's reference to the "12 years before I became president" needs examination. In the first six of those 12 years, the GOP controlled the Senate, but not the House. (Reagan was able, however, to make common cause with House "Blue Dog" Democrats, a long-extinct species.) In the last six of those 12 years, both houses of Congress were under Democrat control, and starting in 1991 they produced what at the time were the three largest budget deficits ever. "They" did it.

When Clinton invokes "we" (as in "we paid down the debt for four years"), to whom is he referring? We can be pretty sure Clinton isn't referring to the Republican Congress that passed the budgets which produced the surpluses. Perhaps Clinton is referring to his OMB staff. Or perhaps Clinton is using the "royal we." In which case, Clinton balanced the budget all by his lonesome -- it really is "my budget."

When Clinton claims to have "paid down the debt," he can't be referring to total debt. As we've shown, total debt never went down during Clinton's tenure, and the most it could have gone down was $26B. Clinton can only be referring to public debt when claiming debt retirement. But he doesn't get that quite right, either, overstating it by a full third; $600B rather than the actual $450B. (To put the GOP's $450B retirement of public debt into context, it's what the total debt was in the middle of 1973. See Table 7.1)

On October 8, another example of Democrat revisionist history aired on CNBC's The Kudlow Report when former Clinton White House official David Goodfriend managed to work his talking points into the show, despite their being unrelated to the topic at hand. Goodfriend's mantra was "We balanced the budget without a single Republican vote." (This is an article of faith for Democrats.) But the electorate had kicked Democrats out of Congress three years before we started to see balanced budgets.

Goodfriend was referring to the 1993 tax rate hikes, which Democrats contend is what balanced the budget. But there is no reason whatsoever to think that if Democrats had retained control of Congress in 1994 that they would have actually used higher revenues to pay down debt -- Democrats can usually find something to spend money on.

Fellow panelist Steve Moore lit into Goodfriend to set the record straight. But when it appeared that Goodfriend was warming to his subject, Mr. Kudlow, thankfully, cut him off and got the show back on track. (Watch the video, "Weak Jobs Fallout." Mr. Goodfriend's revisionist ramble starts 5 minutes into it.)

October 10 on Fox News Sunday, Rep. Debbie Wasserman Schultz (D-Florida) alleged that Republicans "took a $5.6 trillion surplus to a $1.3 trillion deficit." The surplus Ms. Schultz refers to was a projection made by the Congressional Budget Office in January 2001 for the period 2002-2011. It was a prognostication, not a report of an actual surplus. But the $1.3 trillion deficit Schultz referenced is for a single year, FY2009, not a decade. (Actually, the 2009 deficit was $1.412T, a full trillion more than the GOP's biggest deficit of $412B in 2004, but who's counting.)

The problem for Schultz goes beyond the comparing of a decade to a single year, and the comparing of a projection to a realized amount. Her bigger problem is this: The CBO's projection of huge surpluses was made when Republicans controlled Congress and were producing record surpluses, and the record deficit Schultz references happened when Democrats controlled Congress. Oops. How can Schultz do this? By making folks think the president's responsible for the budget. Never mind what the Constitution requires, never mind that Schultz herself has voted for budgets, the president has all the power. Democrat congressmen spread this myth because of their abysmal record of deficits.

Voters used to know that "Congress controls the purse strings." But Democrats and their lapdog media (the MSM) have fed so much hooey to the American people for so long that some now just accept that the president controls everything. But if that were the case, what difference does it make which party controls Congress?

If the deficit were ever a concern to Democrats, they would have cut spending and passed rescission bills. If Obama cared about the deficit he would have exhorted Congress to take such measures. Instead, Obama and his Democrat Congress enacted trillions of dollars of new spending, none of which was paid for.

In the three completed fiscal years since 2007 that Democrats have controlled the budget, they have run the three largest deficits in American history. And their fourth fiscal year, which began October 1, is projected to run yet another trillion-dollar deficit. Without cosmic intervention, the current Democrat Congress will be responsible for the four largest deficits in history. The current Democrat Congress is the most fiscally irresponsible Congress in history, the "spendingest" Congress ever.

The Democrat "strategists" on TV who are quick to remind voters that the last time we had a balanced budget was when we had a Democrat president need to be informed that we're not electing a president this time around, we're electing a Congress. And the last time we had a balanced budget was when we had a Republican Congress.

It's the spending, stupid.

NOTE: Regardless of what they're spent on, off-budget surpluses are added to the trust funds, or "intragovernmental holdings." So, if every penny of off-budget surplus is used to retire public debt, the fall in public debt is exactly canceled out by the rise in trust fund debt, and the effect on the total debt is zero. But if Congress runs an on-budget deficit, then off-budget surplus that makes up for that on-budget deficit cannot also be used to retire public debt, and the total debt would rise by that amount. (We could have included a third condition for total debt not to rise: that there be no off-budget deficit. But we haven't had an off-budget deficit since 1982.)

This article first appeared on NewsRealBlog.

Jon N. Hall is a programmer/analyst from Kansas City.


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