No doubt you’ve heard the news that Henry Paulson wants to tighten standards on banks now that the country is falling apart. Sit back, ‘cuz I got a heck of a story for you:
While I am completely sympathetic to how much people hate our current President and his disastrously arrogant administration, it infuriates me to hear people claim Bush brought about this recession. We’ve been in a recession since Nixon, we just didn’t know it yet. The worst is how people believe that Clinton balanced the budget, and that Bush subsequently ruined it. How slick is Willy. I think I need to explain exactly why this is an outright urban legend.
The whole charade depends on the semantics of accounting. We actually have two different debts that add up to become the National Debt. They are Public Debt and Intergovermental Debt. The first is what the people owe, the second is what the government owes itself (that the people will repay). The government owes itself? Right, the government, much like our brains, is actually several semi-independent entities that interact to govern, and therefore can take loans from each other as if they were separate.
What Clinton did was borrow from the government (Intergovernmental Debt) to pay off Public Debt. If you check the U.S. Treasury records, National Debt continued to increase throughout the Clinton administration, albeit slower than the previous presidencies. How in the world can increasing National Debt be considered a budget surplus? …
Firstly, let’s ask where he borrowed from to pay down Public Debt. What’s a huge surplus of money in the government that could be borrowed without upsetting anything at the moment? Social Security of course! The half a trillion dollars borrowed to “balance” the budget was used to pay Public Debt into a so-called surplus. But if Social Security had a surplus, why is it wrong to do this?
Simple. The surplus that Social Security had is nothing more than an accounting term. The Social Security Trust Fund, which collects your taxes to pay for SS, found that the taxes being collected exceeded what they needed at the time. Projecting ahead into the future, the estimated they would have excess money… that they DIDN’T HAVE AT THE TIME. The surplus is an estimate, remember that. The Clinton takes this projected excess, throws it into the budget (our national budgets project costs into the future) and finds out that we actually have more money we don’t have than we thought! Read that last sentence until you get it.
On top of that, Clinton never had a balanced budget plan, they were all rejected by Congress, not to mention having a balanced budget only means you planned it out on paper to be balanced, regardless of reality. I only plan to spend $500 a month on car insurance, but an accident can happen that will make my plan meaningless. The only thing he did was push for the Balanced Budget Amendment, which was actually the GOP’s plan, spearheaded by Newt Gingrich. None of Clinton’s balanced budget proposals were ever passed anyways. Well, you say, to Clinton’s credit, he still significantly slowed national debt right? Sort of. The National Debt slowed, but let’s see why.
Examine the years Clinton held office, 1993 to end of 2000. Clinton ruled some pretty prosperous years, but the Roaring Nineties (as it came to be called) actually came on the heels of the ’91 recession (that began with the ’87 market crash). Joseph Stiglitz, Nobel laureate and former Clinton advisor admitsthat they had lucked out on the boom, and set us up for many of our current woes with the wanton loosening of corporate accountability and standards.
The prosperity of the nineties led to an unprecedented 60% increase in tax income throughout the Clinton administration. His tax increases actually accounted for little of the newfound wealth. It actually came from a prosperous post-recession boom of Social Security tax paying baby boomers who increased the government’s income and created the Social Security surplus that was later plundered.
In the meantime, with the collapse of the Soviet Union (1991, again), the deficit-generating defense budget was no longer priority. Defense spending fell drastically, hitting its lowest nominal amount in over two decades. The rocketing costs for defense for the Iraq invasion was in part due to the ramping up needed for a massively under-funded (and under-trained) military. We resorted to contractors that ended up costing more and led to many of the atrocities we committed at Guantanamo. I’m in no way absolving the Bush administration of its incompetence, but there was definitely precedent.
After Clinton left office, the fever pitch of the mess he created exploded twice. The first was the dot-com crash. The second is the mess we are in today with sub-prime mortgages. In 1999, Clinton’s secretary of treasury Rubin left a terrible legacy by having the Glass-Steagall Act of 1933 repealed. Originally created in response to the Great Depression, it prohibited the mixing of commercial and investment banking. Less than a decade later, it will wipe out unprecedented amounts of prosperity. That’s pretty much expected… from a guy who headed Citigroup before being hired by Clinton.
Anyways, the point is that the so-called surplus was a sham. When Clinton did it by robbing from the Social Security Trust Fund, it was called balancing the budget. When Enron did it under the pretense of “mark to market” accounting, it was called something else. Ironically, what made the Enron scandal possible was the Clinton administration’s loosening of financial standards.
I want to make clear again that none of this exonerates any of the Bush administration’s actions, and this article has nothing to do with that. I’m merely pointing out why it’s folly to hold Clinton as a saint. Not only did he set us up for a lot of financial ruin, but his supporters should realize that many of most successful policies weren’t even Democratic. Tightening the border, successful welfare reform, balance budget amendments, defense of marriage, NAFTA, etc. were more moderate or conservative than anything.
You may ask why no one has pointed out this social security fraud he committed. The answer is that the presidents before and after have done the same. There are many complicit in this scheme. Clinton just did it very well, and earned a place in people’s hearts for it. But you know better than that now.