A $0 National Debt by 2009? What Might Have Been

[Patrick Degan]

At least that was the claim of the Clinton Plan:

December 28, 2000

Today, President Clinton will announce that The United States is on course to eliminate its public debt within the next decade. The Administration also announced that we are projected to pay down $237 billion in debt in 2001. Due in part to a strong economy and the President’s commitment to fiscal discipline, the federal fiscal condition has improved for an unprecedented nine consecutive years. Based upon today’s new economic and budget projections for the coming 10 years from the Office of Management and Budget (OMB):

* The United States can be debt-free this decade. By dedicating the entire budget surplus to debt reduction, The United States can eliminate its publicly held debt by FY 2009. The next Administration and Congress will need to decide what priorities to address: eliminate the public debt by FY 2010 and still use part of the surplus for responsible tax cuts, prescription drug benefits for Medicare recipients, and investments in key priorities like education and health care.

* The national debt is projected to be paid down by $237 billion this year. Under the budget President Clinton and Congress completed two weeks ago, the U.S. is projected to pay down $237 billion of the national debt in FY 2001.

* The 4 year total debt paydown will be $600 billion. Over the last three years, we have already paid down $363 billion in debt. Therefore, The United States is on track to reduce the debt by $600 billion over four years, the largest four-year debt pay-down ever.

* Record deficits have become record surpluses. This Administration has have moved the country from a deficit of $290 billion in FY 1992 to an expected surplus of $256 billion in FY 2001. Eight years ago, the Congressional Budget Office projected a $513 billion deficit in FY 2001. Thus, the fiscal picture is now projected to improve by $769 billion in FY 2001 alone.

* Nine consecutive years of fiscal improvement. FY 2001 will be the fourth year in a row of overall surpluses and the second year in a row of a surplus without counting Social Security or Medicare. It will be the ninth consecutive year of fiscal improvement, the longest such period in history.

ON TRACK TO ELIMINATE THE DEBT THIS DECADE

* The U.S. is on track to eliminate the publicly held debt this decade. Under OMB’s new baseline projection, the public debt would be eliminated in FY 2009. This budget "baseline" by definition includes no new initiatives or policy changes and therefore the entire budget surplus is dedicated to debt reduction (including the Social Security, Medicare, and on-budget surpluses). A fiscally responsible budget that includes new investments in moderate tax relief, a Medicare prescription drugs proposal, and key domestic priorities could eliminate the public debt by FY 2010.

* Pay down of $600 billion in debt over four years. In FYs 1998, 1999, and 2000, the debt held by the public was reduced by $363 billion. The U.S. government is projected to pay down an additional $237 billion in debt held by the public this fiscal year alone (FY 2001). That will bring the total debt pay-down to $600 billion—the largest four-year debt pay-down in American history. In contrast, under the 12-year tenure of Presidents Reagan and Bush, the debt held by the public quadrupled.

* The debt held by the public will be cut in half ($3.2 trillion lower) in FY 2001 than it was projected to be when President Clinton took office. In 1993, the debt held by the public was projected by the Office of Management and Budget to balloon to $6.4 trillion by FY 2001. Instead, shrinking deficits—and then the growing surpluses of the last four years—will bring the debt down to $3.2 trillion in FY 2001, $3.2 trillion less than projected in 1993. In FY 1993, the debt held by the public was 50 percent of GDP and projected to rise to 68 percent of GDP in FY 2001. Instead, it will be slashed to 31 percent of GDP this year and can be completely eliminated this decade.

* Interest payments on the debt will be $166 billion lower than projected. In 1993, the net interest payments on the debt held by the public were projected to grow to $376 billion in FY 2001. Tough choices in 1993 and 1997 and a commitment to fiscal discipline have slashed this figure by $166 billion, a 44 percent reduction.

LARGEST UNIFIED SURPLUS EVER

* Instead of a $513 billion deficit, there will be a $256 billion surplus this year. In 1992, the deficit in the federal budget was $290 billion—the largest dollar deficit in American history. In January 1993, the Congressional Budget Office projected that the deficit would grow to $513 billion by FY 2001. In fact, the unified budget will be in surplus by $256 billion in FY 2001—the fourth consecutive surplus and the largest surplus ever, even after adjusting for inflation. Over 10 years, the non-Social Security surplus alone is estimated to be over $2.4 trillion. Not including Social Security and Medicare surpluses, the surplus is projected to be $1.9 trillion.

* Largest unified surplus as a percent of GDP since 1948. The 2001 surplus is projected to be 2.5 percent of the Gross Domestic Product (GDP)—the largest surplus as a ratio to the GDP since 1948.

* The fourth consecutive year with a surplus for the first time in over 70 years. The FY 2001 surplus of $256 billion follows surpluses of $237 billion in FY 2000, $124 billion in FY 1999, and $69 billion in FY 1998. The last time The United States had four surpluses in a row was over 70 years ago, during 1927-30. The FY 2001 surplus will mark the ninth consecutive year of fiscal improvement. This is the longest run of consecutive years of improvement in American history, surpassing the pre-Clinton-Gore best of five straight years.

REDUCING SPENDING WHILE CUTTING TAXES FOR MIDDLE-INCOME FAMILIES

* Federal spending as a share of the economy is the lowest since 1966. Spending restraint under President Clinton has brought federal spending down from 22 percent of GDP in 1992 to 18 percent of GDP in 2001, the lowest since 1966. At the same time, President Clinton has increased strategic investments in education, technology, and other areas that are vital to growth.

* The smallest federal civilian workforce in 40 years. The Federal civilian workforce increased from the time when President Reagan took office to the time when President Bush left office. In contrast, since President Clinton and Vice President Gore took office, the Federal civilian workforce has been cut by 377,000—by nearly a fifth – and is now smaller than at any time since 1960.

* While balancing the budget, running large surpluses and paying down the debt, the Clinton-Gore Administration has provided tax relief for working families. The tax cuts signed into law by the President in 1993 and 1997—including the expanded Earned Income Tax Credit, the $500 child tax credit, the $1,500 Hope Scholarship Tax Credit, and expanded IRAs—have cut taxes for American working families. Federal income taxes as a percentage of income for the typical American family have dropped to their lowest level in over 30 years.

What Fiscal Discipline Means For The United States

* Lower interest rates cut mortgage payments by $2,000 a year for families with a $100,000 mortgage. As a result of President Clinton’s policy of deficit and debt reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save roughly $2,000 per year in mortgage payments, effectively a large tax cut.

* Lower interest rates cut car payments by $200 a year for families with a car loan.

* Lower interest rates cut student loan payments by $200 a year for someone with a typical student loan.

* Lower debt will help maintain strong economic growth. With the government no longer draining resources out of capital markets, businesses have more funds for productive investment. This has helped to fuel average real annual increase of more than 13 percent in private investment in equipment and software since 1993, including eight years in a row of double-digit growth. This compares to a 4.7 percent annual growth rate from 1981-92, a period that saw the debt held by the public quadruple.

* Rising investment has contributed to an increase in productivity growth. Non-farm business productivity has grown at a 3.1 percent average annual rate for the last four years and 4.8 percent over the last year. This compares to 1.4 percent growth from the 1970s through the early 1990s.

* Interest payments would be eliminated on the publicly held debt. Currently, we spend 11 cents of every federal dollar on interest payments. These payments, which were once projected to grow to 23 percent of all federal spending in 2010, could be eliminated by that time under a fiscally prudent budget.

* Prepare for the retiring baby boomers. Paying off the debt will create room in the budget for the increased Social Security and Medicare costs when the baby boomers retire. It will also free up funds for investment, help keep interest rates low, and boost workers’ productivity and incomes. This fiscal discipline is the best way to prepare the government and the nation to meet the challenge of the retirement of the baby boom generation.

I don't know if that's how it would have worked out had we a Gore presidency to continue the Clinton debt reduction measures instead of the Bush Maladministration, but even if the plan had gotten the debt down to the 33% of GDP it was hovering at during Jimmy Carter's last year in office, and without financing two wars wholly on credit, at the least the U.S. would have been in infinitely better shape to absorb the hit the economy took when the housing bubble burst and GM and Chrysler were sliding toward bankruptcy.

[Sea Skimmer]

I’d be interested if anyone has graphed the economic projections this was based on vs. the actual course of the US economy.

[bobalot]

It's a bit bemusing. Teapartiers seem to hate Bill Clinton (and Hillary more) even though he almost pulled off their cherished dream of paying down the government deficit.

[Vympel]

Heh. The only reason it became a 'cherished dream' was because their astroturf gardeners told the mindless twits it was their cherished dream. If this were a McCain Presidency right now you'd never have even heard of the Tea Party.

[Sinanju]

Yeah, never underestimate the ability to doublethink. If my family's any indication, somebody who's a really dedicated Tea Partier will say Clinton can't be given credit for the surplus (because the president doesn't set fiscal policy, that's Congress' job, or some excuse like that). For the same reason, Bush can't be blamed for the deficit.

Of course, Obama can be blamed for the deficit. I've never asked why that is, because I suspect whatever is said the real reason will be 'to pin something bad on The Other Tribe'.

[Stargate Nerd]

Of course, Obama can be blamed for the deficit. I've never asked why that is, because I suspect whatever is said the real reason will be 'to pin something bad on The Other Tribe'.

Isn't it obvious? Bill Clinton was a white Southern Christian, not a Black Kenyan Ninja Muslim born in Africa.

But hey, actually Bill Clinton isn't the worst according to the right anymore. Recently Republicans have been praising him for working with the 90s Republican congress to fix the budget.

[Patrick Degan]

It's a bit bemusing. Teapartiers seem to hate Bill Clinton (and Hillary more) even though he almost pulled off their cherished dream of paying down the government deficit.

Ah, but you see, Clinton is guilty of nearly pulling off the paying off of the national debt without eviscerating the social safety net in the process, which is what the teabaggers and their puppetmasters want.

[J]

Tea Party followers would contend Clinton never produced a balanced budget in the first place, they claim the surplus was the result of accounting tricks and robbing the Social Security trust fund.

I’d be interested if anyone has graphed the economic projections this was based on vs. the actual course of the US economy.

We did this for my former employers early last year; the CBO assumed a 10 year real GDP growth rate of around 2.2% per year in its projections during the 2nd Clinton administration, the actual rate was around 3% per year, or it was until everything hit the wall in 2008. 9/11 also threw a wrench in the works and slowed things down for a couple years.

But it's honestly a pretty worthless measure, much of the GDP growth was actually borrowing, speculation, phantom money, accounting fraud and things like that instead of actual productive growth from growing, mining and making widgets. When we worked out a ballpark figure for the distortions caused by borrowing & speculation and backed that out of the GDP figures, the actual grow was in the 0-1% per year range.

[MKSheppard]

I’d be interested if anyone has graphed the economic projections this was based on vs. the actual course of the US economy.

There's this line in the press release:

This budget "baseline" by definition includes no new initiatives or policy changes and therefore the entire budget surplus is dedicated to debt reduction

No new initatives or policy changes for the next ten years is kind of unrealistic.

If the budgets they were proposing were realistic, they'd figure out the general averaged spending added on each year by congress for the last 30 years and use that as a baseline for each year's growth in spending.

[RedImperator]

Even with a Gore presidency, you still get a war in Afghanistan after 9/11, and presumably the housing market still detonates on schedule in 2007/2008 and takes the rest of the economy with it. The debt situation is much better without the Bush tax cuts, Iraq, or a Medicare prescription drug benefit (which I assume a Republican Congress won't pass without a Republican president pushing for it), but $0 national debt sounds astonishingly optimistic.

[Simon_Jester]

The housing bubble might not detonate so violently, though; I don't know. Might a Gore administration have enacted or maintained financial regulations that limited the scope of the problem? Or perhaps not having the Bush tax cuts would reduce the proportion of the nation's wealth being pumped into the stock market by rich investors?

[this is just me speculating]

That said, while this is not a realistic budget estimate, it's interesting as a 'first cut:' the point being that as of the late '90s we actually had a big enough surplus to pay down much or all of the national debt within ten years, instead of (as Duchess might put it) letting the money go to hookers and blow for Lehman Brothers executives.

[Patrick Degan]

Even with a Gore presidency, you still get a war in Afghanistan after 9/11, and presumably the housing market still detonates on schedule in 2007/2008 and takes the rest of the economy with it. The debt situation is much better without the Bush tax cuts, Iraq, or a Medicare prescription drug benefit (which I assume a Republican Congress won't pass without a Republican president pushing for it), but $0 national debt sounds astonishingly optimistic.

Perhaps... But, remember, 9-11 happened only because Georgie the Stupider and his clown crew spent months ignoring warnings of a pending Al Qaeda threat up to and including the August 2001 PDB titled "Bin Laden Determined To Strike In US". Gore would have listened to Richard Clarke. Now maybe the strike happens anyway and we do end up attacking Afganistan. Gore would not have financed the war on credit, which would have considerably lessened the debt burden, along with the other things Gore wouldn't have done which Bushy-boy rammed through with a smirk and a giggle. And if the war doesn't happen, the debt situation is in much better shape. Yes, the housing bubble still bursts, but the U.S. is in stronger shape to take that hit. The $0 national debt doesn't come off but it's nowhere near at 80% of GDP even with the collapse. Who can say just how things might have gone without the Bush Maladministration and its pet Republican congress thoroughly fucking things up?

[Uraniun235]

Didn't Bush sign a law unleashing the leverage limits on banks? Wouldn't the timeline have worked out differently if that hadn't happened?

[phongn]

Didn't Bush sign a law unleashing the leverage limits on banks?

That was an SEC regulatory decision permitting large dealers to use a mathematically-modelled leverage limit. The details can be found here in 69 Fed. Reg. 34428 (PDF)

[MKSheppard]

Perhaps... But, remember, 9-11 happened only because Georgie the Stupider and his clown crew spent months ignoring warnings of a pending Al Qaeda threat up to and including the August 2001 PDB titled "Bin Laden Determined To Strike In US".

How about we go to the source, courtesy of the National Security Archive?

Link

It's got the usual precis summary that starts with the obvious fact that Bin Ladin has wanted to strike us since we TLAMed his tents in 1998.

It's towards the end of page 1 we get the interesting things:

We have not been able to corroborate some of the more sensational threat reporting, such as that from a DELETED service in 1998 saying that Bin Ladin wanted to hijack a US aircraft to gain the release of "Blind Shaykh" 'Umar 'Abd al-Rahman and other US-held extremists.

Nevertheless, FBI information since that time indicates patterns of suspicious activity in this country consistent with preparations for hijackings or other types of attacks, including recent surveillance of federal buildings in New York.

The FBI is conducting approximately 70 full field investigations throughout the US that it considers Bin Ladin-related. CIA and the FBI are investigating a call to our Embassy in the UAE in May saying that a group of Bin Ladin supporters was in the US planning attacks with explosives.

Ok, which of the seventy (!) investigations is the 9/11 plot?

Also, considering that "FBI information since that time indicates patterns of suspicious activity in this country..." encompasses the time from 1998-2001; that's three years of random rumors like the one about hijacking a plane to try and free al-Rahman.

Then there's the part that says "recent surveillance of federal buildings in New York."

As we all know, the Hijackers didn't attack the Jacob K. Javits Federal Building in NYC, but instead hit the WTC and P-Gon.

Gore would have listened to Richard Clarke.

You mean authorizing a covert war in Afghanistan against Bin Laden with Special Forces on the ground like Clarke wanted?

It's worth noting that Bush eventually did come around to the Clarke proposal for a covert war in Afghanistan, albeit significantly expanded, with approval occuring on 4 September 2001.

Another monkey wrench thrown into the Gore-as-Saint theory of alt-history is that he was a big hawk on Iraq.

Here's then-Senator Gore back in 1992 blasting Bush I over Saddam:LINK

Fast forward a few more years to 1998 -- he was one of the big hawks in the Clinton administration regarding Iraq. When Clinton called back the US/UK attack on Iraq during the night of 14 November 1998 after the planes were in the air towards their targets, Gore was livid.

That was reported by Kenneth Pollack, the Clinton Administration's top expert on Iraq in his book The Threatening Storm: The Case for Invading Iraq along with this snippet:

“Not surprisingly, it was Vice President Gore and his staff who remained most interested in the regime change plan, or at least an aggressive containment policy, to head off the possibility of future Iraq crises if they inherited the White House in the 2000 elections.”

The differences in the "Attack Iraq" plan are likely to be a heavier emphasis on airpower -- It's entirely possible that Gore uses the powers he has under the Iraq Liberation Act of 1998 to launch OPERATION SUPER DESERT FOX to hammer Iraq's military infrastructure to rubble; so that an indigenous liberation movement can arise without having to worry about the Iraqi Army's tanks or helicopter gunships crushing it.

Gore would not have financed the war on credit, which would have considerably lessened the debt burden, along with the other things Gore wouldn't have done which Bushy-boy rammed through with a smirk and a giggle.

I hate to break it to you, but every American war except the 1991 Persian Gulf War was fought on credit. In '91 we managed to convince almost the entire rest of the world to pay for the war for us.

Would you mind enumerating 'the other things Gore wouldn't have done', please?

Who can say just how things might have gone without the Bush Maladministration and its pet Republican congress thoroughly fucking things up?

It's worth noting the last couple of Bush budgets (FY07 to FY09) were passed by a Democratic congress via a faustian bargain by both sides -- Bush would get his war funding while the Democrats would get funding for their ideas.

That said, I really don't like the way Bush carried out his whole compassionate conservatism schtick as an excuse to enact various dumbshit programs like NCLB and Medicaid expansion which added significantly to the budget burden.

[Simon_Jester]

Well, on top of that you have the tax cuts, which really didn't help, because the sheer size of the hole they made in government revenue meant we'd wind up stuck with a structural deficit.

With the Bush tax cuts we weren't going to have a budget surplus no matter what happened, even if Bush hadn't enacted any domestic programs at all.

I'd argue that's the really critical factor. The possibility that we might have spent less on the wars is relatively less important compared to the Bush tax cuts.

Put simply, you cannot balance the budget while cutting taxes dramatically; we are not anywhere near the high side of the Laffer curve. Lower taxes and you lower revenues, which forces you to either axe popular and important programs (like Medicare or the US Army) or accept a structural deficit.

[J]

The housing bubble might not detonate so violently, though; I don't know. Might a Gore administration have enacted or maintained financial regulations that limited the scope of the problem? Or perhaps not having the Bush tax cuts would reduce the proportion of the nation's wealth being pumped into the stock market by rich investors?

I doubt there'd be a difference, all key regulatory restraints (Glass-Steagall) were already repealed by the end of Clinton's second term and the further erosions under Bush's watch were just icing on the cake. Leverage limits were formally removed by Bush's administration, however, the limits were already being violated and with a complete lack of enforcement...well, there's not much difference at all.