The Deficit Graph

This will go viral today

As I wrote in 2007, when I was arguing for the impeachment of George W. Bush: even the NY Times admitted in 2006 that tax receipts were at record highs and were lowering the deficit.

That’s what happens when everyone is working because businesses aren’t being taxed to death, or because they simply are too uncertain about the future to hire folks.

About Elizabeth Scalia
  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Just to be clear, the 2009 budget was the Bush Administration’s final budget. The stimulus will be a minor factor as it is a temporary bump in spending. Here is a longer term view of the problem.

    The Anchoress: That’s what happens when everyone is working because businesses aren’t being taxed to death, or because they simply are too uncertain about the future to hire folks.

    Taxes are at one of their lowest points in modern history. The problem is the economic meltdown during the latter part of the Bush Administration. There is no easy solution because everyone is hording cash due to the uncertainty.

    Classically, the policy is to maintain the government budget in balance. So if the economy is growing, leading to increased tax receipts, cut taxes. If the economy is shrinking, causing reduced tax receipts, raise taxes to cover the budget. The problem is that this exasperates the market cycle, leading to booms and busts. Cutting taxes while the economy grows causes it to grow faster, leading to a bubble. When the bubble bursts, raising taxes accelerates the decline, leading to a dangerous, downward spiral.

    During the expansion of the Bush Era, for instance, taxes were cut leading to massive deficits, while overstimulating the economy, leading to the inevitable crash. Instead of spending the money through tax cuts, the U.S. might have put that money aside for a rainy day, in a “lock box.”

    Countercyclical (Keynesian) policy means to run a surplus during times of plenty (seven fat cows), and run a deficit during times of famine (seven skinny cows). In a modern economy that means progressive taxes, which dampen growth as incomes rise, but reverses when the economy declines. Unemployment insurance and other safety net programs act as automatic stimuli.

    The size of the stimulus was too small in relation to the depth of the problem, especially as state spending is contracting at almost the same rate as the federal government is expanding.

  • http://vita-nostra-in-ecclesia.blogspot.com/ Bender

    It is simple commonsense and elementary math — both of which are irrelevant to Obama, et al. — that 30 percent of something will yield a heck of a lot more than 60 percent of nothing.

    When you have already “made enough,” as Obama et al. like to say, and for every extra dollar you make, you are forced to give 60, 70, 80 cents of it to the government, you are naturally going to say, “to hell with that,” and you simply will not go to the bother of the extra effort needed to make that dollar. Time with the family becomes much more valuable.

    When the “rich” don’t bother to make more, because they don’t “need” more, they don’t pay taxes on what they don’t make. And when they don’t bother to make more, because too much of it is stolen from them in taxes, they don’t have that money to hire poor slobs like us and, hence, we end up being screwed too.

  • Jeff

    George Stephanopolous and Charlie Gibson confronted Obama with the fact that raising taxes always leads to a reduction in revenue to the treasury. Those two are hardly conservative thinkers. And Obama just stared straight ahead and said it “didn’t matter” because it was a matter of “fairness.” He doesn’t know what he is doing when it comes to economics.

  • c matt

    I think he doesn’t know what he’s doing when it comes to a lot of things.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Jeff: George Stephanopolous and Charlie Gibson confronted Obama with the fact that raising taxes always leads to a reduction in revenue to the treasury.

    That’s obviously false. Consider a tax rate of 0% compared to a tax rate of 1%.

    Another important consideration is the idea of a marginal tax rate. A couple making $300,000 a year doesn’t pay the highest rate on their entire income, but only on that which exceed a given threshold. For instance, in 2010, they pay only 10% on the first $17,000 in income, and 33% only on the amount of income exceeding $212,600. The 2010 rate for a joint return with $300,000 in taxable income is 23%, and that’s after having already deducted significant sums from the total income. Also keep in mind that most people with very large incomes make their money through capital gains, which are taxed at a lower rate.

  • c matt

    That’s obviously false. Consider a tax rate of 0% compared to a tax rate of 1%.

    Well, it’s not obviously false. 0% can be interpreted as “no -tax”. So “raising” a tax rate can be distinguished from creating a tax in the first place. It could be taken to mean increasing a rate that already exists (a non-zero rate).

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Bender: It is simple commonsense and elementary math …

    Real gdp growth per capita in the U.S. has been remarkably steady throughout the 20th century (excepting the Great Depression), regardless of top marginal tax rates, which were above 70% throughout the Affluent Society of the post-WWII years.

  • Jeff

    Ah yes, the reductio ad absurdum. You know your argument is in trouble when you have to start comparing a 0% tax rate with a 1% tax rate.

    Every recent study has shown that increasing marginal rates, and increasing capital gains rates, decreases revenue to the Treasury. This is because people withdraw from or lessen the amount of transactions they engage in, e.g., the large income person you mention refrains from selling stock and realizing a gain. That money never makes it into the economy; it just sits there stagnant because the person usually will wait or hope for the rate to be reduced in the future. Higher marginal rates also encourage people only to make just enough money to avoid basically working for the government, more than they already do. If your last 50K in income is going to be taxed at a higher rate than your first 250K, most people will not feel compelled to earn the next 50K. The money never gets earned, and then does not get spent, etc. It’s basic human nature, which Obama seems to have no clue about.

  • tim maguire

    I believe the question was specifically about Capital Gains taxes, otherwise, Jeff is right. As for taxes as a whole, the answer to whether raising taxes will raise or lower revenue depends on which side of the Laffer curve we’re on.

  • archangel

    Zachriel, you are so delusional that I am really tempted NOT to even bother but here’s something to chew on:

    1) The key to the budget process is the House of Representatives; NOT the executive branch. The explosion in the deficit is DIRECTLY related to when the democrats retook Congress in 2006.

    2) The graph cleaerly demonstrates that as a portion of the GDP, the democrats have obliterated the national balance sheet. PERIOD. END OF DEBATE on that one.

    3) The “meltdown” was 30 yaers in the making… regardless of political affilitiation. Too many people sought to borrow their way to prosperity without accepting the consequences. They were trained to think that way because their national leaders were doing it ever since FDR began the process. So… if you want a history lesson as to when it started, go there. Not to mention the subsequent generational domination of the democratic party in the House of Representatives until the recent past (1994-2006)

    4) The Obama administration simply is at fault for the last 2 years of pain because it abbrogated ITS responsibilities to the House and Senate. It has allowed continued the FAILED Keynesian policies of the past directly in the face of FACTS. The administration is either feckless or incompetent… take your pick. There are no other choices.

    Liberals like to blame presidents because they view the executive as a sort of “king”. The Congress is the legislative branch with control of the purse. The budgetary process, taxation, spending reside THERE. The EXECUTIVE has only the power to VETO or SIGN, and then eexecute the laws. Where the president provides the direction as to where HE wants the budget to go, the legislature MAY or MAY NOT follow. Bush I and Bush II were never conservatives but Bush II was closer to the fiscal model than his dad. The budget did not get blown out until AFTER 2006 coinciding with democratic takeover. By that time, Bush II had expended ALL his political capital. Congress had control for the last two years of his term.

    So do us all a favor… CAN THE BUSH CRAP!!!

    This current president has rolled the country over by not providing the leadership he sold it. He as allowed his cohorts in Congress to pillage the treasury for every little scheme they could contrive. They are about to get fired and they know it so they are getting ready to procedeed their final attempt at finacial rape.

    This is all landing on the laps of those who deserve it… the Socialist-Democrats and their RHINO enablers.

    ATLAS IS SHRUGGING!

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Jeff: You know your argument is in trouble when you have to start comparing a 0% tax rate with a 1% tax rate.

    Um, you said “always”. The Laffer Curve (which is qualitative, not quantitative), indicates that there is a maximum along that curve. However, the shape of the curve, and where that maximum might be is not resolved.

    Jeff: Every recent study has shown that increasing marginal rates, and increasing capital gains rates, decreases revenue to the Treasury.

    You really should avoid “every” or “always.”

    CBO, Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates, 2005: Under various assumptions, the supply side economic effects of the tax cut are estimated to offset between 1 percent and 22 percent of that revenue loss over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years (see Table 3). According to models that account for both supply-side and demand-side effects, those effects might offset somewhat less than 15 percent of the revenue loss over the first five years.

    Yes, lowering taxes is stimulatory (depending on a number of factors). But since the tax-cutting era began in the 1980′s, the U.S. has struggled with structural deficits. That’s because the tax cuts don’t pay for themselves.

  • Mike Mc.

    Zachriel = proof of my assertion that though O is a huge problem, the people who voted for him are a bigger problem.

    Obama is a talentless affirmativ e action case who truly could not manage to get a 7/11 store through a weekend profitably. He never had a real job in his life, and he is monumentally lousy at the one he has now – his first actual job.

    He thinks he knows car companies, banks, health care and energy businesses though.

    Unreal.

    He’d be an object of universal scorn and derision if it weren’t for the Zach’s of the world, covering for him with utter BS from the faculty lounge.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    archangel: The key to the budget process is the House of Representatives; NOT the executive branch.

    Well, it normally takes both Congress and the President to enact legislation. The Economic Growth and Tax Relief Reconciliation Act was passed with strong Republican support and signed into law by Bush in 2001, complete with a sunset provision. So much for the “lock box”. Imagine how much better off America would be if they had a trillion or two saved in the bank.

    Then it came to pass, that Pharaoh had a dream; and behold, he stood by the river. Suddenly there came up out of the river seven cows, fine looking and fat; and they fed in the meadow.

    archangel: The graph cleaerly demonstrates that as a portion of the GDP, the democrats have obliterated the national balance sheet. PERIOD. END OF DEBATE on that one.

    Ah! One graph and you’ve resolved all economic uncertainties!

  • archangel

    That’s about what I expected from you. In your world, a tax cut for the people who generate the wealth of this country is tatamount to a raid of the countries lock box. I got news for you… WE ARE THE LOCK BOX!!

    The sunset provision was put in at the behest of the DEMOCRATS.

    Yes… one graph can speak volumes and that one does.

    This is in the lap of your party. You and your ilk made this cesspool. Swim in it!

  • baleen

    Why did our current recession begin when Bush was president and taxes were at record low rates?

  • http://westernchauvinist.blogspot.com Western Chauvinist

    Dear dear Zachriel. Normally I would enjoy watching a scripture-quoting Obama supporter make his case, but this is just painful. I have two recommendations for you, which I’m reasonably sure you’ll ignore.

    First, please stop. After making the special case for *zero*, all else falls into question.

    And second, please go directly to the library and check-out “The Commanding Heights” DVD series wherein Lawrence Summers confesses his Keynesian antipathy to the Austrian school before later admitting the indispensability of market forces (free enterprise) for such things as setting prices and raising revenues to fund liberal “social justice” goals.

    Next thing you’ll be trying to convince us that the feds can insure 30 million more people while raising the quality of care and lowering the cost.

  • archangel

    Recessions are a normal business cycle. In the general sense, they are highlighted by inflationary pressures. I will contend that what we have here is a DEPRESSION highlighted by high unemployment and DEFLATIONARY pressures.

    Baleen, your strawman is blowing in the wind. I’m done with this topic. As far as I’m concerned the political left are the new Jacobins. Being a good Catholic… I know what they are about.

  • http://vita-nostra-in-ecclesia.blogspot.com/ Bender

    I am really tempted NOT to even bother

    Not all temptation is bad.

  • baleen

    “Baleen, your strawman is blowing in the wind.”

    I believe the only strawman on display in this thread is the laughable claim that tax cuts always increase federal revenue.

    And raise your hand if you honestly believe that in the unlikely event the Republicans take back control of the House in November they will pass a balanced budget.

    Anyone?

    Beuller?

  • Jeff

    Yeah, so laughable that my favorite libs Charlie and George asserted that claim to Obama’s uncomfortable face. And the claim wasn’t that they “always” increase revenues. That’s another straw man you’re erecting to avoid dealing with the general rule.

  • dry valleys

    It was never real prosperity in the “boom” years, it may still have seemed that way but that was because the banking & neoliberal mirage had not yet been exposed as it was in the recession.

    Obama has done more than most western governments to acknowledge this, but it’s hardly his fault that we all set off on a wild goose chase in 1979.

  • archangel

    Bender-

    Amen

  • P. Buchta

    1. Tax receipts were based on income generated by the artificial housing boom and subsequent derivatives issues.
    2. Bush tax cuts were not off set by taxes or forced reductions in government spending. (Irresponsible?) I’ll leave that for you to decide.
    3. TARP occurred when Bush was still in office
    4. The 2009 deficit was projected to exceed $1.2 trillion even before Obama took office.
    4.The real cost of the wars were in human suffering and still has to be yet determined.

    As of 12/09:
    Iraq:
    US Dead 4,287
    US Wounded 30,182 many of which have lost full mobility. Many of our brave veterans will never lead a normal life again. Unfortunately this figure is not shown anywhere here and the future costs both in sustained care and rehab will affect their families for the rest of their lives.

  • archangel

    BTW- What is lost in the liberal BS is that the tipping point to the meltdown was the fact that MANY people were allowed to buy homes who could not afford them because the lenders were essentially forced to underwrite loans to the least credit worthy. This magnified the rise in property values that was normally occurring, giving even some credit worthy folk a false sense of security of an ever rising asset. They tapped those assets for non-essentials or what one might non-CAPEX expenditures for the home.

    In short MANY got caught in what the market calls a “Bull trap”. Its about personal responsibility and personal greed magnified by STATE irresponsibility and STATE greed. A perfect storm of vice.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    archangel: In your world, a tax cut for the people who generate the wealth of this country is tatamount to a raid of the countries lock box.

    Countries have to balance their books at some point, just like people do.

    archangel: I got news for you… WE ARE THE LOCK BOX!!

    You are the national debt. At least, your creditors think so.

    archangel: The sunset provision was put in at the behest of the DEMOCRATS.

    The sunset provision was instituted to avoid PAYGO restrictions, that otherwise would have allowed the minority to block the law.

    archangel: Yes… one graph can speak volumes and that one does.

    Yes. The last Bush budget was seriously out of whack. That’s what happens when you break your economy. Very painful.

    archangel: This is in the lap of your party.

    We’re not a member of an organized political party. Or a disorganized one, for that matter.

    archangel: I will contend that what we have here is a DEPRESSION highlighted by high unemployment and DEFLATIONARY pressures.

    Not quite, though the danger remains. Deflation can be a real problem because people won’t part with their cash during deflationary periods, which inhibits investment.

  • DWiss

    It doesn’t matter who grew the red lines to the size they are now. The fact is…that’s where they are, and it’s a BIG problem. I could write all day to summarize the ideas on how to fix it – if it CAN be fixed – and the predictions of the calamity we face if we don’t fix it. Use Google to find the commentary and read it with a stiff drink in hand.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    archangel: What is lost in the liberal BS is that the tipping point to the meltdown was the fact that MANY people were allowed to buy homes who could not afford them because the lenders were essentially forced to underwrite loans to the least credit worthy.

    No, it was demand-side. Complex securitization of U.S. real estate, and a faulty rating system, led investors to pour huge amounts of money into the system. This led to the breakdown of underwriting standards. Of course, the collapse of the bubble undercovered all sorts of other abuses that were camouflaged by the ever-rising markets.

    Greenspan: The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of the crisis) would have been far smaller and defaults accordingly far lower.

    The base philosophical error was that markets would lead businesses to do what was in their own long-term self-interest. Instead, people often do what is in their own personal immediate self-interest, even to their own and their company’s long-term interest.

    Greenspan: Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    DWiss: I could write all day to summarize the ideas on how to fix it – if it CAN be fixed – and the predictions of the calamity we face if we don’t fix it.

    Of course it can be fixed. The U.S. had a budget surplus at the end of the Clinton Administration, just a decade ago. It will require some tough choices, probably in the form of budget cuts and tax increases. In the short run, jobs are most important, with the budget deficit a year or so out from the recovery.

  • Jeff

    “Tax receipts were based on income generated by the artificial housing boom and subsequent derivatives issues.”

    I’m sorry but this is just plainly wrong. The first 250K (or 500k) of capital appreciation in real estate was and is tax free. It “generated” no tax revenue to the federal or state governments.

    Tax receipts increased because employment was much higher and taxes were cut. You can try to spin these facts all you want but the graph speaks for itself.

  • Gordon Savage

    Zacherial,

    “Of course it can be fixed. The U.S. had a budget surplus at the end of the Clinton Administration…”

    How exactly did you plan on bringing back the pre-9/11 “peace dividend” and the Tech Bubble? Of course, we will soon have a Dem President facing a Republican Congress, so there is hope that history will repeat.

  • Last Sphere

    (Zachriel wrote – “No, it was demand-side. Complex securitization of U.S. real estate, and a faulty rating system, led investors to pour huge amounts of money into the system. This led to the breakdown of underwriting standards. Of course, the collapse of the bubble undercovered all sorts of other abuses that were camouflaged by the ever-rising markets.”)

    Um…. not quite.

    The Subprime mortgage crisis WAS at the root of the 2008 world market collapse, and THAT was the resulting fruits of three decades of Liberal social engineering policies in the housing market.

    It all started with the Community Reinvestment Act from the Carter Admin in 1977 that acted as a veiled threat for discrimination lawsuits against any bank that refused to extended a mortgage to any minority regardless of their ability to repay.

    Over the years those same policies were institutionalized by government-sponsored enterprise like Fannie Mae, Freddie Mac, and Ginnie Mae. And in the late 90′s those reckless and corrupt loans were wrapped up into derivatives with the full blessing and encouragement of The Clinton Admin and released onto the world market by Bear Stearns.

    It should also be noted that it was President Clinton who shortly thereafter signed into law the repeal of the Glass–Steagall Act which had initially introduced banking reforms that were designed to control speculation.

    And since the 2008 collapse?

    So far, propping up Fannie Mae and Freddie Mac by providing them with the money to cover losses and stay in business has cost taxpayers $145 billion.

    The Congressional Budget Office puts the cost at $389 billion through 2019. However, Barclays Capital says the cost could rise to as much as $500 billion if housing prices fall by 20% from the levels of the end of 2009 and default rates triple.

  • Last Sphere

    (Zachriel wrote – “The U.S. had a budget surplus at the end of the Clinton Administration, just a decade ago.”)

    No it didn’t.

    You’re simply regurgitating liberal talking points.

    There was never a surplus at the end of Clinton’s term 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 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
    Year Year
    Ending National Debt Deficit
    FY1993 09/30/1993 $4.411488 trillion
    FY1994 09/30/1994 $4.692749 trillion $281.26 billion
    FY1995 09/29/1995 $4.973982 trillion $281.23 billion
    FY1996 09/30/1996 $5.224810 trillion $250.83 billion
    FY1997 09/30/1997 $5.413146 trillion $188.34 billion
    FY1998 09/30/1998 $5.526193 trillion $113.05 billion
    FY1999 09/30/1999 $5.656270 trillion $130.08 billion
    FY2000 09/29/2000 $5.674178 trillion $17.91 billion
    FY2001 09/28/2001 $5.807463 trillion $133.29 billion

    The Myth of the Clinton Surplus October 31st, 2007

    QUICK OBSERVATIONS

    * Tancredo Over Principles – It’s all about Tancredo overturning the primary, not about principles

    * McCain’s Colorado Campaign Chair Fundraising for Hickenlooper – Time for individuals to step up and donate $$$

    * Tancredo Tanks – Time for Mr. Tancredo to leave the race

    * Congratulations, Dan Maes! – It’s time to get behind our Republican candidates

    * Federal Reserve Printing Money Again – It took longer than I expected, but they’re finally back at it

    More observations…

    The government can have a surplus even if it has trillions in debt, but it cannot have a surplus if that debt increased every year. This article is about surplus/deficit, not the debt. However, it analyzes the debt to prove there wasn’t a surplus under Clinton.

    For those that want a more detailed explanation of why a claimed $236 billion surplus resulted in the national debt increasing by $18 billion, please read this follow-up article.

    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
    Year Year
    Ending National Debt Deficit
    FY1993 09/30/1993 $4.411488 trillion
    FY1994 09/30/1994 $4.692749 trillion $281.26 billion
    FY1995 09/29/1995 $4.973982 trillion $281.23 billion
    FY1996 09/30/1996 $5.224810 trillion $250.83 billion
    FY1997 09/30/1997 $5.413146 trillion $188.34 billion
    FY1998 09/30/1998 $5.526193 trillion $113.05 billion
    FY1999 09/30/1999 $5.656270 trillion $130.08 billion
    FY2000 09/29/2000 $5.674178 trillion $17.91 billion
    FY2001 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.

    [If I recall, it was not a surplus but a "projected" surplus, and one that was adjusted down some 30% by the GAO after Clinton left office. But that's going back a while, so I might be misremembering -admin]

  • Last Sphere

    Sorry about that last post with the redundant article and the headline observations. But I think you get the point:

    There was never a surplus under Clinton.

    [If I recall, it was not a surplus but a "projected" surplus, and one that was adjusted down some 30% by the GAO after Clinton left office. But that's going back a while, so I might be misremembering -admin]

    Now that may be Anchoress- but I’m I’m not sure.

    However, what Clinton did do was pay down the public debt- But he paid down the public debt by borrowing far more money in the form of intragovernmental holdings (mostly Social Security).

    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 intragovernmental 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 intragovernmental 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.

    And of course, the supposed roaring economy during Clinton’s admin was proven to be a house of cards when the Dot-com bubble finally burst.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Last Sphere: It all started with the Community Reinvestment Act from the Carter Admin in 1977 that acted as a veiled threat for discrimination lawsuits against any bank that refused to extended a mortgage to any minority regardless of their ability to repay.

    A market bubble that took thirty years to burst.

    The consensus view of economists points to a number of interrelated causes, including excess demand for securities, surplus capital, lax regulation, cozy ratings agencies, the disconnect of accountability between originators and securities, and the subsequent loosening of underwriting standards. The CRA never required banks to make unsound loans.

  • archangel

    That “Clinton surplus” came from a REPUBLICAN Congress. It was lucky for Clinton his wife failed with her version of health-care AND he was smart enough to run to the center when he and his party LOST the 1994 elections.

    Barry isn’t as bright.

  • archangel

    The surplus came in Bush’s term. However, the point to be made is that it was the Republican Congress that brought about the deficit reductions and Clinton was bright enough to sign the budgets which guaranteed his reelection in 1996.

    The bottomline here is that the libs here and elsewhere will always deny culpability and will lie through their teeth. They follow their Leninist mantra of telling the lie long enough until it becomes the “truth”. But like all lies, they unravel when the real truth comes out.

    Let ‘em twist in the wind.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Zachriel: The U.S. had a budget surplus at the end of the Clinton Administration, just a decade ago.

    Last Sphere: No it didn’t.

    CBO: Outlays vs. Revenues.

    Fact Check: Q. During the Clinton administration was the federal budget balanced? Was the federal deficit erased?
    A: Yes to both questions, whether you count Social Security or not.

  • Last Sphere

    (Zachriel wrote – “A market bubble that took thirty years to burst.”)

    No. Thirty years of Liberal social engineering.

    The actual “bubble” can be traced back to the release of those reckless mortgages onto the world market by Bear Stearns at the behest of the Clinton Admin in 1998.

    THAT’S when the risk factor went global.

    Oh and- did Democrat Senator Chuck Schumer ever explain why he caused the collapse of Indymac Bank, the second biggest bank failure in American history?

    Remember that?

    It happened late in the summer of ’08 just when McCain was starting to cause some serious polling problems for Obama. And then what do you know? Voila! Old Chucky fires off a very public letter that caused a run on Indy Mac.

    Funny timing huh Zach?

    Never let a good crisis go to waste huh.

  • Jeff

    Probably not as bright, but also doesn’t care. He’s in this for himself.

  • Last Sphere

    (Zachriel wrote – “The CRA never required banks to make unsound loans.”)

    Oh yes they did.

    In fact they release a friendly little pamphlet to lenders with a friendly list of reminders of how they could be sued for a myriad of “discriminatory” policies.

  • Last Sphere

    (Zachriel wrote – “The CRA never required banks to make unsound loans.”)

    From Forbes July 2008:

    (“The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

    According to one enforcement agency, “discrimination exists when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.” Note that these “arbitrary or outdated criteria” include most of the essentials of responsible lending: income level, income verification, credit history and savings history–the very factors lenders are now being criticized for ignoring.

    The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to “promote homeownership,” not to apply sound lending standards.

    Of course, lenders not only sold billions of dollars in suspect loans to Fannie Mae and Freddie Mac, contributing to their present debacle, they also retained some subprime loans themselves and sold others to Wall Street–leading to the huge banking losses we have been witnessing for months. Is this, then, a free market failure? Again, no.”)

    Again, this was result of thirty years of Liberal social engineering. And as usual, liberals failures are spun into evil Republican “free-market” failures.

    Just ask Bawny Fwank.

  • Last Sphere

    (Zachriel wrote:

    CBO: Outlays vs. Revenues.

    Fact Check: Q. During the Clinton administration was the federal budget balanced? Was the federal deficit erased?
    A: Yes to both questions, whether you count Social Security or not.)

    Really?

    I post data from the U.S. Treasury and you counter with a meaningless graph from the CBO and then a meme from “Fact Check”?

    The Annenburg Fact Check.

    Sorry. I don’t listen to Left-Wing “fact” sites.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Zachriel: The CRA never required banks to make unsound loans.

    Last Sphere: Oh yes they did.

    CRA: It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.

    That’s what the law says. But there was a culture that ignored regulatory safeguards during the Bush Administration.

    Last Sphere: In fact they release a friendly little pamphlet to lenders with a friendly list of reminders of how they could be sued for a myriad of “discriminatory” policies.

    Yes, and when banks discriminate unlawfully, they should be sued.

    Here’s the raw numbers from CBO on public debt, in billions of dollars.

    1997, 3772
    1998, 3721
    1999, 3632
    2000, 3409
    2001, 3319

  • http://westernchauvinist.blogspot.com Western Chauvinist

    I just gotta say – I LOVE my conservative bretheren! Ya’ll just keep punching back with the facts. Facts to the left are like a cross to a vampire (to paraphrase Red Square at The People’s Cube). And you, Last Sphere, are Van Helsing. You’re da man!

  • http://runswithangels.wordpress.com/ Bender’s Cheerleader

    Yeah! What WC said!

    But if Last Sphere is Van Helsing, who does that make Bender?

  • Last Sphere

    (Zachriel wrote – “CRA: It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.”)

    From Investors Business Daily Nov 2008:

    (“Clinton created a separate department at HUD to police “fair lending” at Fannie and Freddie and also at lenders like Countrywide, which became Fannie’s biggest client. In 1994, Countrywide became the nation’s first mortgage lender to sign with HUD a “Declaration of Fair Lending Principles and Practices.”

    As a result, Countrywide made more loans to minorities than any other lender — and not surprisingly, was one of the first lenders swamped by loan defaults.

    Other lenders felt the heat from Reno’s Justice Department, which prosecuted them for failing to operate enough branches in black neighborhoods. Reno put the entire banking industry on notice about the CRA and her enforcement program.

    Myth: The CRA did not force anyone to do subprime loans or take excessive risks.

    Fact: Subprime loans were the vehicle banks used to satisfy CRA compliance, and Clinton and his regulators encouraged their use. Before Clinton took office, subprimes were virtually unheard of. By the time he left, they made up more than 9% of the market for mortgage originations. Today they’re 20%.

    “It’s instructive to go back to the early stages of the subprime market, which has essentially emerged out of the CRA,” ex-Fed chief Alan Greenspan said in recent testimony on the roots of the crisis.

    Clinton pushed banks to grant mortgages to minorities with poor credit by using “flexible” underwriting standards — or risk being branded racist. Rules were weakened to the point where welfare and unemployment checks were accepted as qualifying income.”)

    Please note this part again Zach:

    (“It’s instructive to go back to the early stages of the subprime market, which has essentially emerged out of the CRA,” ex-Fed chief Alan Greenspan said in recent testimony on the roots of the crisis.)

  • http://vita-nostra-in-ecclesia.blogspot.com/ Bender

    who does that make Bender?

    Coilette, Super King, the were-car. They’re all good.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Let’s return to the original statement you took issue with.

    Zachriel: The U.S. had a budget surplus at the end of the Clinton Administration, just a decade ago.

    Last Sphere: No it didn’t.

    “Budget surplus” is defined as a positive difference between total revenues and outlays. Internal borrowing between agencies is not part of this calculation. The surplus represented a significant step towards fiscal responsibility, and a goal that is both desirable and achievable. And significantly, it’s the first step to paying down the debt, and setting money aside for a rainy day.

    (Of note, while Zachriel quotes CBO, Last Sphere quotes verbatim from other blogs.)

  • Pingback: The Anchoress says this is going to go viral. Who am I to stand in the way? « The TrogloPundit

  • baleen

    “The bottomline here is that the libs here and elsewhere will always deny culpability and will lie through their teeth. ”

    Reagan increased the federal debt
    Bush I increased the federal debt
    Bush II increased the federal debt

    It’s the people who think the Republicans will balance the federal budget are the ones denying reality.


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