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The Myth of the Clinton Surplus

30 Nov
By Craig Steiner

October 31st, 2007


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’ta 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.


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 notthe sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).


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:

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.

So why do they say he had a surplus?

As is usually the case in claims such as this, it has to do with Washington doublespeak and political smoke and mirrors. 

Understanding what happened requires understanding two concepts of what makes up the national debt. The national debt is made up of public debt and intragovernmental holdings. The public debt is debt held by the public, normally including things such as treasury bills, savings bonds, and other instruments the public can purchase from the government. Intragovernmental holdings, on the other hand, is when the government borrows money from itself–mostly borrowing money from social security.

Looking at the makeup of the national debt and the claimed surpluses for the last 4 Clinton fiscal years, we have the following table:

Total National
FY1997 09/30/1997   $3.789667T $1.623478T $5.413146T
FY1998 09/30/1998 $69.2B $3.733864T  $55.8B $1.792328T  $168.9B $5.526193T  $113B
FY1999 09/30/1999 $122.7B $3.636104T  $97.8B $2.020166T  $227.8B $5.656270T $130.1B
FY2000 09/29/2000 $230.0B $3.405303T  $230.8B $2.268874T  $248.7B $5.674178T  $17.9B
FY2001 09/28/2001   $3.339310T  $66.0B $2.468153T  $199.3B $5.807463T  $133.3B

Notice that while the public debt went down in each of those four years, the intragovernmental holdings went up each year by a far greater amount–and, in turn, the total national debt (which is public debt + intragovernmental holdings) went up. Therein lies the discrepancy.



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.

Consider the following quotes (and accompanying links) that demonstrate how people have known this for years:

In the late 1990s, the government was running what it — and a largely unquestioning Washington press corps — called budget “surpluses.” But the national debt still increased in every single one of those years because the government was borrowing money to create the “surpluses.” 

So the table itself, according to the figures issued yesterday, showed the Federal Government ran a surplus. Absolutely false. This reporter ought to do his work. This crowd never has asked for or kept up with or checked the facts. Eric Planin–all he has to do is not spread rumors or get into the political message. Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000. – Democratic Senator Ernest Hollings, October 28, 1999 Video: CSPAN

An overall “downsizing” of government and a virtual end to the arms race have contributed to the surplus, but the vast majority is coming from excess Social Security taxes being paid by the workforce in an attempt to keep Social Security benefit checks coming once the “baby-boomers” start to retire. 

Of the $142 billion surplus projected by the end of 2000, $137 billion will come from excess Social Security taxes.

When these unified budget numbers are separated into Social Security and non-Social Security components, however, it becomes evident that all of the projected surplus throughout this period is attributable to Social Security. The remainder of the budget will remain in deficit throughout the next decade.

Despite a revenue shortfall, full benefits are expected to be paid out between 2017 and 2041. The system will draw on its trust fund, a collection of special-issue bonds from the government, which borrowed prodigiously from the program’s surplus over the years. But since the country is already running a deficit, the government will have to borrow more money to pay back its debt to Social Security. That’s a little like giving with one hand and taking away with the other. 

The surplus deception is clearly discernible in the statistics of national debt. While the spenders are boasting about surpluses, the national debt is rising year after year. In 1998, the first year of the legerdemain surplus, it rose from $5.413 trillion to $5.526 trillion, due to a deficit of $112.9 billion… The federal government spends Social Security money and other trust funds which constitute obligations to present and future recipients. It consumes them and thereby incurs obligations as binding as those to the owners of savings bonds. Yet, the Treasury treats them as revenue and hails them for generating surpluses. If a private banker were to treat trust fund deposits as income and profit, he would face criminal charges.

Are intragovernmental holdings really debt?

Yes, intragovernmental debt is every bit as real as the public debt. It’s not “a wash” simply because the government owes the money to “itself.”

As I explained in a previous article, Social Security is legally required to use all its surpluses to buy U.S. Government securities. From Social Security’s standpoint, it has a multi-trillion dollar reserve in the form of U.S. Government securities. When the Social Security system starts to falter due to insufficient contributions to pay for all the benefits of retiring baby-boomers, probably around 2017, it will start cashing those securities and will expect the U.S. Government to pay it back, with interest. The problem is, the government doesn’t have the money. The money has already been spent–in part, effectively, to pay down the public debt under Clinton.

    Update 3/31/2009: The Social Security “surplus”–which has been borrowed by the Federal Government every year, including under Clinton to generate the “surplus”–is now expected to evaporate within a year (2009 or 2010) rather than the 2017 mentioned above. The following quote also provides additional evidence that the “surplus” was indeed borrowed from Social Security “for decades.”



The Federal Government cannot just wave a magic wand and somehow “write off” the intragovernmental debt. Essentially, citizens invested money in Social Security and Social Security invested that money in the Federal Government. Now Social Security effectively owes you money (in the form of future retirement benefits) and won’t be able to pay you that money if the Federal Government just cancels the intragovernmental debt. The only way the Federal Government can “write off” intragovernmental debt is if it simultaneously eliminates the Social Security system. That might very well be a good idea, but it isn’t likely. And Social Security will start running out of money in about 2017 if the Federal Government doesn’t honor those intragovernmental holdings as real debt.

In short, if the government doesn’t pay back intragovernmental holdings, other government agencies (like Social Security) will fail. Since allowing Social Security to fail is not a politically viable option, the debt represented by intragovernmental holdings is just as real as the public debt. It can’t just be eliminated by some fancy accounting trick or political maneuvering. If it were possible, believe me, politicians would have done it already and taken credit for reducing the national debt by trillions of dollars.

Trust Funds = Intragovernmental Debt

Social Security isn’t the only trust fund in the federal budget. There are a number of others including the civil service retirement fund, federal supplementary medical insurance trust fund, unemployment trust fund, military retirement trust fund, etc. All of these trust funds, like Social Security, invest their surpluses in U.S. government bonds and increase intragovernmental debt. And like Social Security, their surpluses really shouldn’t count toward a “surplus” because the excess money they contribute to federal coffers actually has to be borrowed by the government from the trust funds.

When the government declared a $236 billion surplus in fiscal year 2000, it literally borrowed $248 billion from trust funds and considered that borrowed money “income” which it counted towards a “surplus.”

For a more detailed explanation of how the government borrowed from trust funds and used the borrowed money to count towards an alleged surplus, please read this follow-up article which goes into more detail on the subject of government accounting.

The reality of the national debt




    Since this article has become a popular reference for people debunking the myth of the Clinton surplus, I have seen a number of responses made by those that cannot seem to accept the fact that there was never a surplus. Some of those responses are listed here and I explain why the responses are invalid.

    Adjusting the National Debt for Inflation or as % of GDP

    A common tactic used by those that cling to the myth of the Clinton surplus seems to be showing a bar graph of the total national debt adjusted for inflation, or depicted as a percentage of GDP. When you adjust for inflation or show the debt as a percentage of GDP, it looks like the national debt went down for a year or two under Clinton. However, that doesnot mean Clinton had a surplus, it simply means inflation was increasing faster than the national debt or the economy was expanding faster than the national debt. That does not change the fact that Clinton never had a surplus. 

    Explained another way, adjusting the national debt for inflation is valid for comparing the debt load of the federal government but it has absolutely nothing to do with whether or not the federal government had a surplus a given year. If you spend more than you take in in a given year, you have a deficit even if your relative debt load went down because of inflation. Explained numerically, let’s say you owe $50,000, earn $30,000, and spend $31,000 (debt load=50,000/30,000=167%)–that leaves you with a deficit of $1000 so that the following year you owe $51,000. The next year inflation is 5% so you now earn $31,500 and spend $32,550 with a deficit of $1,050. $31,500 in earnings with a $51,000 debt is a 162% debt load–so your relative debt load went down thanks entirely to inflation but you still had a deficit of $1,050 that year and your debt continued to grow.

    It wouldn’t be accurate to claim that you had a surplus because your debt load went down even though you spent more than you earned. That’s what people are saying when they try to adjust the national debt for inflation to claim a surplus. 

    The bottom line is that the national debt going down as adjusted for inflation or as a percentage of GDP is a valid metric for evaluating the debt load of the government but it says nothing about whether or not there was a surplus. If the total national debt went up, there was a deficit. Those that think a decrease in the debt load of the federal government as a percentage of GDP or adjusted for inflation is equivalent to a same-year surplus don’t understand the definitions and purposes of each of these terms.

    Congressional Budget Office (CBO) vs. These “Partisan” Numbers

    Another common response to the above explanation of the myth of the Clinton surplus is that the budget surpluses are based on the numbers produced by the non-partisan Congressional Budget Office (CBO). Indeed if you access the CBO’s “historic budget data” document , on the fist page you will see that 1998 shows a surplus of $69 billion, 1999 shows $126 billion, 2000 shows $236 billion–the same surpluses claimed by Clinton and CNN in the article mentioned at the top of this page.

    However, further analysis of the document should make it very clear that important information is missing from the CBO document–specifically focusing on the last two columns of the table on page 1. If you take the $3,772.3 billion debt held by the public at the end of 1997 and subtract the “total” $69.3 billion surplus stated for 1998, you would expect to see the debt go down by 69.3 billion to $3,703 billion. Instead, the debt indicated for 1998 is $3,721.1 billion–suggesting a surplus of only $51.2 billion. This alone should tell you that the CBO numbers aren’t telling the whole story because they don’t add up–and the story they aren’t telling is intragovernmental holdings. 

    The reality is that the federal government and politicians use a form of accounting that would get most accountants thrown in jail. As USA Today wrote in 2007 , special rules used by the federal government allowed it to report a $248 billion deficit in 2006 rather than $1.3 trillion if it had used corporate-style accounting.

    While the CBO may be non-partisan, that does not mean the CBO is non-political nor that their numbers are honest or transparent.

      Update 4/26/2009: Please read this note where President Obama, too, is trying to get certain government expenditures not “counted” in the official CBO deficit even though they’ll cost billions of dollars and increase the national debt. As this paragraph has explained, CBO numbers are not to be trusted as an accurate reflection of reality.

    The fact remains that the total national debt, as explained above, is the only real measure of what we owe. We can discuss the meaning of the different columns of the CBO documents and what they do and don’t include, and we can argue about the accounting tricks that the federal government uses for political reasons. But the fact remains that theBureau of the Public Debt is responsible for the daily reporting of the total national debt. Regardless of how politicians play with the budget numbers, the current national debt reported by the Bureau of the Public Debt is what we owe. If, at the end of each year, we owe more than we did the previous year, politicians can call it a surplus until the cows come home–but the fact remains that we owed more money than we did the previous year. Playing accounting and political games to call it a “surplus” doesn’t change the fact that we’re even more in debt than we were the year before.

    During the Clinton years, the total national debt increased every year. Only in Washington D.C. would that somehow be considered a “surplus.” 

    There was a Surplus Not Counting Interest and “Off-Budget” Items

    It is sometimes claimed that there was a surplus but the national debt didn’t go down because of interest payments on the existing debt, or because of “off-budget” items. Anyone that makes this claim is just buying into twisted Washington accounting games that are convenient for their argument.

    The reality is that “off-budget” items and interest payments on the debt are real government expenditures just like any other. Off-budget items are declared as such by the stroke of a pen specifically for political reasons but it does not change the fact that they are part of government expenses.

    To demonstrate the fallacy of this argument, consider this: We have a budget surplus right now, too, if we declare the department of Health and Human Services to be “off-budget.” After all, Congress and the president can do that with the stroke of a pen. Presto, we now have a surplus!

    Of course, we wouldn’t really have a surplus. And neither did Clinton. It’s just a matter of saying that some expenses don’t “count” even though they do.

    There Was a Surplus But It Wasn’t Used to Pay Down The Debt

    Some people claim that there was a surplus but it wasn’t used to pay down the debt. They claim that one issue is whether or not you have a surplus and another issue is what you do with it; hence they also claim that you can have a surplus and not have the national debt go down.

    However, this is not true. 

    If there was a surplus and it wasn’t used to pay down the debt, then that means it was spent–which means even if therecould have been a surplus, it evaporated the moment it was spent. During the Clinton years, not only was it spent–the government borrowed even more! Every year!

    It’s like earning $30k in a year and only having $29k in expenses–so you have a $1000 surplus. To celebrate, you then go out and spend $2000 on a new LCD TV. All the sudden you earned $30k and spent $31k and what originally looked like a $1000 surplus is now a $1000 deficit and you’re even further in debt. You almost had your financial house in order but then you went out and spent the “extra” money rather than saving it or paying off some of your existing debt.

    In short, if the government had a surplus and spent it on anything other than paying down the national debt, there was no longer a surplus the moment the money was spent on something else.

    Comparing National Debt on January 1st

    Some have responded by saying that Clinton had a surplus and paid down the debt because, when they compare the national debt from one January 1st to the next, the debt does show a decrease. This may be an honest mistake, but the government’s fiscal year is from October 1st through September 30th. All government and budgetary activities are based on that fiscal year so it is necessary to do debt comparisons using that same fiscal year. As a result, all comparisons should be made either on September 30th or October 1st… not January 1st. Says Clinton Had a Surplus repeats and uses the same government numbers that this article illustrates to be misleading. Further information on why the CBO’s numbers (and FactCheck’s numbers) are misleading is explained in my follow-up articlehere

    The Link Provided Above is Allegedly False

    Some people have claimed that the link I provided ( is an illegitimate or fraudulent site that provides false numbers. I don’t know where that accusation comes from or why people think that, but I’ve seen at least some comments that criticize the link because it doesn’t point to To verify that my link is to a valid government information source, please follow these steps:

    1. Go to the U.S. Treasury website:
    2. Scroll to the “Bureaus” section and click on “Bureau of the Public Debt” which takes you to
    3. Scroll down to the section “The U.S. Public Debt” and click on “See the U.S. Public Debt to the Penny.”
    4. This takes you to the link I originally provided:

    The assertion that my article points people to a fraudulent website is incorrect. I am providing a direct link to the U.S. Treasury, Bureau of the Public Debt, National Debt to the Penny website. This is the official website that the U.S. government provides which allows the public to track the debt.