It's Time For Some Truth! Bill Clinton NEVER Balanced a Budget and NEVER Ran a Surplus

On Friday Former President Bill Clinton spoke at the dedication of a bridge at his Presidential library.  During his address he complained that Republicans try to take too much credit for his welfare reform legislation and for balancing the budget. The two parties can argue about who was behind welfare reform, but no one deserves credit for balancing the budget.  The truth is  the United States federal budget was not balanced in any of Bill Clinton's eight years as President. Not once!

The federal government has two types of debt public debt and intra-governmental debt.  Public debt is comprises securities held by investors outside the federal government, including that held by investors, the Federal Reserve System and foreign, state and local governments  Intra-governmental debt comprises Treasury securities held in accounts administered by the federal government, such as the Social Security Trust Fund.

Traditionally the annual federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. This is a trick as intra-governmental debt needs to be repaid just like the publicly held debt. This is also how Clinton claimed a surplus in three out of his last four years. (Source for all of the numbers below, US Treasury Direct).

Fiscal Year	End Date		Public Debt	Claimed Surplus
FY1997	09/30/1997		$3.789667T
FY1998	09/30/1998		$3.733864T	$69.2B
FY1999	09/30/1999		$3.636104T	$122.7B
FY2000	09/29/2000		$3.405303T	$230.0B
FY2001	09/28/2001		$3.339310T

These figures include the public debt but not the intra-governmental debt.  Its like paying off your American Express card while ignoring the fact that your Mastercard over the limit and months past due. Your Amex looks great but your budget is not balanced.

When the Treasury department reports the National Debt (now at $14.5 trillion) it counts both public and intra-governmental debt. Clinton's first full budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994) and his last started in October 2000 and ended in September 2001. Using those bookends and subtracting each year's national debt from prior years,  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	$346.87 billion
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

To be fair, Clinton's FY 2000 budget came very close, it only added about $18 billion to the national debt, but in his last budget he was back up over $130 billion.

Despite what you may hear from Democrats on the campaign trail, there were no giant surpluses that Bush squandered (Bush did overspend, but there was no surplus to squander). The myth of Clinton balancing the budget and producing surpluses belongs with unicorns and and elves, in the realm of myths. The last president to preside over a balanced budget/surplus was Dwight Eisenhower, whose government saw surpluses of  approximately $2 billion dollars in 1956 and 57.

Neither Bill Clinton nor any Republicans deserve any credit for balancing the budget in the 1990s, because the budget was never balanced.

Major Bond Fund Manager: US Is in Worse Shape Financially Than Greece

Bill Gross is one of the world's largest mutual fund managers, focusing mostly on bonds. Called "the nation's most prominent bond investor" by the New York Times, he co-founded Pacific Investment Management (PIMCO) and currently manages PIMCO's Total Return fund (the world's largest bond fund and fifth largest mutual fund) and several smaller ones. In other words this guy knows what he is talking about.

Gross spoke to CNBC today and made a startling accusation. When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries. Gross explains that while the public and the Congress is concentrating on our $14.3 trillion public debt, they are forgetting about the liabilities from entitlement programs, money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures. On top of all that are the debts created by the bailout of the financial system.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly."

Gross spoke following a report that US banks were likely to scale back on their use of Treasurys as collateral against derivatives and other transactions. Bank heads say that move is likely to happen in August as Congress dithers over whether to raise the nation's debt ceiling, according to a report in the Financial Times.

Apparently Wall Street is concerned that our government will not be able to negotiate a solution to our debt problem.

"We've always wondered who will buy Treasurys" after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. "It's certainly not Pimco and it's probably not the bond funds of the world."

Gross confirmed a report Friday that Pimco has marginally increased its Treasurys allotment—from 4 percent to 5 percent—but still has little interest in US debt and its low yields that are in place despite an ugly national balance sheet.

"Why wouldn't an investor buy Canada with a better balance sheet or Australia with a better balance sheet with interest rates at 1 or 2 or 3 percent higher?" he said. "It simply doesn't make any sense."

Gross also predicts that if Greece become even more of a crisis, it will be German Debt not that of the United States would be the safe-haven of choice for global investors.

Its time our Government woke up and smelled the coffee, its past time we got serious about our debt.