Treasury Secretary Calls Clinton Budget Surplus "a Mirage"
The graphic below is derived from data provided by the Congressional Budget Office. The value for 2005 is as projected by the CBO. The data used do not take into account the effect of inflation because the essential character of the dynamics of the net federal budget cash flows would not change: positive numbers remain positive, and negative numbers remain negative even when they are adjusted (that is, divided) by an index. Furthermore, "adjustment" methods being used by the Bureau of Labor Statistics on raw price data present certain challenges concerning the accuracy with which the consumer price index and the producer price index are reflecting actual inflation at the retail and wholesale levels, respectively. The essential results of the analysis presented below are nonetheless robust to the choice of nominal or real (i.e., inlfation-adjusted) federal budget figures.
As if gearing up to rewrite history, some neo-conservatives are now claiming that certain government tax revenues were "unusually high" in the last years of the Clinton Administration. This line was delivered by none other than a senior economist from Goldman, Sachs & Co., who was quoted in the Bloomberg article. The claim that some anomaly was behind the Clinton era budget surpluses is entirely out of line with the graphic above and the data, which clearly show not a one-time-only surplus, but a sustained, long-term fiscal discipline that started immediately upon Clinton's ascendancy to the White House and remained the regime in the nation's fiscal house until the very end. Those same numbers demonstrate the sea change that occurred when the neo-conservative policies of tax cuts and war-based fiscal stimulus became policy under George W. Bush.
To highlight the dramatic and incontrovertibly fundamental policy shift toward growth driven by massive federal budget deficits caused by tax cuts, separate linear regression trend lines can be calculated for the respective Clinton and Bush Administrations' net federal budget cash flows.
In the graphic above, the blue line indicates the trend for the Clinton Administration. It has a slope of approximately 70, which means that the federal budget was gaining a net cash inflow of about $70 billion (nominal) annually over the eight years of the Clinton Administration.
On the other hand, the green line indicates the trend for the Bush Administration. It has a slope of about 117, which means that the federal budget deficit has, under the neo-conservatives, been suffering a net outflow of $117 billion (unadjusted) annually, which is opposite to and almost twice the rate of the Clinton Administration's net federal budget trend line slope.
This is no mere "mirage," as Treasury Secretary Snow would have people believe. The trend lines are in opposite directions, and those trend lines represent the cumulative effect of sustained net cash flow changes that reflect, at one level, policy priorities and, at a deeper level the different degrees of responsibility with which two, separate administrations and their politically influential allies have carried out their duties to manage the fiscal house of the federal government of the United States.
The graphic at left below presents the 1993 to 2005 federal budget surpluses/deficits as a percentage of gross domestic product, as displayed in Table 2 at the CBO historical federal budget data Webpage (with the 2005 projected value provided in Table 1-1 at the CBO Webpage presenting current federal budget projections). Using the same trendline analysis as above (and taking into account a growth of the economy that may be fueled to some extent by creeping inflation in the projection for 2005), the numbers re-inforce those presented above: during the Clinton Administration, net federal budget cash flows grew at an annual rate of 0.90% of GDP; during the current Administration, net federal budget cash flows have been falling at an annual rate of 1.01% of GDP. Again, the trend lines are in opposite directions.
The legacy of the Presidency of George W. Bush will be other than that claimed by Treasury Secretary Snow, and his assured insistence that Mr. Bush will have "reduced the deficit" serves no other purpose than to reduce the credibility of an Administration and its supporters who have already materially demonstrated an incapacity to manage fiscal policy in a manner consistent with any reasonable metric of control, care, and responsibility.
The Dark Wraith awaits a time when the nation has leadership that does not defend its mismanagement by claiming a better President's results were a mirage.