The Myth of the Clinton Surplus

http://www.craigsteiner.us/articles/16 ^ | October 31, 2007 | Craig Steiner

[Brad from Tennessee]

Clinton inherited the “Peace Dividend” from the Reagan/Bush policies that helped collapse the Soviet Union. Clinton was able to drastically shrink the military and funding for intelligence services. The period of “peace” also opened up new markets for American business including the former USSR.

[Eagle Forgotten]

I think you’re correct that Social Security was put “on-budget” under LBJ. I don’t think that played a significant role in funding Vietnam or the War on Poverty, though.

Back then, Social Security was essentially a pay-as-you-go system. It didn’t accumulate significant surpluses that could be borrowed for other purposes. That change came in 1983. At that time the FICA tax rate was increased for the specific purpose of building up a huge surplus that could be used to fund Baby Boomer retirements decades later.

It was only after 1983 that putting Social Security “on-budget” had a significant effect on the government’s annual reported surplus/deficit.

Of course, we’re nearing the point when, even in economic boom times, Social Security will show a net deficit, as it draws down the Trust Fund so as to maintain benefits. When that happens, the President, whether a Democrat or a Republican, will be strongly tempted to separate out the Social Security budget, because that’s what will make the “official” figure for the federal budget look better.