“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

Words to live by for those in government. For example, the word “surplus” is supposed to denote the result of consuming less than one receives. But that is not the meaning employed by our wise overlords. Or rather, they choose to cherry-pick what constitutes “receive” and “consume” so that the difference between those terms can be any value they desire. It’s time for some myth busting: there was no Clinton surplus. The entire thing is a fabrication, an accounting sleight of hand. “Hogwash!” you’re thinking! Certainly if this had been the case the conservatives pundits would have been all over this, right? Wrong. Their collective silence speaks volumes in testament to the fact that the same “math” used to show a surplus under Clinton also shows smaller deficits under their guys (e.g. Bush Sr. claimed $1 trillion in deficits, but it was actually $1.5 trillion, likewise Clinton claimed a $62 billion surplus but actually had a $1.4 trillion deficit)

Here is the essence of the subterfuge:  Let us imagine a single mom, let’s call her, I don’t know, Julia. Julia earns $30,000 a year. She receives $5,000 a year from her ex-husband that is to be put into a savings account for her son’s education. However she has $32,000 a year in expenses and a $1,000 credit card debt. So she “borrows” $5,000 from the education account. $2,000 of it goes to the extra expenses, and $1,000 of it goes to pay off the credit card debt. Quite pleased with the situation she tells her friends she has paid off her credit cards and has a $2,000 surplus to boot! To celebrate she spends the “surplus” $2,000 on clothes and a new TV. She rationalizes owing the $5,000 to her son’s account with the idea that in the future she’ll make more money and pay it back later, but she needs it now for her and her son’s benefit, so that makes it ok. Fast forward 18 years and we find that although her pay has increased, so have her expenses, and she has continued to accumulate $5,000 IOU’s each year such that the account contains nothing but $90,000 in IOU’s. In any other arena except government this process is known as embezzlement.

One difference between what Julia did and what the government does is that the theft is legally mandated: all federal government trust funds (there are others besides social security) are required to turn over excess funds to the federal government by way of purchasing special government bonds (IOUs). The government then counts these “excess” funds as REVENUE, even though that money is obligated to future recipients. Let me repeat: the government is counting loaned money as income! That might balance cash flow but it is merely “Wimpy” can-kicking governance: “I’ll gladly pay you Tuesday for a hamburger today.” Guess what? Today is Tuesday.

“I’ll gladly pay you Tuesday for a hamburger today.”

The effect of this fake revenue is to decrease the gap between normal tax revenue and spending (the deficit), which is why every administration loves this technique. However even the government can’t hide from the effects of ignoring reality. Any money the government borrows from itself is added to the Intra-Government debt holdings account. The IG debt account is distinct from the “Public Debt” account (money lent to the government by non-government entities). The Public Debt went down under Clinton by using IG debt to pay it down (i.e. using credit card A to pay off credit card B). Adding these two numbers together reveals that total debt went up. If you don’t believe me, check for yourself; see the US Treasury data. Each and every year from 1992 to 2000 the “Historical Debt Outstanding” increases. Pundits can try and confuse the public with jargon, but at the end of the day it simply is a matter of checking just one number (total debt). If it goes up, there was a deficit, if it goes down, there was a surplus. End of story.