Once upon a time - yes, it does seem like a fairy tale now even though it was just 10 years ago - the United States had a budget surplus. This surplus was generated during the time of a Democratic President. His name was Bill Clinton. He was preceded in the Oval Office by two other Presidents who had made a big deal about controlling government spending. The first of them, Ronald Reagan, had decried deficit spending and the accumulation of those deficits into the national debt. He made a big deal of describing the soaring stack of thousand-dollar bills it would take to pay off a national debt that was, when he stepped into the White House in 1981, $937 billion. When he left, it was $2.6 trillion. When his successor left, the debt was $4.2 trillion. Not one year was either of these Presidents' budget in surplus.
Bill Clinton added to the national debt, too. But when he left office in January 2001, the budget was in surplus. This allowed Alan Greenspan, the Federal Reserve chairman at the time, to almost euphorically tell House Committee on the Budget on March 2, 2001:
The challenges you face both in shaping a budget for the coming year and in designing a longer-run strategy for fiscal policy have been brought into sharp focus by the budget projections that have been released in the past month and a half. Both the Bush Administration and the Congressional Budget Office project growing on-budget surpluses under current policy over the next decade. Indeed, growing on-budget surpluses were projected even under the more conservative assumptions of the Clinton Administration's final budget projections. ...
The most recent projections from OMB and CBO indicate that, if current policies remain in place, the total unified surplus will reach about $800 billion in fiscal year 2010, including an on-budget surplus of almost $500 billion. Moreover, the admittedly quite uncertain long-term budget exercises released by the CBO last October maintain an implicit on-budget surplus under baseline assumptions well past 2030 despite the budgetary pressures from the aging of the baby-boom generation, especially on the major health programs.
These most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach and, indeed, would occur well before the end of the decade under baseline assumptions. ...
In general, for reasons I have testified to previously, if long-term fiscal stability is the criterion, it is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases....
That said, the changes in the budget outlook over the past several years are truly remarkable. Little more than a decade ago, the Congress established budget controls that were considered successful because they were instrumental in squeezing the burgeoning budget deficit to tolerable dimensions. Nevertheless, despite the sharp curtailment of defense expenditures under way during those years, few believed that a surplus was anywhere on the horizon. And the notion that the rapidly mounting federal debt could be paid off would not have been taken seriously.
But let me end on a cautionary note. With today's euphoria surrounding the surpluses, it is not difficult to imagine the hard-earned fiscal restraint developed in recent years rapidly dissipating. We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake.
Uh-huh. Policies like the Bush tax cuts, which added $2.5 trillion of the $4.35 trillion that the national debt increased during his two terms of office. The tax cuts and the cost of two wars totaled more than half the $1 trillion deficit for fiscal 2009, Bush's last budget year.
Today, the complaints about deficit-spending are laid at the feet of the Democrats, particularly a Democratic President who inherited those tax-cut policies, those wars and an economic disaster that analysts have found can only be adequately measured by comparing it to the worst economic downtown in the past 120 years, the Great Depression. Those complainers never met a tax cut they didn't like. During the 20 years their favored choices for President were in office the only surplus generated was a pile of rhetoric about fiscal responsibility that had zero to do with the reality of their policies.
Under President Obama, deficit spending has risen sharply, and that, of course, cannot be continued forever. Some people, however, might argue that when you inherit more than a year's worth of impacts from the worst economic downturn in 75 years, the direct and indirect spending for two ongoing wars, the cumulative impact of tax breaks for the rich, a lengthy period of "deferred maintenance" on the nation's infrastructure, and the loss of government revenue because so many Americans are out of work, temporarily high deficits are to be expected. That is, if you are going to create a budget that pretends to do anything to keep the situation from getting worse.
To be sure, the deficit spending we are now engaged in is eye-opening. But if the supply-side whiners were more than tin-horn con artists, they'd now be able to crow about the trillions of surplus dollars they frugally tucked away in the nation's mattress in the past 10 years. And our national balance sheet would look more like China's.