THE LARGEST BUDGET SURPLUS IN HISTORY AND THE LARGEST DEBT PAY
DOWN IN HISTORY
October 27, 1999
Today, the Office of Management and Budget and the Department of the
Treasury Announced the Largest Budget Surplus In History and the Largest
Pay Down of Debt in History. In 1993, President Clinton put in place a
three-part economic strategy of fiscal discipline, investing in people,
and opening markets abroad. The latest data provide even more evidence
that this strategy is working:
Last year's unified budget surplus was $123 billion, the largest
America has paid down $140 billion in debt held by the public over
the last two years, the largest debt pay down ever.
The debt at the end of FY 1999 was $1.7 trillion lower than it was
projected to be when the President took office.
Under the President's budget, we will pay off the debt held by the
public by 2015.
The Largest Surplus Ever
Largest dollar surplus ever, even after adjusting for inflation.
The $123 billion surplus in 1999 is the largest dollar surplus in
American history, breaking the record $69 billion surplus last year.
Even after adjusting for inflation, it is still the largest surplus in
Largest surplus as a share of the economy since 1951. The surplus
is expected to be about 1.4 percent of GDP - the largest surplus as a
share of GDP since 1951.
The first back-to-back surpluses since 1956-57. The 1999 surplus of
$123 billion is the second year in a row of surplus, following a $69
billion surplus in 1998. The last time the Nation had budget surpluses
in two consecutive years was in 1956-57.
Seven years in a row of fiscal improvement -- the first time in U.S.
history. Achieving a larger surplus in 1999 than in 1998 marks the
seventh consecutive year of improved fiscal balance - extending what was
already the longest period of sustained fiscal improvement in American
LARGEST DEBT REDUCTION EVER
Paying down $140 billion of debt held by the public over the last
two years. In 1999, debt held by the public was reduced by $88 billion,
which follows the $51 billion debt reduction in 1998, and brings the
two-year total up to $140 billion.
In 1992 the deficit was $290 billion and projected to rise to more
than $400 billion this year. In 1993, the deficit would projected to
reach $429 billion in 1999. Instead the budget is actually in surplus
by $123 billion. This is a $552 billion improvement in 1999 alone.
The debt held by the public is $1.7 trillion lower than was
projected when the President took office. In 1993, the debt held by the
public was projected to balloon to $5.4 trillion by 1999, reaching 63
percent of GDP. Instead, shrinking deficits and surpluses in the last
two years have brought the debt down to $3.6 trillion, which is only
about 41 percent of GDP.
As a result, interest payments on the debt were $91 billion lower
than projected. In 1993, the net interest payments on the debt held by
the public were projected to grow to $321 billion in 1999. Fiscal
discipline has slashed this figure by $91 billion.
Spending Restraint Helped Usher in an Era of Surpluses
Federal spending smallest share of economy since 1974. The spending
restraint under President Clinton has brought spending down from 22.5
percent of GDP in 1992 to 19.3 percent of GDP in 1999 - the lowest in a
quarter century. In fact, Federal spending as a percentage of the
economy has been lower in every year for which President Clinton
submitted a budget than it was for any year under either of the two
preceding Administrations. At the same time, President Clinton has
increased investments in education, technology and other areas that are
vital to growth.
Discretionary spending down under President Clinton and up under the
previous two Administrations. Real discretionary spending has fallen by
more than .5 percent per year under President Clinton; from 1980 to 1992,
real discretionary spending increased 1.0 percent per year.
What Fiscal Discipline Means For America
Lower interest rates cut mortgage payments by $2,000 for families
with a $100,000 mortgage. Because of the policy of deficit and debt
reduction, it is estimated that a family with a home mortgage of
$100,000 might expect to save roughly $2,000 per year in mortgage
payments - effectively a large tax cut.
Lower interest rates cut car payments by $200 for families with a
Lower interest rates cut student loan payments by $200 for a person
with a typical student loan.
Lower debt will help maintain strong economic growth. With the
government no longer draining resources out of capital markets,
businesses have more funds for productive investment. This has helped
to fuel a 12 percent real annual increase in producers durable equipment
investment since 1993 - the sixth year in a row of double digit growth.
This compares to 3 percent annual growth from 1981-92, a period that saw
the debt held by the public quadruple.
Rising investment has contributed to an increase in productivity.
Non-farm business productivity has grown at a 2.1 percent average annual
rate for the last four years and 2.8 percent over the last year. This
compares to 1.25 percent growth from the 1970s through the early 1990s.
Under the President's Framework to Strengthen Social Security and Medicare,
the Debt Held by the Public Is Projected to be Eliminated by 2015.
Interest payments would be eliminated. Currently we spend about 14
cents of every Federal dollar on interest payments. These payments,
which were once projected to grow to 28 percent of all federal spending
in 2015, would be eliminated under the President's plan.
Prepare for the retiring baby boomers. Paying off the debt will
create room in the budget for the increased Social Security and Medicare
costs of the baby boomers. It will also free up funds for investment,
help keep interest rates low, and boost workers' productivity and
incomes. This fiscal discipline is the best way to prepare the
government, and the Nation, to meet the challenge of the retirement of
the baby boom generation.