A Blast From The Past

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Source: Bianco Research



Since I am away this week, I am going to turn over the noon slot to Jim Bianco’s Blast From The Past:

Clinton to Propose Early Debt Payoff  The Los Angeles Times – (January 26, 2000)

Spending: Due to economy, budget going to Congress will contain plan to retire $3.6-trillion obligation by 2013, two years sooner than expected.

President Clinton said Tuesday that the budget he will send Congress on Feb. 7 will propose paying off the entire $3.6-trillion national debt by 2013–two years earlier than had been expected even a few months ago. At a news conference, the president attributed the opportunity for a speedup to an economy that is even stronger than had been forecast, resulting in higher tax revenue and lower expenses, and to his own austere budget policies.


So how did that work out?

As the story above says, the national debt held by the public was $3.6 trillion the day Clinton made this announcement.  Today, instead of it approaching zero, it is $11.065 trillion and growing in a parabolic fashion.  The two charts below highlight U.S. debt-to-GDP when Clinton made his statement and what subsequently happened.

To be fair, Clinton was not the only one to think the U.S. might pay off its debt.  Greenspan was concerned about conducting FOMC operations in the absence of Treasury debt.  Instead, we now have Bernanke “printing money” to buy back exploding budget deficits, essentially the opposite of Greenspan’s fear 12 years ago.

Keep this in mind the next time pundits and economists discuss long-range government forecasts as if they are sure to come true.


Click to enlarge:

Source: Bianco Research

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