I Guess It Depends On What Is Is

Now I have to wonder about the accuracy of this,

On the US budget, Clinton warned that the federal deficit may be coming untenable, driven by foreign wars, the post-hurricane recovery programme and tax cuts that benefitted just the richest one percent of the US population, himself included.

“What Americans need to understand is that … every single day of the year, our government goes into the market and borrows money from other countries to finance Iraq,
Afghanistan, Katrina, and our tax cuts,” he said.

“We have never done this before. Never in the history of our republic have we ever financed a conflict, military conflict, by borrowing money from somewhere else.”–emphasis added

During World War II, the U.S. debt went to over 100% of GDP. According the Bureau of Economic Analysis GDP in 1945 was $223.1 billion. The national debt at that time was $258.7 billion. That is, the U.S. public debt was just under 116% of GDP. Compare this to today when the public debt is about 64.7% of GDP. Now don’t get me wrong the run up in debt and the future with endless deficits doesn’t look good, but Clinton is…well it looks like he is making crap up. I suppose it is possible that all the debt incurred during WWII was sold only to the U.S. public. Frankly I doubt it since U.S. debt has taken two forms. There are marketable and non-marketable bonds. Non-marketable bonds are sold under pretty strict conditions, but the marketable bonds are sold without any conditions. So it is likely that countries like England, Canada, and others, and the individuals in those countries were buying U.S. bonds just like they do now.

There is reason to point out that the deficits are problematic, and I think Bush needs to take an axe to the budget (although I doubt he has the ability or the courage to do it), but this kind of…well lie just goes to show that Clinton sure can lie really well. I bet he didn’t blink or stumble over that one at all. Reagan might have been the Great Communicator, but Clinton is the Great Fabricator.

FILED UNDER: Economics and Business, US Politics
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. mark says:

    In the 1940s almost all of US debt was domestically held. The UK and Canada were busy borrowing money themselves (mainly from the US, so the net flow was from the SU to others). All the “war bond” drives were designed to sell US govt bonds for the war. I think Clinton meant that tax cuts are probably not a good thing in wartime as expenses are going up. Sure you have to borrow a lot, but it doesn’t make any sense to leave your tax rate the same as it was in the pre-war era if you have to fund all these military operations. Same with Iraq. If the economy was in surplus, then fine, but as there is a big and growing deficit, refraining from tax cuts is probably in order.

  2. DL says:

    Is he saying that Japan etc. did not puchase US debt intruments during his incursions in Somalia, Haiti, The Balkans, or …let’s see missiles in Sudan and Afghanistan? Financing through selling of bonds to foreign states is
    what happened during his administration -regardless of any deficit or lack thereof.

  3. Herb says:

    Clinton: “I did not have sex with that woman”

    That statement tell you everything you need to know about Clinton.

  4. Cricket says:

    And of course, Clinton has never heard of China.

  5. Anderson says:

    I think Clinton must’ve meant we’ve never *entirely* financed a war by borrowing. Not that he’s above lying, of course.

  6. ken says:

    By the comments of the conservatives here it is clear they do not have any understanding of economic reality. Not that that is a surpise.

    Only stupid conservatives believe that you can raise revenue by lowing taxes. This, of course, has been proven to be a false idealogy but it doesn’t stop them from believing it.

    And Steve, who should know better, also thinks that financing his tax cuts with money borrowed from Communist China and leaving his debt to my children and grandchildren to pay back is just fine. Clinton is taking a morally correct stand on this issue while Steve is taking an immoral one.

  7. M1EK says:

    All the caterwauling about Clinton misses this: he’s absolutely right. We never fought a war this big by borrowing ABROAD. Note the words “from somewhere else” in his quote.

    As another commenter pointed out, the rest of the world didn’t have any money to lend us during WWII! We fought that war by borrowing money from our own citizens.

  8. Steve Verdon says:

    And Steve, who should know better, also thinks that financing his tax cuts with money borrowed from Communist China and leaving his debt to my children and grandchildren to pay back is just fine. Clinton is taking a morally correct stand on this issue while Steve is taking an immoral one.

    Really? I wrote that? Where?

    All the caterwauling about Clinton misses this: he’s absolutely right. We never fought a war this big by borrowing ABROAD. Note the words “from somewhere else” in his quote.

    As another commenter pointed out, the rest of the world didn’t have any money to lend us during WWII! We fought that war by borrowing money from our own citizens.

    Actually I looked for data on borrowing and who held what during WWII and couldn’t find anything. The fact that marketable bonds were available means that non-U.S. citizens could have bought them.

    I think Clinton must’ve meant we’ve never entirely financed a war by borrowing. Not that he’s above lying, of course.

    And this is true today. A big part of the U.S. debt is held by citizens. Granted Japan and China hold quite a bit, but in total it is fairly small percentages.

  9. Herb says:

    Ken, whats with you? you apparently let your ultra liberal mind overcome your sense of good judgment. And If you don’t think that Clinton is a Liar, then you must believe in the tooth ferry. You liberals are and have been sore losers and you let your hate overcome the norms of good judgment. You say Conservatives are “stupid”. but you are just plain “Dumb”

    As Confucius says, ” He who knows not and knows not that he knows not is a FOOL. That Ken, fits you.

  10. M1EK says:

    “The fact that marketable bonds were available means that non-U.S. citizens could have bought them.”

    Oh, that’s a load of crap. Really, if Clinton saved a baby from a burning house, you guys would accuse him of child molesting.

    During WWII, NOBODY IN THE REST OF THE WORLD HAD ENOUGH MONEY TO BUY A NON-TRIVIAL AMOUNT OF OUR BONDS. GMAFB.

  11. ken says:

    It looks to me like idiots like Herb believe we could have financed WWII by cutting taxes domestically and then borrowing money from Germany and Japan. What a nut.

  12. Steve Verdon says:

    Oh, that’s a load of crap. Really, if Clinton saved a baby from a burning house, you guys would accuse him of child molesting.

    Ummm, no it is a fact. I thought you liberals were supposed to be part of the “Reality Based Community”. I call a person who dismisses facts a kook.

    During WWII, NOBODY IN THE REST OF THE WORLD HAD ENOUGH MONEY TO BUY A NON-TRIVIAL AMOUNT OF OUR BONDS. GMAFB.

    Really? Where is your evidence of this? Seriously, I’ve looked but can’t find it. Could it have all been self-financed? I suppose, but then why not simply raise taxes? Bonds after all do pretty much the same thing: take money from those who have it and put in the hands of those who don’t. With interest of course. Granted taxes have deadweightloss as well so its hard to say if taxes would have been less efficient.

    And speaking of trivial amounts of bonds with over $7 trillion in debt, even $350 billion is pretty small. Most of the U.S. debt is held by Americans.

    It looks to me like idiots like Herb believe we could have financed WWII by cutting taxes domestically and then borrowing money from Germany and Japan. What a nut.

    Really? Herb wrote that? I keep looking but I don’t see it.

  13. odograph says:

    1. Is the $7 trillion s the debt a good thing?

    2. Does making yourselves all aquiver about what Clinton says change the answer to question 1?

  14. Steve Verdon says:

    1. Is the $7 trillion s the debt a good thing?

    Depends on why you rack up debt. For example, during WWII it was probably a good thing. Right, now…I don’t know, but I’m inclined to go with “a bad thing”.

    2. Does making yourselves all aquiver about what Clinton says change the answer to question 1?

    Nope. Was there a point to this question besides implying that lying by a former president is acceptable?

  15. odograph says:

    I like your newer post, about the debt/deficit problem. I didn’t like this one because it seemed focused on a sideshow, or worse distract focus from the deficit itself.

    FWIW, I got the $7 billion from:

    http://www.publicdebt.treas.gov/opd/opdpenny.htm

  16. Herb says:

    See Ken, you didn’t learn a thing. You forgot what I tried to teach you. Or maybe you are just a slow learner.

    You know, About What Confucius Said.

  17. Herb says:

    And Ken. I forgot to tell you, I was a young led when WW11 was started and going on. In fact, I sold defence stamps going door to door. I bet you never heard of defence stamps.

    And by the way, where were you during WW11?

  18. Herb says:

    OTB Readers, I just couldn’t pass this one up.

    As I read the comments from Ken
    It makes me wonder when
    Ken will start to think straight
    And not be to late
    To realize Old Timers are right

    While the Old Timers were there
    Ken was only a glare
    In his daddys eye one night.

  19. An Interested Party says:

    Indeed, Clinton’s lies are only rivaled by our current commander-in-chief…

  20. TangoMan says:

    The US raised over $185.7 Billion dollars during the course of the war by selling War Bonds strictly to the American public. Find out what the national debt was prior to US quasi-involvement (lend-lease) in the European war and they’ll probably balance. Don’t forget to factor in US seizures of Japanese-American property and seizure of Axis assets in the US.

    Don’t forget that Britain and Canada entered the war on Sept.10, 1939 and their domestic savings were used to fund their war efforts. I think it highly unlikely that they cared very much for funding the US war effort two years still in the future. Besides, don’t underestimate the patriotic feelings and the anger that takes place, as it did in the US, against people who didn’t buy their own nation’s war bonds.

    Now President Clinton made mention in his preamble of the fact that our gov’t goes into the market to borrow from other countries. We certainly didn’t do that in WWII. As for Korea and Vietnam, I’m not sure, but they were more police actions, weren’t they 🙂

    So, I think President Clinton isn’t bending the truth. Note the phrase “Somewhere else.”

    I reserve the right to modify my position if you provide details on Korea and Vietnam.

    Also, keep in mind that in the ole days we were the world’s largest creditor nation. Things weren’t always like today where we are the world’s largest debtor nation.

    Another also, in those days the preferred financial metric was Gross National Product because our significant foreign income was added to our GDP.

    but Clinton is the Great Fabricator.

    Not true in this case.

  21. Steve Verdon says:

    Tangoman, I see your skills at arithmetic are a bit weak. $213.4 billion less $185.7 billion leaves about $27 billion unexplained. How much of that was owned by foreigners (governments or individuals).

    The point is that the U.S. has frequently gone into the market place borrowing money to cover expenditures, even during times of armed conflict (by the way, while the War on Terror is called a War, I don’t think a decleration of war has been issued as like in WWII, or WWI) and not really caring where the money came from (which is the point behind marketable bonds).

    Another also, in those days the preferred financial metric was Gross National Product because our significant foreign income was added to our GDP.

    This is irrelevant in that while it would change the ratios in the post it would not change the fact of massive borrowing during WWII.

    I reserve the right to modify my position if you provide details on Korea and Vietnam.

    We ran deficits during both conflicts.