It's the options and dot.coms, stupid
As we all fondly recall, 1998, 1999, and 2000 saw budget surpluses -- the last two, the largest in U.S. history.
President Clinton and his acolytes crowed that it was the President's 1993 tax increases that resulted in these incredible numbers. Of course, they never did get around to explaining why it took 5 years for those tax increases to lead to the rapid tax revenue growth we saw starting in 1998 or why in 2001, before President Bush enacted his tax cuts, tax revenues were starting to decline.
Republicans took control of Congress in 1995 and claimed that the 98-'00 surpluses were the result of fiscal discipline. If it wasn't so painfully untrue, it would keep me laughing for years. Federal spending was at 1.515 trillion in 1995. In 2000, the great Republican pocketbook-minders had "shrunk" federal spending to a level of 1.789 trillion -- which, by the way, was almost exactly how much the Democrats had "shrunk" federal spending in the 5 years before the Republicans took office.
Congressional Republicans are a lot like those guys who cut back on small purchases to save for the 60" widescreen television set for their trailer home. Whereas Democrats eschew such "rich man's status symbol purchases" and instead fritter away their money on thousands of $4.50 Hallmark cards, which make them feel more egalitarian and "close to the little people".
Of course, neither are actually controlling spending (or serving the public good), and the last 5 years have laid waste to any credibility Republicans thought they had as the party of fiscal restraint -- spending a staggering 2.47 trillion in 2005. Almost doubling what the "fiscally conversative" Republican and Democratic Congresses had done in each of their previous 5 year terms.
Source for the above numbers: CBO
So how do we account for these record setting budget surpluses?
In unrelated news -- 1998-2000 -- Amazon.com's stock rose from about $15 to over $100. By 2002, Amazon.com hovered around $25 per share. Freemarkets (the company) rocketed to over $300 per share. By 2002, it was fighting to keep its head above $15 a share.
In further unrelated news, CNET.com kindly put together a Top 10 dot com busts list (just for the heck of it, I included the years of their "rise" and ultimate demise.)
1) Webvan (the people who thought using the Internet to deliver groceries was a great idea... I suspect they're currently working on a rival to Apple's fabulous iTunes -- it will be called "The 8-track Jukebox") -- (1999 - 2001)
2) Pets.com -- (1998 - 2000) (You know you have a LOUSY business model when growth on pet spending by Americans and Europeans begins to look like a chart of Anna Nicole Smith's weight in the same time period and yet you fail)
3) Kozmo.com (1998-2001)
4) Flooz.com (1998-2001) -- the geniuses who thought that people would prefer "Internet currency" to using their credit cards.
5) eToys.com (1997-2001)
6) Boo.com (1998-2000)
7) MVP.com (1999-2000)
8) Go.com (1998-2001)
9) Kibu.com (1998-2000)
10) GovWorks (1999-2000) (as we can see from the numbers above, GovDoesntWork would have likely led to a more successful (or at least truthful) business.)
Again... in unrelated news ...
The year 2000 saw individual income tax reach its highest level ever... at just over 1 trillion dolloars.
Analyses conducted by the CBO indicated that stock option exercise revenues increased from scant amounts in the early 90's to over $100 billion in 2000. (Resulting in approximately $40-45 billion in additional revenue)
Thus, we got rich in the late 90s in the same way the crack addict does who sells all of his belongings. (This is not even factoring in the falsely inflated salaries that some people received because RealBadBusinessIdea.com and GoingToGoBust.com and the Y2K scam artist companies lured away IT professionals and web designers, as well as lawyers, marketing, executives, and HR folks)
Unfortunately just like that crack addict, there comes a point when that source of temporary cash infusion (employees cashing in stock options on their company's ridiculously over-inflated stock price -- who the hell was buying Amazon.com for $100 a share or Freemarkets for over $300 a share???) dries up, and all you are left with is a greater need for a fix (or federal spending) without the cash (revenue) to support your greater crack spending habits. Unfortunately for crack users, the Chinese government is not willing to finance their crack habit by purchasing crack user securities. More unfortunately for us, the same cannot be said about U.S. government securities.
So if you are wondering why we cannot balance the budget now like we did back then, all you need to know is that now everyone knows that delivering groceries over the Internet will never work, that we have 3 60" widescreen tvs in a studio apartment, and our crack habit is as bad as ever.
Perhaps it also helps explain why I consider President Clinton neither a good President nor a bad President... but rather a mediocre, morally-flawed President with fortunate timing -- a 1990s version of Calvin Coolidge -- another man upon whom chance smiled and about whom the best one can say is that he was at the right place at the right time.
And why I think of President Bush (43) as a fiscal conservative as often as I think of Teddy Kennedy as a fiscal conservative. Indiscriminately cutting every tax in sight does not make you a fiscal conservative, it just makes you indiscriminate. Ronald Reagan - no friend of taxes -- actually raised certain taxes because in his judgment that was the only sensible way of preserving certain programs -- i.e. social security. And buying 3 60" widescreen tv sets for a studio apartment may appease you, your wife, and daughter, but it sure as heck is not the fiscally responsible (or adult) thing to do.
