I've been thinking about this thread since it was first posted. I probably should go back and re-read the previous 11 pages, but one question that has bugged me is what conditions led to the small period of time in the late 90's that led to a surplus? I can remember at the time the gov't had ran deficits from the 60's until the 90's, and then the Republican Party took power in like '94 and had their contract with America, and then we had a gov't shutdown, and then not long after we had surpluses. I do remember welfare reform and shrinking of the military at that time, but as we've stated the # 1 cause of the debts and deficits are entitlements.
Were the entitlements of the era much smaller than they are today? And if so, was the federal government able to just cut discretionary spending and get things under control?
Or was it a mixture of the economy being supercharged, bringing in more taxes, at the same time the gov't made modest cuts and these factors combined to create the surplus? I do remember that after W got elected, it didn't take long at all to start running deficits again. Blame 9/11 or the GWT (Global War on Terror), but it seems like we hit GO and never looked back.
It was a whole lot of things and you hit on most of the big ones.
The biggest:
Were the entitlements of the era much smaller than they are today?
Yes.
The baby boom is considered 1946-1964. In 1990 those folks were 26-44. They were all in or entering their prime earning years. 30 years later in 2020 they were all 56-74. They were all in or entering retirement.
The retirees of 1990 were mostly people born in the mid-1920's and prior. Here is
a site I found (just googled, so not vouching for it but looks ok, maybe). US births for the years shown from 1910-1945 are all around 2.5 to a little under 3M. It started really climbing after WWII and peaked at 4.3M in 1957. It stayed above 4M through 1964 (last year of the aforementioned Baby Boom) then started dropping. I personally was born in the trough of the baby-bust. Annual births in 1973-1975 were <3.2M, the only such post-war years.
People tend to be at peak earnings at around 30-50. Before that people are generally getting into position and after that people start winding down and retiring. Also note that people over 50 tend to be less likely to seek out increases because they have less time left to collect the rewards.
When you look at the economy, a lot of the mystery can be answered simply by asking "who is 30-50". In 1990 the 30-50 year olds were born from 1940-1960 so that covers most of the baby boom. Then in the mid-1990's the people entering that cohort started to be the less numerous children of the mid-1960's while the people exiting that cohort were the VERY numerous children of the mid-1940's. The last baby-boomer exited that cohort in 2014.
Entitlements are up because:
- There are a LOT more retirees for at least two reasons: I, people are living longer; II, more people were born 60-90 years ago (1934-1964) than were born 60-90 years prior to 1990 (1900-1930).
- Healthcare costs (much of it borne by Medicare and Medicaid) have been rising faster than overall prices for decades.
- The Medicare Rx benefit was added in 2006.
On the defense side of things, IIRC, postwar defense spending peaked during Korea (1950-1953), Vietnam (mostly 1964-1972 with some minor involvement before and after those dates) and the Reagan-era buildup (1981-1989). Then the Berlin Wall came down and defense spending dropped for a while before 9/11 sent it back up. The mid-1990's was after the Wall came down and before the Towers came down so defense spending was comparatively low.
Politically, when R's took Congress (both houses) in the 1994 elections then Clinton held the WH you had a situation where they were fighting and not wanting each other to get credit for any major new initiatives so basically not much happened and as it turns out, that is cheap.
