Clinton's "Surplus"

With all the recent news about Obama’s budget plans, I want to set the record straight about something.

I keep hearing liberals boast, “Well, when Clinton left office he had a surplus, and look what Bush did to it…”

Clinton didn’t have a surplus.

Slick Willy changed the rules of accounting while he was in office to make it look like he had a surplus.

Clinton decided to use the “cash” based accounting numbers, which look directly at cash that came in vs. cash that went out. This type of accounting is fine for very small businesses or personal checking. Federal law requires businesses with revenues over $1 million/year to use “accrual” based accounting. Accrual accounting measures income and expenses when they accrue. For example: if I borrow $10,000, cash accounting says that I have $10,000 on my books and doesn’t take into account that I owe someone that money. Accrual accounting says that I have $10,000 + -$10,000 in debt = $0.

During the final 4 years of Clinton’s budget, they reported a $559 billion surplus. When the government audited the numbers (using accrual accounting), there was actually a $484 billion deficit.
http://www.usatoday.com/money/2006-08-02-deficit-usat_x.htm