September 07, 2004
Record Deficit?
Well not really. Despite what many newspapers are reporting as "record deficits" the current deficit is not a record breaker (click here and here for two examples). However, when adjusting all budget surpluses and deficits to 2000 dollars another picture emerges (Note: While the OMB has data back to 1789 I am looking only at data from 1940 onwards).
- Highest Budget Deficit: 1943 $486.2 billion.
- Second highest Budget Deficit: 1945 $456.8 billion.
- Third highest Budget Deficit: 1944 $448.2 billion.
- Fourth highest Budget Deficit: 2004 $383.7 billion (estimated).
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So...is that big? Sure, but it isn't a record buster. In fact it is short by about $100 billion dollars. The first link above, the Seattle Post Intelligencer, is particularly misleading. Note this paragraph,
When adjusted to erase the effects of inflation, the projected $422 billion deficit projected for 2004 would exceed the value of every annual shortfall since World War II.
Gee, why stop at 1945? Could it be that it blows the headline of the story out of the water? I mean we aren't in a war right now are we....oh wait, nevermind.
Also, if we look at deficits as a percentage of GDP this current deficit is even "smaller" in that it comes in as the 17th highest deficit. The years 1941, 1942, 1943, 1944, 1945, 1976, 1982, 1982, 1983, 1984, 1985, 1986, 1990, 1991, 1992 and 1993 are all higher as a percentage of GDP.
The article from CBS Market Watch is also pretty bad with its headline: Long-term budget picture worsens: Congressional Budget Office sees record $422 bln deficit. Well not really. The budget deficit estimate declined $55 billion! How a $55 billion dollar decline in the deficit is a "worsening of the budget outlook" is beyond me. Maybe it is kind of like how the economy shrunk last quarter according the innumerates at Reuters (Reuters handily changed the headline and the previous one disappeared down the memory hole).
Now the basis for the claim in the article is that the long term forcast for U.S. debt is going to rise $300 billion. Of course, this is a projection, and one from the people who several years ago were projecting huge surpluses only to have to change those projections to deficits over the course of a few months.
Now, this doesn't mean the current deficit isn't large. It doesn't mean that it doesn't signify some economic problems are still looming, or that we should simply ignore the deficit. What it means is that we have idiots reporting on economic matters. It took me maybe 30 to 45 minutes to find all this data and compose this posts and I'm not a journalist. These guys should be fired.
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