The headline of a WSJ article on the deficit told readers that: "deficit to hit all-time high." This is not true in any meaningful way. Measured in nominal dollars, the $1.6 trillion deficit is an all-time high, but measured as a share of GDP (the only meaningful measure) the deficit is about 11 percent of GDP. This leaves it much smaller than the deficits run during World War II which exceeded 20 percent of GDP. (Marketplace radio made the same error on Monday morning.) The article reports that after falling as the economy recovers, the deficit is projected to rise again due to baby boomers collecting Social Security and Medicare. Actually, the main reason for the projected increase in the deficit at the end of the decade is rising health care costs which will get passed on in higher costs for Medicare, Medicaid and other government programs. If the United States health care system were as efficient as those in other countries, the U.S. would be expecting huge budget surpluses in future decades.
--Dean Baker
