When Did Federal Deficits Begin to Decline?

Ask almost anybody and they'll tell you the federal deficit began going down in the 1990s following the 1993 tax hike, the largest tax increase in history.

Tables put out by the government seem to bolster this impression. This is a chart published by the White House Office of Management and Budget on August 22, 2001. The table seems to show that the deficts increased in the early 1980s, then flattened a bit before peaking in 1992. In the 1990s, the chart shows, the deficits rapidly declined.

The chart accurately measures the deficit in absolute numbers (or as economists put it, in nominal dollars). But as economist Dean Baker recently pointed out, voters"would get a better picture of the relative importance of budget deficits over this period if they were measured as a share of GDP. This measure would give a substantially different picture."

While the chart shows the defict peaking in 1992 at just under $300 billion dollars,"measured as a share of GDP, the deficit peaked at 6.0 percent in 1983," Mr. Baker reported."By this measure," he concluded,"the deficit fell through most of the eighties, although it did rise back to 4.7 percent of GDP in 1992, as a result of the recession in 1990-91."