Will the Real Federal Deficit Stand Up
In some circles, the federal budget deficit has become the hottest political issue since Vietnam. Democrats and Republicans echo each others' proclamations of disaster and largely restrict their differences to proposed remedies and the casting of blame. Scoring political points has replaced almost all efforts at sober economic analysis. Deficits do matter, but to know how and how much, you have to measure them right. And deficits can be good as well as bad. By official measure, the federal budget has been in deficit in all but eight of the fifty-five years from 1931 through 1985. In fact, in the twenty-five years since 1960 only one, 1969, had no deficit. The last sixteen years have presented an unbroken picture of deficits. World War II saw what were then huge deficits, totaling $170 billion for the years 1942 through 1945. The total gross federal debt over that period rose by $203 billion. From 1946 through 1984, budget deficits, net of surpluses, totaled $988 billion; including off-budget outlays, they totaled $1,112 billion. Over that period, the gross federal public debt increased by $1,317 billion. This is a history that, at least in general terms, is well etched into the public consciousness. It has been the stuff of many sober pronouncements and warnings and has frequently agitated political debate. A number of additional items of information, however, compli-