Facebook Twitter Tumblr Close Skip to main content
A Project of The Annenberg Public Policy Center

Biggest Deficit in History? Yes and No

Half a trillion dollars is the most ever, but several others have been worse relative to the size of the economy.


Kerry said Feb. 26 that Bush’s budget deficit is “the largest in history.” But by the most important measure that’s not quite true.

This year the deficit is projected to be in the neighborhood of half a trillion dollars, a record. That’s 4.5% of the entire economy, a figure large enough to worry Alan Greenspan and others concerned about a drag on future economic growth. But it was even higher in both the Reagan administration and in the term of Bush’s father.


The federal deficit for fiscal year 2004 (which ends Sept. 30) is projected by the President’s Office of Management and Budget to be $521 billion. The Congressional Budget Office is predicting a somewhat lower total of $477 billion. But either would easily exceed the previous record deficit of $375 billion set last year. That in turn broke the previous record of $290 billion, which was reached under Bush’s father in 1992.

Bush in red: Clinton in dark blue
Source: Table 1.3 Budget of the United States Government: Fiscal Year 2005 Historical Tables.

But the most important measure of the deficit is not the size in dollars, or even the size in dollars after adjusting for inflation. The most important measure is the size relative to the nation’s economic output, what economists call Gross Domestic Product or GDP. And in fact, the current projected deficit was equaled or exceeded in four years during the Reagan administration and two years in the term of Bush’s father.

Source: Table 1.3 Budget of the United States Government: Fiscal Year 2005 Historical Tables

Still, there’s little question that the deficit is far too big by any measure. President Bush himself admits as much, and is promising to cut the deficit in half within two years. And on Feb. 25, Federal Reserve Chairman Alan Greenspan said he feared deficits are again becoming chronic, and threatening to drag down economic growth in the future.

Footnote: The biggest deficits by far — measured as a percentage of the economy — came during World War II. In 1943 the deficit was $54.3 billion — which today would amount to little more than rounding error. But back then it amounted to more than 30% of the wartime economy. Nothing since the war years has come close.



Budget Of The United States Government: Fiscal Year 2005 Historical Tables “Table 1.3 —Summary Of Receipts, Outlays, And Surpluses Or Deficits (−) In Current Dollars, Constant (FY 2000) Dollars, And As Percentages Of  GDP: 1940–2009″ Jan 2004.

US Congress, Congressional Budget Office “Monthly Budget Review ” 6 Feb 2004.

Alan Greenspan “Economic outlook and current fiscal issues”  Testimony before the Committee on the Budget, U.S. House of Representatives 25 Feb 2004.