Economist Dean Baker, writing in his weekly newsletter (Feb. 2, 2004):

Budget Office Forecasts Record Deficit in '04
Edmund L. Andrews
New York Times , January 27, 2004, Page A1
http://www.nytimes.com/2004/01/27/politics/27BUDG.html?ex=1390539600&en=cf91e85a5fc67a37&ei=5007&partner= USERLAND

This article reports on the release of new budget projections from the Congressional Budget Office. The headline of the article describes the projected deficit of $477 billion in 2004 as a record, based on the fact that it is the largest deficit in history measured in dollar terms.

While this is true, it is misleading. As the economy grows, it can absorb larger deficits. The only meaningful measure of the deficit is as a share of GDP. The projected 2004 deficit is equal to approximately 4.5 percent of GDP, less than the post-war high of 6.0 percent of GDP in 1982. This fact is mentioned in the article, but only as a small point that many readers could miss. The size of the deficit as a share of GDP should have been highlighted instead of the deficit measured in nominal terms.

It is worth noting that the “on-budget” deficit, which excludes the money the borrowed from the Social Security trust fund, is projected to be approximately 6.3 percent of GDP in 2004. This deficit is a record high.