President Obama's 2011 budget projects the deficit in 2010 to reach $1.55 trillion, which would be the highest number in history. But the number also deserves some context. News organizations like the Wall Street Journal and Reuters are reporting that the 2010 deficit is a "record." Nominally, that's absolutely true. As a percent of GDP, it is not.

Dean Baker makes the case:

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.

I'm with Dean. It's not that years of trillion-dollar deficits aren't worrisome (they are) or that our long-term debt isn't a crisis (it really, really is). But it doesn't make any sense to divorce the deficit figure from history. In 1943, when the deficit accounted for a modern record of 28 percent of GDP, our GDP was smaller than $200 billion. Today it's around $14 trillion. It's silly to compare the GDP numbers nominally, so why compare the deficit figures without context?

That said, it's impossible to avoid the conclusion that we face a long-term debt crisis. That bit is not only widely reported, it's also exactly right. After we climb down from the trillion-dollar-debt range in the next five years, we have about a five-to-ten year window of smaller deficits before the baby boomer generation begins to retire, pays fewer taxes and collects a lot more government benefits from Social Security and Medicare. That's exactly why any serious deficit commission cannot leave revenues and entitlements off the table. Debt reform is revenue and entitlement reform, ipso facto.

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