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Editors Note: On Dec. 26, 2011, PolitiFact Virginia rated as Mostly True a statement by Democrat Tim Kaine that Republican George Allen, during his term in the U.S. Senate from 2001-2007, helped turn the largest budget surplus in U.S. history into the largest deficit. Our ruling was largely based on raw federal budget numbers dating back to the 1930s. The Allen campaign recently told us that our rating did not give enough credence to what two economists said in the original story: The best way to compare deficits through history is to express them as a percentage of the Gross Domestic Product at the time. We took a new look at the fact-check and concluded the Allen campaign is right. So we are changing our rating to Half True because there is still validity to Kaine’s claim, but his numbers need context. And we are providing a new analysis, which appears below: Democratic Senate candidate Tim Kaine says that Republican George Allen was a big spender during his term in the U.S. Senate from 2001 to 2007. He (Allen) turned, and his colleagues in the majority in the Senate turned, the biggest surplus in the history of the United States into the biggest deficit in the history of the United States, Kaine said in a Dec. 7, 2011 debate between the two candidates. We should point out that when measured in raw dollar terms, deficits in the last couple years have easily been the largest shortfalls ever. This fiscal year alone it’s projected to be $1.33 trillion, according to the Office of Management and Budget. But Brandi Hoffine, a Kaine campaign spokeswoman, said Kaine was referring specifically to surpluses and deficits as they stood at the time of Allen’s term in the Senate. Allen supported each of about four dozen appropriations bills that came to the Senate floor during his tenure. Did a record U.S. surplus melt into an historic deficit during Allen’s time? We checked. Hoffine, in an email to us, correctly noted that Office of Management and Budget data shows the surplus hit $236 billion in fiscal 2000. The data also show the budget sank to a $412.7 billion deficit in fiscal 2004. One way is to look at the numbers, as Kaine did, are as measurements of surpluses and deficits in their current year dollars without adjustment for inflation. By that method, 2004 had the highest deficit on record up until that time. Fiscal year 2000, which ended a couple months before Allen arrived, had the highest surplus on record. In May 2001, the Congressional Budget Office had been projecting another banner surplus for fiscal year 2001 -- $275 billion. But in an updated August 2001 analysis, the CBO said the surplus that year was expected to be much lower -- $153 billion. The main reasons for the diminished outlook, the CBO said, were the sluggish economy (a recession hit in 2001), as well as the enactment of the Bush tax cuts in 2001, which Allen supported. The OMB also provides data measuring each year’s deficit or surplus in 2005 dollars that have been adjusted for inflation. When that’s done, the deficits during World War II were greater than the 2004 deficit peak during Allen’s tenure. For example, when measured in 2005 dollars, the deficit was $531.7 billion in 1943. In 2004, the height of the deficit during Allen’s term, the shortfall was $428 billion. So by that measurement, Kaine’s claim does not hold up. A third way to look at this -- favored by several analysts we spoke with -- measures surpluses and deficits as a percentage of the country’s gross domestic product in a given year. The comparison to GDP -- the market value of all goods and services produced by a country -- provides a gauge of a nation’s ability to absorb its deficit. In 2004, the U.S deficit was 3.5 percent of GDP, the highest level during Allen’s term. Richard Kogan, a senior fellow at the liberal Center on Budget and Policy Priorities, noted the deficit was a higher percentage of GDP at other times, including under President Ronald Reagan from 1982 to 1986. The Reagan administration hit its high water mark in 1983 when the deficit was 6 percent of GDP. OMB tables show other periods -- including the early 1990s, World War II and the 1930s -- when the deficit as a share of GDP was greater than 2004. The 2000 surplus was 2.4 percent of GDP. We found one point, in 1948, when the surplus was bigger -- 4.6 percent of GDP, according to the OMB tables. Kogan said measuring the deficit by current year dollars, without taking into account for inflation and other factors, is one way of looking at the story. It’s not the best way. The best way of looking at the story is to measure deficits as a share of GDP, Kogan said. The reason for that is numbers have vastly different meanings over decades. Kogan said most analysts compare deficits through history by measuring how they compare to a particular year’s GDP. But Kogan said that when measuring deficits in strict dollar terms and not adjusting for inflation, Kaine’s statement isn’t entirely off the mark. As long as he (Kaine) meant through that date, through when Allen left the Senate, he’s literally correct, Kogan said. Michael Linden, director of tax and budget policy at the liberal Center for American Progress, said Kaine’s broad point that the surplus switched to deficits is correct. But Linden said he cringes when he hears historic comparisons using raw dollar figures. Dollars are worth different things in different years, said Linden, who prefers measuring deficits as a share of GDP. Norman Ornstein, a resident scholar at the conservative American Enterprise Institute, said it’s not wrong using raw dollar tallies when comparing deficits over time. Ornstein, however, said he thinks it would be better to use dollars that have been adjusted for inflation. Our ruling Kaine said Allen, during his term in the Senate, was part of a Republican majority that turned the largest surplus in U.S. history into the nation’s biggest deficit up until then. Kaine relied on raw numbers that do show the surplus peaked a few months before Allen took office and then dove into a record deficit during Allen’s term. But analysts said Kaine’s numbers -- which are unadjusted for inflation and do not take into account the size of the U.S. economy at the time -- are a weak basis for historical comparison. Several analysts told us the best historical measure comes from looking at annual surpluses and deficits as a percentage of the nation’s GDP for a given year. By that gauge, although the U.S. had high deficits during Allen’s term, they were not close to record-setting. So Kaine’s statement is accurate in terms of raw numbers, but it frays when historical context is added. We rate his claim Half True.
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