H t ow large should the federal budget deficit be? Any economist or policy-maker seeking to answer this question is immediately confronted with a range of questions about how to measure the deficit. Should the deficit be measured including or excluding Social Security's cashflow surpluses? Should it include all or part of the recent savings and loan bailout? Should it be adjusted for growth, inflation, and the state of the economy? Should the deficit be measured net of government investment? Should the deficit include changes in the unfunded liabilities of Medicare, Social Security, and the civil service and the military retirement systems? The answers one gives to these and the plethora of similar questions make all the difference in the world to the measured size of the deficit. For want of agreement on the" correct" way to measure the deficit, the Congressional Budget Office now routinely offers the public a menu of deficits from which to choose. Take fiscal year 1992. For that year, the CBO reported that the" official" deficit, as measured for Congressional budget purposes, was $290 billion (CBO, 1993, Table 2-1). But it also reported that the" on-budget" deficit, which excludes the large surplus of the social security system and the small deficit of the postal service, was $340 billion. The CBO also offered a" standardized employment" deficit, which was only $201 billion, as well as a $292 billion deficit that excluded the net payments received to help finance Operation Desert Storm as well as those made to bolster the nation's deposit