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The budget news over the next few months is likely to be bad and, therefore, will receive more prominent play than it has over the past few months.

For the first time all year, spending will be formally recognized as being higher than previously forecast. This will happen for a number of reasons, including:

• The costs of the war and the occupation of Iraq were not included in either the president's budget or the baseline.
• The $20 billion in aid to states that was included in the just-enacted tax bill also was not assumed in prior estimates.
• The fiscal 2004 defense appropriation is expected to provide more spending than was assumed in the baseline or proposed in the president's budget.
• Revenues will be lower than anticipated, both because the economy has not performed as well as was projected earlier in the year and because the tax bill will cut taxes by more in the first two years than was assumed in the Bush budget.

Put all this together, and a federal deficit between $400 billion and $500 billion in fiscal 2003 and fiscal 2004 is likely to be officially estimated for the first time.

To a certain extent, this will not be news at all. Private analyses and informal comments by federal officials have indicated for months that deficits of this magnitude were likely.

However, the next few months will include the first official federal government forecasts of annual half-trillion dollar deficits, and that will make it news. The Office of Management and Budget, which puts out its midsession budget review in July, and the Congressional Budget Office, which releases its midyear budget update in August, will confirm for the first time what many others have been saying all year long.

That will set the stage for another debate on the deficit, the debt and the Bush administration's budget policies, even though the budget resolution and debt ceiling have already been adopted this year. Statements on the floor of the House and Senate, testimony at committee hearings, and speeches by presidential candidates will all keep the issue in the news.

The budget will also be news in the weeks and months ahead for several other reasons.

First, the Senate will have to hold confirmation hearings on Josh Bolten, the Bush administration's choice to replace Mitch Daniels as Office of Management and Budget director. No one expects Bolten to have a tough time being confirmed. However, the hearings will provide a forum for another debate on the budget that the White House had hoped to avoid the rest of this year. If the hearings and floor debate do not happen quickly, they could occur at almost the same time that OMB releases its midsession review.

Because of that, don't be surprised if the Senate hearing and floor debate on Bolten are scheduled quickly, or if, as has sometimes happened in the past, OMB delays the release of its midsession review until Bolten has been confirmed.

Second, the higher deficit will put additional pressure on all domestic appropriations. Cuts in these programs and even limited increases will be news both in Washington and the communities around the country that will be affected.

In addition, many representatives and senators who were so adamant that the deficit was not a problem earlier in the year during the tax-cut debate will likely make it an issue as the spending bills are considered. Their inconsistent positions and what could be nasty debates will all be newsworthy.

Third, interest rates are very likely to rise in the coming months as the economy picks up. For many, this is expected and will be welcome because it will indicate that economic growth has accelerated and that financial markets have recognized that it is here for a while.

However, regardless of the reason it is happening, rising interest rates will also be a burden for those who borrow, and that will prompt the powerful Washington organizations that represent real estate agents, home builders, mortgage bankers and automakers to call for action, like reducing the deficit.

Combine rising interest rates with the falling dollar, and the increased cost of many goods and services in the United States will quickly become the focus of Washington's economic policy-makers.

Finally, the new and much higher estimates will make news because they will validate the allegations made by those who expressed concerns about the deficit. They will also provide what appears to be proof that the White House's claims about the government's bottom line were wrong.

When combined with higher interest rates and the declining value of the dollar, this could put an administration that is used to having its way with the media on the defensive. That, by itself, would be news.

Question Of The Week

Last Week's Question. The question was both simpler and not as simple it seemed. The federal program that shuts down first if an increase in the federal debt ceiling is not enacted by the time the existing limit is reached is... the issuance of new debt by the U.S. Treasury. In fact, no other programs might be affected at all. The government can continue to issue checks even if it doesn't have the cash to make them good. It would have been up to a bank to decide whether to honor the checks. In most cases, banks would have done so, especially if government borrowing was expected to resume in a short time, which would make the checks good.

In addition, the Federal Reserve, which processes all checks, has said on numerous occasions that it cannot distinguish between those checks issued for different purposes and so is unable to assign a priority to one program over another. That means that no one program would have been affected before another in any case.

The winner of the fabulous, white, silver and red "I Won A 2003 Budget Battle" mouse pad (I'm using mine as this is being written) is Nathan Haselhorst from Chicago.

This Week's Question. This week's question is a follow-up to last week's question. If a lack of cash doesn't shut down the government, what does? Click here to send in your response. Your answer must be received by 5 p.m. PDT on Saturday, June 8, 2003. The winner of the "I Won A 2003 Budget Battle" mouse pad will be selected at random from all those who submit correct responses. You must include your mailing address so the mouse pad can be sent if you are the winner.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the mouse pad actually gets to you.

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