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The start of the federal fiscal year was changed from July 1 to Oct. 1 almost three decades ago. But in reality, the current fiscal year still basically ends on June 30, because there is little that Congress or the president can do at this point to change the bottom-line results.

Any legislative actions taken during the last quarter of 2003 are far more likely to affect 2004 than the current fiscal year. This includes further supplemental appropriations, which under even the most expeditious schedule would only start to be spent in September - that is, during the last month of the year. October and beyond is when most of these outlays would actually occur.

The same is true of another tax cut. Even if the Treasury Department were ready to implement legislation enacted the first week Congress returns from its July 4 recess, most of the revenue loss would be felt in 2004. It should be noted, however, that another tax cut is not expected to be enacted that quickly and, given the differences between what the House and Senate say they want to do, it is not clear how the Treasury could be ready immediately in any case.

The only thing at this point that could have a significant impact on the budget is the economy. But most analysts still expect overall growth to be slower than had been anticipated when this year's budget debate began and there is virtually nothing the government can do in the last quarter of the year to change that.

Even with the fiscal and monetary policy fixes now in place - the tax cut going into effect and the Federal Reserve's decision last week to lower short-term interest rates again - the economy is still sluggish. The post-Iraq war boost that many had anticipated has not occurred, energy prices have not fallen as precipitously as had been projected, and state and local taxes are rising as these governments deal with their own budget deficits.

So although there are still three months left before we all lift a glass to usher in a new fiscal year, and even though the mid-session reviews have not yet been released by either the Office of Management and Budget or Congressional Budget Office, it is not too early to reach some conclusions about 2003.

• First, regardless of whether you think it is justified or not, the fiscal 2003 deficit will set the all-time record for highest in nominal terms. The previous $290 billion record will be exceeded by around $135 billion - that is, by nearly 50 percent.
• Second, fiscal 2003 is likely only the beginning. The spending and tax policies put in place this year are very likely to result in deficits of $300 billion or higher every year through at least the end of this decade. Deficits of $400 billion a year would not be a surprise either.
• Third, fiscal 2003 is very likely to be considered a significant demarcation point - and not just because of the numbers. The deficit, which has been a major characteristic of federal budget politics for at least the past 30 years, may no longer be a significant factor in the future.

  The most recent example of this is the $400 billion prescription drug plan that now seems all but certain to be enacted in some form this year. This was the plan that several years ago was justified because there was a projected surplus. That surplus is long gone, but Congress and the White House seem determined to put the program in place anyway.

• Fourth, the long-term budget outlook has changed significantly because of the spending and taxing polices put in place this year. A major category of spending - interest on the publicly-held federal debt - which only two years ago had been projected to fall to practically nothing by the end of the decade, will now be around $350 billion a year by 2010. This most uncontrollable of all mandatory spending will haunt the federal budget, and therefore national politics, for generations.
• Finally, fiscal 2003 is the year when it became clear that the federal budget process is nothing more than a completely empty shell. Congressional budget resolutions are now enacted only so that the reconciliation procedures can be used to avoid a filibuster in the Senate with legislation that increases the deficit. Budget resolutions generally include appropriations levels that virtually everyone knows are artificially low and cannot be met unless gimmicks are used. The budget committees, which for most of the past three decades had assumed the responsibility for at least keeping their House and Senate colleagues informed about the budget consequences of their actions, have gone silent.

So while some of us wait for the night of Sept. 30 to toast the start of the new fiscal year, we might want to consider whether drinking heavily in the meantime is also justified.

Question Of The Week

Unfinished Business. Last week's column misidentified the employer of the winner of the "I Won A 2003 Budget Battle" mouse pad. Janet A. Bruning works for the Western (rather than Washington) Area Power Administration. My thanks (and a mouse pad) go to Elizabeth Ching, who works for Sen. Max Baucus, D-Mont., for pointing out the error.

Last Week's Question. There seem to be a great many budget chef wannabes out there, judging from the large number of people who submitted their recipe for a sandwich called "The Federal Budget." As might be expected, the predominant ingredients that people used were boloney (or bologna), pork and ham, many of which were combined in highly imaginative ways and put on "wry" bread.

The winner of the "I Won A 2003 Budget Battle" mouse pad, which can also be used as a placemat when serving this meal, is Michael Packard, who works for the Federal Aviation Administration, for the "Budgetwich," which Mike says is made as follows:

Start with white bread and mayonnaise as the condiment because the budget has to be bland and acceptable to everyone. Stack high with lots of lettuce and sprouts because there needs to be things that seem to be nutritious for the country but mostly just pad the sandwich with inexpensive filler. Add next a layer of roast beef but not enough for the overhead cost of the meal to be too much for the restaurant owner. On top of that place slices of ham, because the restaurant's suppliers always need to have lots of "pork" in the finished product, and processed cheese to satisfy the palate of the special interests and to bulk up the sandwich with lots of impressive-looking but essentially empty calories. Garnish with a pickle because we always seem to get into one with the budget.

Honorable mention (but no mouse pad) to Jackie Smith, who works for the U.S. Air Force at Luke Air Force Base, and Barry Elson, who works for the Defense Information Systems Agency.

This Week's Question. Many people suggest that the federal fiscal year and the calendar year should start on the same date - that is, on Jan. 1. The question: What is one good reason why that's a bad idea?

Click here to send in your response. Your answer must be received by 5 p.m. PDT on Saturday, July 5, 2003. If there are similar winning answers, the "I Won A 2003 Budget Battle" mouse pad will go to the person selected at random from all those who submit the same response. 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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