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We've all seen the old commercial: One person insists that it's a breath mint, the other that it's a candy mint, and then an announcer tells them to stop arguing because it's really two, two, two mints in one.

That's what is happening with the deficit these days.

Over the past few weeks President Bush has been increasingly insistent that the deficit is a problem that must be addressed immediately. The deficit demands fiscal discipline, he says. In other words, the deficit is a breath mint.

But conservative commentators like Larry Kudlow of CNBC and Fred Barnes of Fox have been saying the deficit is not a problem that merits concern. They say the fact that the deficit exists at all - let alone that it is higher than projected - is economically insignificant. In other words, the deficit is a candy mint.

So which is it? Can the federal budget deficit really be two deficits in one?

The president and others in his administration have been describing the deficit as a problem only when talking about federal spending being higher than requested. That's the deficit they say requires immediate attention.

Kudlow, Barnes, and others have been talking about the deficit not being a problem only when the subject has been tax cuts. When the discussion has been about not fully phasing in last year's tax cuts, not passing legislation to make it permanent, or Congress not adopting the additional tax cuts the president may propose this fall, they've said the importance of the deficit is overstated and should not be a consideration.

Some tax cut advocates have also been increasingly insistent that a tax cut will not increase the deficit anyway. But earlier this year an Office of Management and Budget spokesperson was quoted as saying that one of the reasons federal revenues were down was because of the tax cut legislation enacted last year.

Until recently, the president was saying that it is OK to have a deficit when there is a war, an economic problem, or a national emergency. That set the stage for no action on the deficit this year; the administration did not propose a deficit reduction plan, Congress has not adopted one, and no talks of any kind are expected when members reconvene this week.

Lately, however, the president in effect has been saying something different: that he will take action to impose fiscal discipline if Congress refuses to do so.

In other words, the deficit isn't a problem if it is the result of the president's policies plus the unintended fiscal consequences of the war on terrorism and the economic downturn. It is a problem, however, if the higher deficit is because of congressional policies - especially spending increases - that are different from what the White House proposed.

All of this leads to two conclusions.

First, any talk about a new budget process to replace the limits that will expire at the end of this year is almost certainly just talk. The major changes in federal budget procedures that have been adopted in the last quarter-century (1974, 1985 and 1990) were all preceded by a general consensus about the major problem that needed to be addressed. Not only does that type of agreement not exist currently, there is probably less agreement now than at any time over the past few years.

Second, the budget battles ahead in September and the rest of this year are likely to be extremely bitter and hard to settle. Without an underlying agreement on the big picture of what should be done, it is hard to see how many of the smaller issues will be settled easily or quickly.

Of course, if the commercials are any kind of guide, there is also the possibility that some type of deal could be in the offing. Remember, both of the people arguing about what type of mint it was went away satisfied and with a smile on their face. Then again, commercials aren't known for their realism.

Question Of The Week

Previous Question. Two weeks ago, "Budget Battles" readers were asked to come up with an appropriate stock ticker symbol for the federal budget. The most popular responses were IOU, PORK, FNTC (Fantasy), and variations on REDI (Red Ink). However, the winner of the incredible "I Won A 2002 Budget Battle" coffee/tea/hot chocolate mug is Sarah Peterson, who works for the Internal Revenue Service in Georgia for T$@W (Tax Dollars At Work). Honorable mention (but no mug) to Barbara Bell, who works for the Office of Personnel Management, for "MTPOT," and to Pete Davis, who heads up his own Washington analysis firm, for "W."

This Week's Question. Now that September has arrived you can almost feel that chill in the air. That means that there has never been a better time to get your own "I Won A 2002 Budget Battle" mug for those great cups of steaming coffee, hot soup, etc. that you'll need shortly. And the mug's bright red color is just perfect for waking up when it's dark outside as you leave for work.

Many states have slogans or sayings on their license plates that make some type of statement like "The Sunshine State" (Florida), or "Live Free or Die" (New Hampshire). The question: If the federal government had license plates, what federal budget-related statement should be on it? Send your response to scollender@nationaljournal.com by 5 p.m. PDT on Saturday Sept. 7, 2002. If there are similar winning responses, the winner will be selected at random from those entries. You must include your mailing address so the mug can be sent if you win.

The Budget Equivalent Of Captain Kirk Is...?

Last January's extremely popular executive briefing on the budget debate, "Three-Ring Budget," which used the sights and sound of the circus to explain what would happen, will be followed in January 2003 by the latest from National Journal, Government Executive and Fleishman-Hillard: "Houston, We Have A Budget."

This half-day briefing will lift off as it explains why the debate is likely to leave you feeling like you are in orbit. Will it take the fiscal version of a Jedi knight to deal with the chaos of no budget limits? Will the debate boldly go where no one has ever gone before? The briefing will be held in Washington during the week of Jan. 27-31. Big discounts will be offered for early registration and groups of more than four from the same organization. More details soon.

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