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Anyone who thinks the election results point to a monumental budget debate next year where major reductions occur in the size of the federal government will be sorely disappointed.

The fiscal 2004 debate will be focused on only a very small portion of the budget. This will put severe pressure on the few programs that are scrutinized, make it virtually inevitable that total federal spending will continue to grow substantially and make any progress on the deficit impossible.

It also means that fiscal 2004 will be a tough year for anything other than Pentagon and Homeland Security Department appropriations. Many federal agencies and activities - including the Securities and Exchange Commission, Amtrak, and aid to state and local governments - will end up funded at far lower levels than many are hoping for. Most of these programs will be lucky to just keep even with inflation.

Total federal spending will be close to $2.2 trillion in 2004. More than $200 billion of that will be interest on the federal debt, which can be reduced only if the government runs a surplus or interest rates fall significantly. Neither of these is expected to happen.

None of the other so-called uncontrollable portions of the budget - mainly Social Security and Medicare - are likely to be looked at seriously. The only likely change next year is the addition of a new benefit for prescription drugs.

Interest on the debt and the other entitlements will total about $1.4 trillion - roughly two-thirds of all spending in the budget. All of this effectively will be excluded from the debate.

The Defense and Homeland Security departments will make up more than half of everything that's left, and neither will be looked at for reductions next year. Pentagon spending likely will increase significantly even if there is no war with Iraq. In addition, the general expectation is that the cost of homeland security, including the so-far-unbudgeted transition costs of setting up the department, will be greater in 2004 than anyone so far has admitted.

That will leave about $300 billion in appropriations to bear the full brunt of the fiscal 2004 budget debate. But this includes other homeland security-related activities such as the State, Justice and Treasury departments; the FBI and CIA; the Internal Revenue Service; the Federal Emergency Management Agency; and the Centers for Disease Control. It also includes other politically important departments and agencies like the Securities and Exchange Commission, National Institutes of Health, Education Department, Interior Department and Environmental Protection Agency. There will be little tolerance for significant reductions in any of these areas.

And most of the about $150 billion that's left at this point, which includes the funds for the White House and Congress and a variety of nuts and bolts activities, will be largely untouchable. A 10 percent reduction in these programs, which is unrealistic and extremely unlikely, would yield a very small amount. It would also be overwhelmed by the increases at the Pentagon and elsewhere.

The other side of the budget - revenues - will be at least as untouchable next year as any of the most politically sensitive programs on the spending side. Indeed, taxes may now have replaced Social Security as the new "third rail" of the budget.

In addition, fiscal 2004 revenues are almost certainly going to be lower than the current baseline estimates because of the tax cuts that are in the works.

All of this implies that appropriations for everything other than the military and homeland security will be under extreme pressure next year. But it also indicates that the fiscal 2004 federal budget debate will be more about which spending should increase rather than which programs should be curtailed.

And that means the fiscal 2004 deficit almost certainly will be higher than any of the baseline forecasts - and far higher than anyone currently is willing to admit.

Question Of The Week

Last Week's Question. In keeping with the season, last week's question asked "Budget Battles" readers to suggest the most appropriate thing to serve on Thanksgiving to someone involved in the federal budget debate. The most frequent response was some variation of "pork." But the "I Won A 2002 Budget Battle" coffee/tea/hot chocolate mug goes to Jon Neal from West Lafayette, Ind., who said that the meal should be a "wishbone with gravy." According to Jon, "the Pentagon and [Department of Homeland Security] get the gravy; everyone else gets to fight over the wishbone."

This Week's Question. Here's a technical question for the budget geeks (and you know who you are) among us. The Bush administration supposedly will send its budget to Congress on Monday, Feb. 3. The question: What's the earliest date Congress can begin to debate the fiscal 2004 budget?

Send your response to scollender@nationaljournal.com by 5 p.m. PST on Saturday, Dec. 7, 2002. You must include your mailing address so the mug can be sent if you win. If there are similar winning responses, the winner will be selected at random from that group.

Here's The Agenda For The FY04 Budget Briefing!

Click here to find out everything you need to know about the upcoming executive briefing on next year's budget debate that National Journal, Government Executive and Fleishman-Hillard will be presenting on Jan. 28 in Washington.

"Houston, We Have A Budget" will be presented by "Budget Battles" columnist Stan Collender. In just three hours, you will learn everything you need to know about what's likely to happen as Congress debates the fiscal 2004 budget, spending and tax bills and what it means for your company, association, department, agency or clients.

The budget briefing will be held at the Shakespeare Theatre in Washington, near two Metro stops, just seven blocks from the U.S. Capitol, and a short cab ride from Reagan National Airport and Union Station. The Shakespeare Theatre also is one of the best facilities in Washington to hold a briefing because of its comfortable seating; great views of the stage; and top-notch sound, lighting and special-effect capabilities.

The briefing will be from 8:30 a.m. to 11:30 a.m., and the cost is the same as last year - $299 per person for registrations received by Jan. 1, 2003, and $399 per person for registrations received after that date. Group discounts also are available.

For more information or to register online, click here. You can also register or receive more information by contacting Beverly Campbell (campbelb@fleishman.com or 202-828-9712).

Why is the briefing called "Houston, We Have A Budget"? Because next year's budget debate could be out of this world.