Sen Dirksen is supposed to have said: "A billion here, a billion there, and pretty soon you're talking real money"? - Real money is discussed below.

-- In fiscal 2004, which ended Sept. 30, the U.S. registered its biggest-ever deficit in dollar terms: $412 billion, being 3.6% of gross domestic product ("GDP").

-- Tax revenues now represent 16% of GDP, the smallest since 1959.

-- Government outlays are at nearly 20% of GDP.

-- The war and reconstruction efforts in Iraq and Afghanistan are running about $5 billion a month.

-- Of the government's $2.3 trillion spending this year, about 85% is almost untouchable by public consensus.

---- About 20% of the total goes toward defense (spending in this area has increased 55% on Mr. Bush's watch).

---- Social Security benefits represent another fifth of the budget.

---- An additional fifth is spent on Medicare and Medicaid health-insurance programs.

---- A thinner slice goes to unemployment compensation, farm subsidies and other benefit programs.

---- Interest on the nation's borrowing is a big and growing budget item, one that cannot be cut except by slashing the debt itself. The $168 billion in annual payments, much of it to overseas holders of Treasury bonds, represents just over 7% of the federal spending (that's more than the government will spend on education, housing, transportation, science, space and technology combined).

-- The remaining discretionary funds [and as noted below, these are the area Mr. Bush has targeted for shrinking] cover much of what many Americans typically think of as government work, including breast-cancer research, aid to rural and inner-city schools, veterans' medical care, weather forecasting and park rangers. These annually appropriated activities accounted for about 18% of the federal budget in fiscal 2004.

In his first term, President Bush's domestic policy focused on creating winners, through tax cuts, a new prescription-drug-benefits plan for seniors, large farm subsidies, big homeland-security contracts and increased spending for education, scientific research and more.

Now, with worries about the size of the deficit widespread, get ready for a second Bush term about identifying losers.

Fights over what gets cut, and by how much, will likely become a defining feature of Mr. Bush's second term. The president has pledged to halve the deficit, a promise that will likely clash with some of his pet policy initiatives.

[Things likely to be cut] include some of the most visible areas of domestic spending, including the Medicaid health program, subsidies to Amtrak, agricultural research and even some federal education programs.

(wsj 12-21-04).

Tighten your seat belts folks. Things are going to get rough. And there is going to be a bit of a war between the White House and the Governors, especially as the White House targets the joint federal state and federal Medicaid program as Bill Shipp has recently written about. The battle will be the Governors resisting changes that eventually move more costs to the states from the federal government.

And I guarantee we are going to soon see a change in the alternative minimum tax (the "AMT"). As you may know, this tax was originally designed to prevent rich taxpayers avoiding taxes altogether, but now it hits up about 3o million mostly middle-class Americans. Fixing the AMT is going to cut federal receipts by hundreds of millions of dollars. So many feel it now is why pressure will remain on Congress to fix it as it has promised to do for several years, and yes, Bush will go along.