Oct. 28 (Bloomberg) -- Hold on. The U.S. is puffing up yet another economic bubble. And this one could be the all-time doozy.

The government is headed for an indefinite run of annual budget deficits of about $500 billion as it borrows to pay for tax cuts and increased health benefits at home and to fight terrorism and spread democracy overseas.

Some perspective:

-- Based on its recent results, it would take oil giant Exxon Mobil Corp. 33 years to earn $500 billion.

-- The record U.S. budget deficit before this year was $290 billion, in 1992.

-- A deficit of half a trillion dollars amounts to about 5 percent of the current output of the U.S. economy. The countries that use the euro as currency want their governments hold their deficits to 3 percent of gross domestic product.

-- Yearly deficits of $500 billion would double the U.S. national debt in about 14 years.

The prospect of the ballooning interest on that debt is overwhelming just when most Americans have adjusted to the bursting of the stock market bubble and when they figure a deflation of the heated housing market would be manageable, if not a good thing.

Lasting Drain

The George W. Bush administration and a compliant Congress have decreed $1.7 trillion in income tax cuts between now and 2010. The tax cuts are supposed to expire in that year, but that's eyewash. Bush wants to make them permanent.

The tax cuts are supposed to stimulate consumer spending and economic growth, thereby increasing government tax revenue enough to offset the cuts. That's dubious on its face and impossible in light of the government's spending agenda.

There's an irresistible call for Medicare to pay for drugs for retired people -- an estimated 10-year cost of $400 billion. This added obligation will come when the government should be figuring out how to reduce Medicare costs. Social Security Administration trustees estimate that given current requirements, the Medicare trust fund will go broke in 2026.

Simultaneously, Bush is asking Congress to approve $87 billion more in military and reconstruction money for Iraq and Afghanistan. The administration says it may need $30 billion-$55 billion more, depending on how much oil Iraq can sell. Bush is sure to get the money. Congress can't abandon U.S. troops in harm's way.

And Counting

The Congressional Budget Office has pegged the budget deficit for fiscal 2004 at $480 billion even without this added spending, following the deficit of $374 billion for fiscal 2003, ended in September.

Sadly, all of these programs have been tried by Bush predecessors without success. In the late 1960s, Lyndon Johnson spent big on both the Vietnam war and domestic programs. The U.S. inflation rate rose from 3 percent in 1967 to 4.7 percent in 1968, the last year of Johnson's presidency, and to 6.2 percent the next year. By 1971, Richard Nixon felt compelled to impose price-and-wage controls on the nation.

Ronald Reagan tried the tax-cut-to-prosperity ploy after he was elected in 1980. By 1983, the budget deficit had climbed to 6 percent of GDP. That's still a post-World War II record. Ultimately, Bush's father, George H.W. Bush, and Bill Clinton had to raise taxes. That, along with the booming 1990s economy and spending curbs, led to short-lived budget surpluses for the four years ending with 2001.

Economics history, however, gets overrun by politics. Some definitions: Republicans are people who constantly complain about taxes they can easily afford to pay. Democrats are those who think the government owes them a living. Neither party has shown a long-term ability to resist deficit spending.

The U.S. has always survived and prospered, to be sure, but the outlook for spending, burdensome debt payments, inflation and high interest rates makes you want to duck.

Last Updated: October 28, 2003 00:07 EST