President Bush is about to announce his next federal budget. He will likely call for a freeze on discretionary spending at near-current levels. He will inform the public that the deficit, which ballooned in his first term, is shrinking, thanks to a strong economy that is generating higher revenues from taxes on income, corporate profits, capital gains, and dividends. And he will propose cutting the deficit in half in four years, in fiscal 2009. That's the good news.

Unfortunately, there will also be bad news. The President's budget won't include the cost of the Iraq occupation, the potential cost of making the transition to private Social Security accounts, or the cost of fixing the alternative minimum tax. These are significant omissions.

It gets worse. The President is sure to ask Congress to make permanent his previous tax cuts. At the same time he is proposing a five-year budget instead of the usual 10-year plan. That means most of the fiscal impact of his tax cuts won't be felt until he leaves office. And then it will be severe. If all the 2001 and 2002 tax cuts are made permanent, the deficit will rise by an additional $45 billion in 2009. In 2012, the hit to the deficit will grow to $300 billion. President Bush may succeed in his goal of cutting the deficit in half by the end of his Administration, but he could easily leave behind a fiscal disaster that will drive interest rates higher and the dollar much lower.

Certainly, there are good reasons to extend many of the tax cuts. Lower taxes on income and capital increase incentives for work, investment, and economic growth. There are good reasons to reform the alternative minimum tax, which increasingly pummels the middle class. There are good reasons to fund Iraq's experiment in democracy, even as the U.S. draws down its military forces there. And there are even some reasons to promote private Social Security accounts. They prefund retirement and build a nest egg.

But there are no good reasons for hiding the cost of all these endeavors or denying their consequences. New private retirement accounts could cost $1.5 trillion from 2011 to 2015 and add $100 billion a year to the budget deficit for 20 years. Making tax cuts permanent could cost $2 trillion. Fixing the AMT could cost an additional $500 billion. These are real numbers that should be included in any real budget. If President Bush believes the policies proposed are best for the nation, then he should lead an honest dialogue about how we should pay for them.

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