In his first appearance before a joint session of Congress in January, President George W. Bush posed as a representative of the American taxpayer asking for a "rebate" of "excess revenues." His implicit message was that the country could have it all -- big tax cuts targeted to high earners (along with a smaller tax refund for regular folks), big increases in spending for education and defense, a new Medicare prescription drug benefit, new private retirement savings accounts, and a slew of other goodies -- without putting the budget into the red or damaging the economy's prospects.

That was then. This is now. Yesterday, the President's Office of Management and Budget released a new federal budget forecast in which the non-Social Security surplus for the current fiscal year dropped from $122 billion to $1 billion. For the upcoming fiscal year that begins in October, the non-Social Security surplus also drops to $1 billion, and stays in the single digits through the end of the President's term in office.

The budget picture is actually worse. The Administration cooked the books to keep the forecast barely in the black, in part by using higher economic growth projections than most economists would support, and in part by resorting to some accounting gimmicks to shift a few billion out of the off-limits Social Security trust fund accounts into general revenues. Next week the Congressional Budget Office (which reports to both the Republican-controlled House and the Democratic-controlled Senate) will release its own budget forecast that is expected to show the non-Social Security surplus turning into deficits this year and for the immediate future.

Keep in mind that the budget estimates for the upcoming year assume deep cuts in non-defense appropriations that neither party in Congress is at all inclined to enact, and do not include what the Administration itself has deemed necessary for defense and education. Washington is now officially prepared for what is likely to become the biggest end-of-session budget fight since Newt Gingrich foolishly shut down the federal government in 1995. The President, of course, will try to claim that congressional Democrats are busting his already discredited budget with runaway spending, while Democrats will likely try to force the President to admit his own errors before they give him the defense and education money he badly wants.

But while most of the attention this fall will be focused on the short-term budget problem, it's the long-term budget numbers released by OMB yesterday that should really shake people up. If both Social Security and Medicare payroll dollars are put off limits to spending for other government programs (as virtually every member of Congress from both parties has pledged to do), the ten-year surplus, estimated at $2.5 trillion in April, is now down to $38 billion. Even that tiny surplus assumes a strong economic rebound beginning next year, and does not account for the money needed for such Administration priorities as a big national missile defense system, restructuring of the Pentagon, or partial privatization of Social Security (which would alone require about $1 trillion in transition costs).

This worsening long-term budget picture, attributable largely to the President's tax cut bill, is already increasing upward pressure on long-term interest rates, which will in turn make a strong economic recovery a lot harder and a lot less robust. It's the mirror image of the situation at this point in President Bill Clinton's Administration, when his controversial deficit reduction measures greatly eased long-term interest rates and paved the way for the "long boom" of the 1990s.

Put it all together, and it's clear that President George W. Bush has risked virtually everything he says he cares about -- education reform, military reform, economic recovery, fiscal discipline, and even the very claim to be a "compassionate conservative" -- in order to secure his tax cut bill. Now those apparently endless surpluses that had everyone in Washington so excited a year ago are vanishing, and the economy that still looked pretty strong when the President started raising recession alarms in January is genuinely in trouble.

If the economic and budget picture continue to get worse as the President's fiscal policies take hold, it will be clear Mr. Bush cannot "have it all," and he will truly have a lot to answer for.