"IT'S CLEARLY A BUDGET. It's got a lot of numbers in it," George W. Bush told a reporter during his run for the presidency some four years ago. After examining the budget that the president submitted to Congress last week most of Washington is saying, "It's clearly a budget. It's got a lot of lies in it." Wall Street may be talking about the increasingly glowing profits reports that are now a daily occurrence, or the rise in consumer confidence to its highest level since July 2002, or--best of all--the revival of fee-generating merger activity. But in Washington, it's all about the $2.4 trillion budget that the president has put before Congress.

With reason. A budget is, after all, more than "a lot of numbers." It is a statement of the spending priorities of the administration in power, and of its attitude toward the trade-off between taxing and borrowing as the means of funding those priorities.

The president has been absolutely clear on both scores. His spending priorities are homeland security and the war on terror. And he plans to pay for those priorities by issuing U.S. government IOUs. Many past presidents have refused to choose between guns and butter, with dire consequences for the economy. George W. Bush has decided to have both guns and butter, and, in addition, tax cuts and a trip to Mars that his father once estimated would eventually cost about $400 billion. All in all, the president is projecting a deficit of $521 billion, up from $375

THE GOOD NEWS is that forecasts of budget deficits are notoriously inaccurate. But, the errors in this forecast are likely to be in one direction. Consider just one item, the new prescription drug program for the elderly. Just a few months ago the cost was estimated to be $400 billion over 10 years; now the estimate is $540 billion. And no serious analyst believes that will be the last increase in the projected cost of acceding to the demands of the increasingly powerful gray lobby.

Throw in some other Bush initiatives--a $72 billion energy bill remains on the president's wish list--and you have a riot of spending that calls into question the president's projection of a gradually shrinking deficit. It is obviously easier to turn on the spending spigot, and to cut taxes, than to turn off the spigot and raise taxes. Not for the White House fans of John Maynard Keynes his warning, "There is a good deal of advantage in retarding expenditure by such [government] bodies when other sources of demand are strong . . ."

Nor does anyone believe the president will persuade Congress to go along with the virtual freeze he wants to impose on spending on the environment, the highways, and mass transit projects on which Congress proposes to spend $375 billion over the next six years. (But in this election year he is more likely to be able to persuade Congress to make permanent the tax cuts that he quite properly pushed through to reduce the length and severity of the recent economic slowdown.)