Sure, the US has a rainy-day fund. But is it enough?

When President Bush goes on the road to sell his tax cut, he likes to tell his "grandmother" story.

It's one he heard from a woman in Council Bluffs, Iowa, when he was touring there earlier this year. The grandmother stood up and told him that she had baked a lot of cookies in her day, and that every time she set a plate of them on the table, they quickly disappeared.

Her point - as well as his - is that money left lying around in Washington will be spent. Which is why it's not surprising that when the president hands Congress a plate with $1 trillion on it, and no particular instructions on how to spend it, lawmakers are ready to finish the portion and demand seconds.

In this case, the plate of cookies is what's known as the contingency reserve - money set aside to cover unspecified needs and emergencies over the next 10 years. It's a highly novel approach to a budgeting process that usually allocates every penny to a specific program, and it's possible only because the United States is enjoying an unusual period of budget surpluses.

The reserve, a sort of rainy-day fund, clearly serves a political purpose: helping to sell the Bush tax cut as affordable. As the president likes to point out, his budget covers the country's everyday expenses, as well as puts money aside for unanticipated ones. Even after that, he says, "there's still money left over." Tax-cut money.

But critics of the president's budget say his rainy-day reserve is more like a bailing bucket with a hole - inadequate to handle the torrent of anticipated expenses ahead.

"If you look at the claims against this reserve, they are actually much larger than the reserve itself," says Richard Kogan, a budget specialist at the Center for Budget and Policy Priorities in Washington.

As outside experts go over the fine print of the budget, one week after its release, they point to a number of looming costs not covered by the contingency fund:

* A prescription-drug benefit. The White House designates $153 billion in its reserve for a limited drug benefit, called an "immediate helping hand." But the Congressional Budget Office estimates that a full drug benefit will cost at least $400 billion over 10 years. Neither Democrats nor Republicans on the Hill believe the Bush proposal is anywhere near adequate.

* Social Security. As Bush's own budget document points out, the nation's pension system is "unsustainable in the long run." To deal with that challenge, the president's budget adopts the now-conventional wisdom that money collected from Social Security payroll taxes should be spent exclusively on the retirement program - the so-called "lock box" principle. He also provides about $600 billion over 10 years for changes in the system.

But that's overshadowed by cost estimates of another Bush proposal. He advocates allowing workers to divert 2 percent of their 12.4 percent payroll tax to private retirement accounts - a move that would cost the government $1 trillion, according to some estimates.

* Defense spending. Because the president has ordered a sweeping review of the nation's military needs, the defense budget is hardly concrete. One item not budgeted for at all - neither in the reserve fund nor in the discretionary part of the budget - is a national missile-defense system, a big-ticket item high on the president's agenda. No one really knows how much it will cost, though "hundreds of billions" is the phrase most commonly used.

* Everything else - including the emergencies for which the contingency reserve was partly conceived: funds to help drought- or storm-plagued farmers, funds to help with natural disasters such as tornadoes, hurricanes, or earthquakes. It's impossible to predict exactly what such disasters could cost, but in the agricultural community alone, the federal government spent $25 billion in special assistance over the past three years.

So, can the reserve fund handle all these pressures?

"It isn't big enough," says Washington budget specialist Stan Collender flatly. "Next question?"

Not surprisingly, the White House disagrees. Office of Management and Budget Director Mitchell Daniels acknowledges that looming problems like Social Security and Medicare could easily swamp projected surpluses - the very surpluses that feed the contingency fund. But he says these costs can be tamed by reforming the programs.

The reserve fund can accommodate social spending, defense, and agriculture, "if you don't let discretionary spending run wild in the meantime," says Mr. Daniels.

And that, of course, is the challenge when you hand Congress a plate of cookies labeled "contingency fund."

Staff writer Dante Chinni contributed to this report.

(c) Copyright 2001. The Christian Science Monitor