WASHINGTON -- It could only happen in the land of trillion-dollar budgets.

Senior members of the Senate Intelligence Committee were shocked recently to find that the Pentagon and the CIA were spending $350 million to build a spy satellite headquarters near Dulles International Airport. Sen. John Warner, R-Va., said he was"absolutely astonished" at the size of the project in his home state and expressed wonder at how the whole costly enterprise just "slipped up the middle."

Once again we get a reminder, if needed, that when it comes to dropping the bucks, no one can top the U.S. government. The threat of the Red Menace may have collapsed in the rubble of the Berlin Wall, but not the menace of red ink spilling across the nation's ledgers.

But budget deficits are not on the agenda now.

Look at the skimpy press being given these days to the bipartisan commission on budget reform headed by Sen. Robert Kerrey, D-Neb., and Sen. John Danforth, R-Mo.

Earlier this month, the commission issued a preliminary report proclaiming what no one wants to hear.

While the short-term fiscal outlook has improved, federal spending is projected to start growing faster than revenues after 1998.

Unless changes are made, federal payments on the national debt and outlays for Social Security, Medicare, and other entitlement programs will gobble up 70% of the budget by the year 2003.

In 1963, such mandatory spending took less than 30% of the budget.

Nothing much can be done about interest payments, which have to be made to bond market investors in order to keep the dollar from turning into funny money.

And interest Will keep rising as long as we keep throwing budget deficits onto the national debt pile.

That leaves entitlements - that huge and growing pan of the budget that all say must be reformed until they learn that it means cutting payments for the nation's growing army of retirees.

The Clinton administration, which created the Kerrey commission, is treating it like. a mangy dog on Main Street. The White House knows The old saw about how Social Security is like the third rail of politics: "Touch it and you die."

Instead, the tack of the administration has been to talk about how well the economy is doing since Congress enacted the President's deficit reduction package a year ago. With understandable pride, President Clinton claimed credit for bringing down the deficit three years in a row.

But we are still left with what Reagan budget chief David Stockman once called "$200 billion budget deficits as far as the eye can see." Under Clinton's budget, the deficit climbs back to $207.4 billion in the year 1999.

Clinton's advisers say the answer to all this is health care reform to trim outlays for Medicare and Medicaid. But no one is sure that health care will not end up turning into another government budget-buster, and even supporters admit there will be some start-up costs.

The Clintonites would help matters if they stressed the linkage between health care reform and the threat of rising deficits. Instead the emphasis is on a short-run dip in the level of red ink and on all the benefits of creating a new entitlement program.

When it's summer and time to legislate, reality is always the first casualty.

The Bond Buyer is a sister publication of the American Banker.

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