The budget wars are back. From the first Reagan Administration to the first Clinton Administration, the politics of federal red ink dominated Washington. Remember David Stockman? How about Ross Perot, the Concord Coalition, and supply-siders?

Well, the American taxpayer got a brief respite toward the end of the ‘90s when the red ink disappeared, culminating in a record $236 billion surplus in fiscal year 2000. Federal coffers were flush, largely thanks to some policy steps taken by the Clinton Administration, an historic economic expansion, and a remarkable bull market.

But the government is on track this fiscal year to show a deficit of at least $300 billion and possibly as much as $400 billion. Now, part of the fiscal deterioration isn’t a worry. It reflects a bear market into its fourth year, a recession, a recovery that looks like a recession, as well as huge increases in defense, homeland security, and health care costs. Federal spending is supporting the economy.

No the concern is long-term. The Bush Administration’s budget could run a cumulative deficit of some $2 trillion dollars over the next decade.

Although not all economists agree, most believe massive budget deficits are a threat to national savings and, therefore, national income. A risk is that a deteriorating fiscal situation would undermine the confidence of overseas investors in U.S. economic policies, putting upward pressure on interest rates. The federal government’s voracious appetite for debt might crowd out private investment.

The average businessperson and consumer aren’t thrilled at the prospect of large deficits, either. When I recently gave two talks on the state of the economy in Tennessee, no one stood up during the question and answer session to defend long-term deficits. Several audience members expressed concern.

Yet sanity may be returning on the fiscal front. Yes, there will be a tax cut. But it will be less than the President wanted. The House has approved a $550 billion tax cut plan. The Senate came up with a $350 billion figure. The two institutions now need to reconcile their numbers.

The coming debate over fiscal policy could be more moderate than was the case during the Reagan, Bush, and first Clinton Administration. Why? Well, for one thing, Congress is concerned about the cost of war and reconstruction in Iraq. There seems to be little stomach to revisit the vicious budget battles of the ‘80s. The age of retirement for the massive baby boom generation is getting closer and, therefore, the price of fiscal irresponsibility goes higher with each passing month. The budget deficit projections are so large that no one believes the tax cuts will pay for themselves through strong economic growth.

Paul H. O’Neill, the 72nd Secretary of the Treasury, got little respect while in Washington. A headstrong maverick, O’Neill’s blunt, impolitic talk alienated Wall Street, many powerful Republicans, the international establishment, and eventually his bosses over at the White House. O’Neill was forced to “resign” in early December. But O’Neill was a strong believer in fiscal discipline. Perhaps that is why he got the boot.

Hopefully, others will keep up the fight for fiscal discipline, and that budget reason for the long haul prevails.

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