The Obama administration will likely face a fierce fight over the $17 billion in budget cuts [1] it proposed today – but don't think for a moment that this is where the real action is on the federal budget.

The programs President Obama wants to cut may well deserve to go, or not. (You can read the list [2] and decide for yourself). But as people in Washington start arguing over this, there are two things worth keeping in mind:

• Whoever said "don't sweat the small stuff" was clearly not part of the federal budget process. First off, $17 billion is a lot of money, and we ought to save it if we can. But in a total budget of $3.5 trillion, it doesn't amount to much. That won't, of course, prevent anyone from fighting over it.
  
  The fact is that Congress and the White House spend most of their time arguing over the smallest sections of the federal budget. The federal government spends most of its money on just a few items, like Social Security, Medicare and Medicaid and defense. And in the long run, it's the "entitlement programs" like Medicare and Social Security that are the real problem [3]. As the baby boomers retire and health care costs mount, these are the programs that really threaten to bust the budget. But they're also the hardest to fix politically.



• The real budget battle will be over health care. The Obama administration has essentially made a huge fiscal bet on health care reform [4]. It's chosen to set aside Social Security, arguing with some justification that Medicare is the bigger problem, and that controlling health care costs is fundamental to controlling Medicare.

Fair enough, but it does raise the stakes for the health care debate – not that those stakes needed to be any higher [5]. Rising health care costs are a huge burden to business and individuals as well as the government, not to mention the fact that millions of Americans are uninsured. But if Washington can't come up with a health reform plan that's more cost-effective than our current system, it's hard to see how we're going to get a grip on the federal budget and our spiraling national debt.

Right now we've still got choices for dealing with our fiscal problems. If we miss our chance now, however, our options as a nation are going to get narrower and narrower, until, like so many homeowners today, our debts decide our future [6].