WASHINGTON (AP) -- President Bush's tax cut and the lagging economy are shrinking federal
surpluses, shaping the political battle over the budget into a fight over which party will be forced to dig
into Social Security and Medicare funds.

Democrats say the tax cut -- along with spending Republicans envisioned in the 2002 budget -- will
drain away expected surpluses in the near term and eat into money generated by the two politically
sacrosanct programs for the elderly and disabled.

``There is still very much a sense in this town, in this institution, that there's money for more tax cuts,
that there's money for more spending,'' Senate Budget Committee Chairman Kent Conrad, D-N.D.,
said last week. ``I don't believe that's the case.''

Republicans contest the Democrats' figures but say that if they are accurate, it is Democrats who will
have to restrain their spending habits.

``The possibility government could start dipping into the Social Security and Medicare surplus should
be a powerful incentive for people to keep spending down,'' said Terry Holt, spokesman for House
Majority Leader Dick Armey, R-Texas.

Conrad and the top Democrat on the House Budget Committee, Rep. John Spratt of South Carolina,
say the recently enacted tax cut and Republican spending plans would erode the Social Security and
Medicare trust funds by up to $5 billion in 2003 and 2004.

The GOP's plans would also come within a few billion dollars of doing the same thing in 2005, the Democrats say.
If the economy continues to weaken, as expected, surplus projections will be sliced even further.

The amounts of Social Security and Medicare money that Democrats are trying to protect are tiny
compared with the $2 trillion annual federal budget. Because fiscal 2003 does not begin for nearly 16 months,
there is plenty of time for lawmakers to change their tax and spending plans, or for the economy to improve.

Even so, the Democrats' figures raise political red flags.

Their numbers exclude costs that were omitted from the GOP budget that Congress approved last
month. These include the multibillion dollar price of the education bill Congress is working on, the
increase the Pentagon is preparing to request, additional tax cuts Republicans want, and any natural
disasters or other unexpected expenditures that may arise.

Democrats say that if Republicans want to spend money on any of those items, they will have to use
Social Security and Medicare money or make painful cuts elsewhere. The Republicans brought the
difficult choice on themselves, Spratt said, ``simply because the tax cut is too big.''

The White House and many congressional Republicans argue that the situation is not so dire. They say
they do not mind using Medicare surpluses to cover the costs of a new Medicare prescription drug
benefit -- up to $300 billion over the next decade.

``There is enough of a surplus to accommodate increased defense spending and other priorities and still
yield a surplus,'' said Christopher Ullman, spokesman for the White House budget office. ``We reject
their way of calculating deficits.''

The fight over tapping the Social Security and Medicare trust funds represents the latest political twist
the budget has taken in recent years.

Persistent federal red ink dominated Washington in the 1980s and early 1990s.

But the surging economy and a series of deficit-cutting plans turned the budget shortfalls into surpluses,
and the politics changed. Since the first surplus emerged in 1998, the two parties have battled over what
to do with it, with Republicans generally pushing for tax cuts while Democrats largely sought spending.

President Clinton and Congress mostly fought each other to a draw and most of the surpluses were
used to reduce the accumulated national debt.

But with Bush's election, he and the Republican-controlled Congress enacted a 10-year, $1.35 trillion
tax cut, giving back much of the surplus to taxpayers.

With the tax cut's passage, projected surpluses are so small that both sides must watch that their
spending proposals don't tap into Medicare and Social Security funds.