Let’s talk about fiscal policy, or what passes for fiscal policy in the “Alice in Wonderland” dream world — or perhaps the nightmare world — that Congress is now in. [IMGCAP(1)]

The dream sequence started with a remarkable statement by House Majority Leader Tom DeLay (R-Texas) in which he declared victory in the war against fat and waste in government, along with a pledge to move forward with the plan to accelerate tax cuts, make them all permanent and search for additional tax cuts to pass. This, in turn, was followed by his dismissal of the notion of postponing the implementation of the Medicare prescription drug bill, and his even more contemptuous rejection of the idea of revisiting the mammoth, pork-laden highway bill that passed before the August recess. (Stung by criticism, DeLay wrote an op-ed for The Washington Times on Monday pledging his undying fealty to smaller government — in wonderfully general terms.)

The fundamental position of the White House and Republican leadership is that we will make an open-ended commitment to fund recovery in the Gulf Coast without putting any other restraints on spending, and certainly without paying for it by finding more revenues — instead we will work aggressively to implement more tax cuts. Whew.

Next, let’s turn to “Operation Offset,” a commendable effort by the Republican Study Committee to at least attempt to find offsets for what is now expected to be $200 billion-plus in Hurricane Katrina relief (not to mention Hurricane Rita relief and whatever catastrophes lie ahead).

Good for House Republican conservatives to try to show some intellectual consistency about fiscal discipline. Indeed, Operation Offset includes the one big-ticket item that could make a substantial difference in the short term: delaying the implementation of the Medicare prescription drug program for a year. This could save $40 billion. It also calls for a major cutback in the unnecessary earmarks in the just-passed transportation bill, including projects in some of their own districts. They actually take on Medicare, although mostly by making retirees pay more. And they address frontally many corporate welfare programs.

But even here, the kudos have to be diluted once one examines other offsets the RSC recommends in its 23-page report. It includes these smashingly great ideas for public policy:

• Eliminate the National Science Foundation’s math and science education program. Over the years, the nation’s biggest advantage in global competition is our edge in scientific excellence and technological innovation. We already are seeing that edge erode. Cutting science education is like eating one’s seed corn. At current levels of funding, Newt Gingrich has called our basic research and science education commitment “insane.” What would cutting even further be? Criminally insane?

• Eliminate federal grants for wastewater infrastructure; reduce funds for waste disposal grants. We have serious water problems across the nation. The Louisiana catastrophe may leave many parts of the state without potable water for extended periods, making those regions effectively uninhabitable. Hello?

• Reduce funds for the Centers for Disease Control. Now this is an interesting idea to pursue just days after President Bush addressed the United Nations about the menacing danger of avian flu. That huge potential disaster, along with the threats of biological and biochemical attacks from terrorists, make up a critical share of the risks that could kill millions of Americans. The CDC is our front line to help track their advance, ameliorate their impact and find vaccines to prevent their spread. Yes, it’s a great time to make cuts!

I could go on and on. The offsets include eliminating family planning funding for teens (does the RSC want more unwanted pregnancies and abortions?); slashing funding for parks, fish and wildlife preservation and Forest Service maintenance; slashing funding for energy conservation, etc. Oh yes, and many of the cuts are for health care for the poor.

A careful look at their report shows the underlying problem. Federal spending has been growing like topsy — more under Bush’s leadership than under any other president, and with Congress’ avid support.

Most of the efforts to cut back have been symbolic, focused on the sliver of the budget that is discretionary domestic spending. Sure, there are savings that could come in defense and homeland security. But the reality is that with our commitment in Iraq, the clear and growing gaps in our force numbers and structure, the alarming recruitment numbers, and the tattered state of the National Guard and Reserves, defense spending is headed up, not down. As for homeland security, it should be restructured, including radical changes in the formula for grants. But the reality here, as Katrina vividly shows, is that on balance, we need more, not less.

There is zero political will to take on the biggest of big-ticket items — Social Security and Medicare. We have no rainy-day fund for catastrophes. We have huge, unfunded liabilities that inevitably will lead to massive deficits — and even bigger ones if interest rates rise, as they are likely to do.

Our revenue base is shrinking while our spending is growing, and we are adding a commitment worth several hundred billion dollars while doing business as usual. We are tumbling ever further down the rabbit hole. “Alice in Wonderland” lives, only this time it’s on Capitol Hill.

Norman Ornstein is a resident scholar at the American Enterprise Institute.