Washington ? Under the shadow of a continuing threat of terrorism and a rapidly approaching military showdown with Iraq, a largely unforeseen test of domestic policy is coming before the American people.

When President Bush took office 26 months ago, few could have foreseen that his tenure would produce a serious debate on the proper size and shape of government. His rhetoric contained the usual flourishes of anti-bureaucratic sentiment, but he qualified his conservative message by emphasizing “compassion” as a proper goal. On one memorable occasion, he rebuked congressional Republicans for what seemed to him an effort to “balance the budget on the backs of the poor.”

Even if one viewed those statements with skepticism, the prospect of giant budget surpluses — $5.6 trillion over the next 10 years — made it seem unlikely that hard choices would be forced on Congress or the president. With the two parties evenly balanced, the betting was that Republicans and Democrats alike would be able to finance their favorite programs and still cut taxes.

Well, the combination of a persistently weak economy, the effects of the 9-11 attacks and the costs of preventing terrorism and challenging rogue regimes from Iraq to Afghanistan to North Korea have shattered those comfortable illusions.

The Bush budgets still strive to preserve the pretense that all good things can be had at once. The budget message he delivered last month claimed to “address the many challenges our society faces: bridging the gap for low-income families, so they can buy affordable homes; helping communities of faith pull the addicted from the grip of drugs; lifting children out of poverty and hopelessness by creating good schools and offering them caring adult mentors; and easing the pain and hardship of the global epidemic of AIDS.” All this, plus another large tax cut.

It did not take long, nor was it difficult, for opposition Democrats and the interest groups involved in those programs to refute most of those boasts with figures from Bush’s own budget. Housing advocates, for example, pointed out that funds for public housing, elderly housing, community development and several other major programs are budgeted by Bush to be lower in fiscal 2004 than they were a year ago — without even reckoning the need for additional spending to keep up with inflation and population growth.

Such disputes are almost routine in Washington, a standard part of the bargaining process when Congress is weighing the next year’s spending plans.

But this year is not routine in terms of the belt-tightening needed in Washington to accommodate the president’s big increases in military and homeland-defense spending and still stay within his overall target of a 4 percent increase in discretionary spending.

And when you factor in what is happening in states and cities, it becomes clear that hard choices are being made about programs that directly affect people’s lives.

One day last week, I had a visit from Philip Ennen, the vice president of Community Hospitals of Williams County, Ohio. He was in Washington to add his voice to those of other rural hospital administrators who complain that Medicare reimbursement payments — set lower for them than for big city hospitals — have become a crippling problem.

The shortfalls in federal Medicare payments mean that costs are “shifted onto local businesses, industries, commercial payers and the working poor, who are mostly self-insured,” Ennen told me. Local firms in Bryan, Ohio, often are owned by conglomerates headquartered in distant cities, he said, and when the green-eye-shade executives at headquarters see how disproportionately high the health care costs are in cities like Bryan, those plants and their jobs become vulnerable.

Thus, budgetary economies affect whole communities, not just hospitals.

My next visitors were leaders of child advocacy groups from Arizona, Illinois and Missouri, in town for a meeting of their national association, Voices for America’s Children. They described in measured but dead-serious tones what the combination of state budget crunches and Bush’s recommended spending restrictions are doing.

“I have been doing this for 25 years,” said Carol Kamin of Arizona, “and I have never seen the situation as dire.” She and her counterparts talked about the reductions that are looming in health insurance for children, in day care services for those whose mothers have moved off welfare, and in pre-school programs.

The message from all of them: The gains that have been made, slowly and painfully in the last decade, may well be reversed now.