While the war in Iraq dominates Washington this month, brewing just beneath the headlines is a nasty battle between the Democratic Congress and President Bush over spending bills that--theoretically--must be passed by September 30 to keep the government running. It's rarely clockwork, but this year, with newly empowered Democrats running Capitol Hill and a president dug in, the two sides are gearing up for a major clash.

The 2008 fiscal year battle revolves around the $933 billion budget that Bush requested back in February. The president proposed slashing domestic spending in areas like healthcare and education, while extending his tax cuts and increasing defense spending. Ever since, Bush has been adamant that Congress not exceed the $933 billion figure in its 12 annual appropriations bills. But as the bills worked their way through Congress--they're through the House already, and now the Senate is trying to deal with them--they've topped the Bush total by $22 billion.

And it's that $22 billion that Congress and the president are fighting over. Democrats argue that their bills, which garnered support from some House Republicans, better reflect the nation's priorities, while Bush claims their spending levels are "irresponsible and excessive." He's threatened to veto nine of the 12 bills.

The left-leaning Center on Budget and Policy Priorities says $22 billion is a pretty modest number; the total federal budget is $2.7 trillion. "It'll be a very big fight," says Bob Bixby of the nonpartisan Concord Coalition, "over a fairly small sum of money." President Bush counters that "only in Washington can $22 billion be called a very small difference."

Cuts. The battle lines are similar in many of the 12 bills, like the one governing transportation and housing and urban development. The president requested $47.6 billion--according to White House calculations, different than Congress's--and cut funds from 2007 spending levels for community development block grants and housing for the elderly, while restructuring funds for Amtrak, an annual source of controversy.

By late July, when the House passed its version 268 to 153, the price tag in White House numbers had grown by $3.4 billion to $51 billion. Bush issued a veto threat. Among other changes, House members added $160 million for elderly housing, $600 million for Amtrak, and $963 million for community development block grants. The Senate version of the bill also exceeds the president's request and includes an additional $75 million for housing vouchers for homeless veterans returning from Iraq and $100 million for housing counseling for sub prime borrowers.

Further inflating the price tag for both bills is a slew of earmarks that have drawn Bush's ire. According to Taxpayers for Common Sense, a fiscal watchdog group, among those in the House version is $50,000 for a national mule and packers museum in Bishop, Calif. Earmarks [are] "a very corrupting influence," says Republican Sen. Tom Coburn of Oklahoma, an anti-earmark crusader.

If Senate Democratic leaders can pass the transportation bill this week, they will have completed four of the 12 bills. The House and Senate versions of each bill must be reconciled before heading to Bush's desk. All of that finagling could force Congress to miss the September 30 deadline, leaving lawmakers to fund government with short-term stopgap measures. And if Bush carries through on his veto threats, the process will take even longer--so long that Democrats may be forced to cram some or all of the appropriations measures into one giant, unwieldy spending bill. And bills of that nature have always been a recipe for mischief.