(FORTUNE Magazine) – Even partisan Republicans have expressed deep skepticism about President Bush's budget's fiscal responsibility--or lack thereof. Joshua Bolten, the director of the Office of Management and Budget, took some time to speak with FORTUNE writer Jeremy Kahn about President Bush's budget. For a man in the hot seat, he sounds awfully serene. Here are edited excerpts. (For a longer version, see fortune.com.)

What parts of the budget demonstrate hard-nosed fiscal responsibility?

There are a number of tough calls to be made. For example, while we are substantially increasing the federal commitment to homeland-security spending, we have shifted our emphasis to high-threat areas. So the bulk of our federal assistance will go to those areas that the Department of Homeland Security operation thinks are most under threat. Now that's a politically difficult thing to do. On its merits it's absolutely the right thing to do.

Can the administration really persuade Congress to hold nondefense discretionary spending growth to 0.5% a year?

There is always pressure in Congress to spend more, but we've heard from some members in the Republican caucus that they would like to be even slightly more restrained than the President has been. So we think we've hit it about straight down the middle of the fairway as far as what is both sensible and realistic. We'll see what Congress does with it. I think there is a good prospect of achieving an '05 budget that is very close to, if not exactly on, the numbers the President has sent up.

If Congress does not hold spending to those levels, is the President going to start vetoing spending bills?

The President hasn't needed to veto bills in the past because the leadership in Congress has ensured that bills fall within his parameters. Last year is a good example. The President set some limits, and it was agreed to by the Republican leadership [of the House and Senate]. There are plenty of complaints about the priorities chosen by Congress in some of those bills, but in terms of the overall spending restraints, Congress lived within the limits the President asked for. And I am very optimistic that we'll be able to do the same or better this year.

There's criticism that the administration's revenue projections are unrealistic too.

I think the revenue projections in the budget are realistic. If anything they're conservative. We've chosen a conservative growth rate of 4.4% for this year. Blue Chip [an organization that pools the forecasts of Wall Street economists] is now at 4.6% and CBO [the Congressional Budget Office] is now at 4.8%, so the growth rates are conservative.

Some argue that the U.S. has always managed to grow itself out of deficits. Can we simply grow ourselves out of this one?

History tells us that the projections are often wrong, and it could well be that we have underestimated economic growth and therefore the revenues coming in. But I don't think we should count on just growing ourselves out of this deficit. We also need to exercise serious fiscal restraint. I think that is well reflected in the budget that's been presented in '05 and in our assumptions going forward.