That Monster Deficit

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minute for 19 years. The. President has used a similar metaphor. In a speech unveiling his economic program soon after he took office, Reagan dramatized his concern about the national debt, then approaching $1 trillion, by noting that it would take a stack of $1,000 bills 67 miles high to equal that total. When he brought out his new budget this month, Reagan failed to mention that his deficits would push the debt to $ 1.8 trillion by next year and raise his stack of $ 1,000 bills to more than 120 miles.

The most frightening aspect of the deficits and the national debt is that they may be snowballing out of control. The President's budget predicts that the deficit will remain in the $180 billion range through fiscal 1987, but then will fall to $123.4 billion in 1989. That forecast, however, rests on the shaky assumption that the interest rate the Government must pay on three-month Treasury bills will drop, from an average of 8.6% last year to 5% by 1989. Feldstein has argued that if budget deficits are not reduced in the next few years, interest rates may not fall significantly. The President's budget projections are thus internally inconsistent.

Using a more realistic forecast that interest rates will drop only slightly, the Congressional Budget Office (CBO) calculated last week that the shortfall might reach $248 billion in 1989. even if all the deficit-cutting measures proposed in the Reagan budget are adopted. That gigantic number is also optimistic: the CBO assumed no new recession for the rest of the decade. Charles Schultze. chief 'economic adviser for Jimmy Carand now a senior fellow at Washington's Brookings Institution, estimates that if another downturn occurs and nothing has been done in the meantime to close the budget gap, the deficit could top $350 billion by the late 1980s.

In general, economists think that the budget deficit in a healthy economy should amount to no more than 2% of the gross national product.

As recently as the 1970s, the shortfall generally stayed at about that level. But unless something is done, deficits are now bound to total about 5% of the G.N.R until 1990. Interest on the national debt ($149.5 billion this year) is already the third largest single budget item after defense and Social Security.

It is ironic that such a specter has arisen during the Administration of Ronald Reagan, who as a candidate talked of balancing the budget by 1984. If Reagan serves a second term, even his optimistic budget projections show that he will run up a higher deficit total ($1.3 trillion) than all past Presidents combined (about $766 billion), although inflation accounts for some of the difference.

Reagan has tried to blame the current deficits on a legacy of freewheeling Government spending that he inherited from past Administrations. But an analysis by the CBO challenges that contention. If no laws had been changed during the Reagan years, says the CBO, the budget would be headed toward an $11 billion surplus by 1989. The rise in the deficit results mainly from the 23% personal income tax cut that Reagan pushed through Congress in 1981 and his large military buildup. By 1989 increases in defense spending will almost completely offset the cuts Reagan and Congress have made in domestic programs.

The President's belief early in his term that he could slash taxes, restore American military might