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Early last week, the crack analysts at the Congressional Budget Office (CBO) suddenly ``found' an extra $225 billion - and, voila! White House and congressional negotiators had their budget deal.

But about this $225 billion: If it's a windfall, why not give it back to the taxpayers? That's $2,250 per U.S. household - a decent piece of change. Or why not use it to pay part of our $5 trillion debt?No, the negotiators decided to spend the money - on food stamps, highways, welfare benefits, etc. ``The windfall also enabled negotiators to drop a proposed cap on spending for each Medicaid beneficiary,' reported the Wall Street Journal. (Another good idea gone to the trash heap of history.) And it meant that Social Security cost-of-living adjustments would not have to be pared by 0.15 percentage points.

In other words, the windfall allowed the president and Congress to duck the important matters of reform with which they should be wrestling and instead produce a ``balanced budget' - which, in Washington, means something that says that, under certain shaky assumptions, the deficit will equal zero five years from now.

Getting to zero has taken precedence over making fundamental changes in the way government operates - and, more important, decisions about what government should and shouldn't do. Here are a few of the questions unasked:

Should Washington give profitable corporations hundreds of millions for research and marketing? Fund a government railroad? Subsidize college-bound students with the tax dollars of families whose kids don't get beyond high school?

Should seniors be required to participate in a government-run program whose costs keep soaring? Or should they get Medicare vouchers to make their own choices and encourage market competition that holds down costs and increases quality?

Should we have a tax system that discourages saving? Or one that taxes only consumption? A system that's simpler, flatter, with fewer loopholes and deductions?

Should we continue to force Americans into a Social Security system giving negative returns? Or should they be allowed to invest sensibly for retirement?

The irony is that politicians were able to duck these vital questions and still produce a balanced budget last week because the private sector has been so successful at the kind of restructuring and priority-changing that government refuses to do. These firms reaped their own windfalls, a big chunk of which Washington now spends.

This is precisely what I feared in January would happen after it became clear that the CBO was drastically underestimating economic growth - and, thus, tax revenues.

If only we were still dominated by sclerotic companies, producing growth of one or 2 percent a year, then tax revenues would have been insufficient to support this new federal spending. Congress would have been forced to make serious reforms in entitlements.

But, alas, gross domestic product has been zipping along at nearly 3 percent since 1982, and it was absurd for Hill analysts to keep projecting 2.2 percent for the future. Thus, the $225 billion windfall, the extra spending and this deal.

I'll concede that the deal itself may have been the best Republicans can achieve. But why not take the traditional route? Reject the White House budget that was offered in February, pass your own, then fight it out for five months in full view of the people?

Republicans give several answers: First, last week's deal does meet some key aims: It ensures a capital gains cut (probably pushing the top rate down to 20 percent from 28 percent), and it includes reductions in projected spending on Medicare of $115 billion and on Medicaid of $15 billion. As proof, Republicans can point to the complaints of liberals. ``It's a Republican bill,' whined Rep. Charles Rangel, D-N.Y.

Still, this is hardly the promised land. Net tax cuts are just one-third of what Republicans originally wanted; so are Medicare savings. And Clinton was conceded his tuition tax credits and health insurance for children in non-poor families-new entitlements.

But, Republicans say, by clinching a deal now, they're free to discuss long-range reform in the coming months. Also, they can't be called obstructionists. They've shown they can work in a bipartisan manner, and voters will smile on them in 1998.

This is the most disheartening excuse of all. Why the reticence?

For some courage, listen to one of my heroes, Sir Roger Douglas of New Zealand. As finance minister under a Labour government, he privatized industries, drastically cut tax rates and slashed the size of government so much that it began running huge surpluses. I met him for the first time recently at the Heritage Foundation and asked how he succeeded against all odds.

``This sounds strange,' he said, ``but I learned that you can't win unless you're prepared to lose. We decided to do the right thing and let the chips fall where they may.'

There are two separate, opposing public philosophies in America today. To obscure that fact in a bipartisan bargain amounts to an antitrust violation. Instead, kill the budget deal. Let the Democratic president and the Republican Congress contend in the clear light of day. Let them each decide what's right, then stand and fight on principle. Let the sparks fly.


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