The new year is only a few weeks old, but there's already a good candidate for the most overplayed story of 1985. "Arts Agency Faces 11.7% Budget Cut," read The New York Times page one headline on Jan. 15. "Support for Opera, Music and Dance Would Decline Most Under '86 Reagan Plan."

Someone at the Times thinks the nation would suffer grievously if art subsidies were cut. I think the story important, but for a different reason: It symbolizes the mentality that has given us big budget deficits. We have overused government to support almost anything that seemed worthy.

Balancing the budget isn't so difficult, as I will show. But I don't think we'll make much headway unless we confront the root cause of the problem: a confusion over the role of government. We should focus on the larger issues of government's proper responsibilities and citizens' obligation to pay for necessary government. Instead, the budget debates dissolve into dizzying detail and exaggerate the turmoil threatened by any realistic effort to reduce the deficits.

Should the national government pay for local opera? No way. In the American tradition, government is -- or ought to be -- about society's collective needs. Its vast powers shouldn't be dissipated into secondary activities that, however desirable they seem, serve little public purpose. If you ask what those purposes are, I'd list four: national security; activities that benefit society as a whole but may not be done privately (for example, environmental regulation); protecting those most vulnerable to private markets -- the unemployed, disabled, poor and elderly; and doing these things in a way that promotes prosperity.

Opera doesn't qualify. It's a form of entertainment and expression not unlike, say, rodeo. There's no more public purpose in subsidizing opera singers than rodeo riders. But opera subsidies are a metaphor for the condition of government. It supports everything from dairy farmers to a passenger railroad. The careless expansion of governmental powers presumed that a strong economy could bear the extra costs. We are now discovering that it can't. Large deficits raise interest rates, enlarge trade deficits and ultimately threaten the growth of living standards. In effect, we are sacrificing a stronger economy to cater to all the groups (and most of us belong to one) addicted to today's splintered government benefits.

The attachment to individual benefits also creates the false impression that disturbing them -- what deficit reduction is all about -- would be enormously disruptive. This isn't true. Even eliminating the deficit would not fundamentally discomfort most of us. In August, the Congressional Budget Office estimated the 1988 deficit at $238 billion. Here's how it might be closed:

* Save $30 billion by eliminating programs without a compelling national need and imposing user fees on groups receiving government services below costs. Most farm programs, general revenue sharing for localities and many other subsidies (for exports, culture, Amtrak) would vanish. Plane and boat owners, truckers and users of federal irrigation would pay higher fees.

* Freeze for a year cost-of-living adjustments for Social Security and most other government retirement and transfer programs, saving $12 billion in 1988.

* Require most Medicare recipients (the poor might be excluded) to pay slightly more of their health costs. Along with some limits on hospital and doctor fees, this would save $8 billion.

* Impose a 25-cent-a-gallon oil tax, raising about $50 billion. Because oil prices have been dropping, the tax wouldn't raise "real" (inflation-adjusted) retail prices above their 1981 peak.

Together, these measures would cut the deficit $100 billion in 1988, generating interest-rate savings because the government would borrow less. Those savings would total between $17 billion and, if interest rates dropped 2 percentage points, $40 billion. Further cuts would properly have to come from defense or higher income taxes. National security is government's first responsibility. If the Reagan buildup is wasteful, then it can be cut. If not, it needs to be paid for through taxes. Holding the "real" growth of military spending to 3 percent annually -- the administration wants about 6 percent -- would require roughly a $60 billion increase in personal and corporate income taxes in 1988 (about an 11 percent rise) to balance the budget.

This is reform, not revolution. An 11 percent income-tax increase is painful, not oppressive. A one-year freeze of Social Security is a trimming, not a gutting. The elderly's economic position has improved; they can bear a tad more of government's burden. An oil tax is something the government should do anyway to prevent falling oil prices from increasing our consumption and dependency on insecure imports. What about programs that get axed? Mostly, they pay for private or local benefits. Will the nation be worse off without Amtrak? Assuredly not. However, Amtrak passengers may be worse off. Instead of being subsidized, they will have to travel by car, bus or plane.

What frustrates change is a bias in our system favoring small, organized interests over the general national interest. They lobby for their programs and tax preferences because they receive the full benefits. By contrast, almost no one lobbies for measures that benefit the nation as a whole because the benefits are dispersed. Take the dairy program. The government pays dairy farmers to produce milk no one wants. There's no public purpose, but eliminating it would bankrupt some dairy farmers. So dairy groups lobby for it, Congress is sympathetic, and the program survives.

"Special interests" are often powerful because they are not evil interests. Dairy farmers are decent people who have become dependent on federal benefits, whose withdrawal would cause genuine harm. There may be a case for softening the transition, but instead we often maintain an unjustifiable benefit. And we all ultimately pay in the loss to the economy's overall strength. Government is about society's collective needs, and no one doubts our collective interest in general prosperity. What is at issue is our ability to endure immediate and modest inconvenience for larger, but deferred, gains. That's 1985's real story.